KNR Constructions Ltd

Dear Shareholders,

I sincerely hope that this message finds you in good health and high spirits. I am delighted to present to you the Annual Report of our esteemed infrastructure company, KNRCL, for the financial year 2022-23.

As we reflect upon the past years, we have faced unprecedented circumstances such as the Covid - 19 pandemic and the ongoing Ukrainian war, both of which have contributed to a global inflationary trend. However, I am proud to share that despite these challenges, our Company has demonstrated resilience and achieved significant milestones in line with our projected goals and objectives. By strictly adhering to project schedules and exercising cost prudence, KNRCL has successfully navigated through obstacles and emerged financially stronger.

Industry Dynamics

India's Infrastructure growth is a key driver for the Indian economy. It has the potential to propel the nation's growth and overall development. The Government has been consistently initiating policies that would ensure time-bound creation of world class infrastructure in the country. The construction industry in India is expected to grow by 12.0% to reach Rs 45,907 Billion in 2023. Despite near-term challenges in certain construction sectors, the medium to long-term growth story in India remains intact. The industry is expected to witness a steady growth over the next four quarters, and further expected to witness CAGR of 9.9% during 2023-2027. The sector is further expected to reach Rs 66,954.8 Billion by 2027. Despite the surge in construction costs, Government spending on infrastructure projects has remained strong in 2023, and the trend is projected to further continue in 2024.

Interesting Insights!

Government has planned slew of huge investments for the next five years in the infrastructure sector, particularly highway sector. The following interesting insights highlights our optimism:

US$ 1.4 Trillion

India's plans to spend on infrastructure through ‘National Infrastructure Pipeline' in the next five years.

100

Critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertiliser, and food grains sectors have been identified and will be taken up on priority with investment of Rs 7,50,000 Million (US$ 9 billion), including Rs 1,50,000 Million (US$ 1.8 billion) from private sources.

Capital Investment of Rs 100 lakh Million (US$ 122 Billion)

Investment outlay for infrastructure is being increased by 33% to, which would be 3.3% of GDP and almost three times the outlay in 2019-20.

Rs 13,40,150 Million (uS$ 17.24 Billion)

Allocated to National Highways Authority of India (NHAI)

Rs 6,00,000 Million (uS$ 7.72 Billion)

Allocated to Ministry of Road Transport and Highways (MORTH)

10,933 Kms

Projects awarded by NHAI in FY 2022-23

12,500 Kms

Projects targeted to be awarded by NHAI in FY 2023-24

uS$300 Million

Government's plan for the upgrade of 300 Kilometers of state highways and district roads in Assam

uS$350 Million

Maharashtra Government plans to deploy to improve connectivity with key economic areas in the region

Performance Outcome

Your Company has achieved commendable financial results during the FY 2022-23. The revenue growth has been robust, reaching a turnover of Rs 37,438 Million, representing a 14% increase compared to the previous year. Profit after tax stood at Rs 4,988 Million, demonstrating a significant growth of 30% compared to the earlier year. Furthermore, the net worth amounted to Rs 27,343 Million. In line with these achievements, the Board of Directors has proposed a final dividend of Rs 0.25 per share, pending approval from the shareholders at the upcoming Annual General Meeting (AGM) of the Company.

Your Company has effectively maintained its financial strength through the implementation of an asset-light policy, timely monetization of BOT and HAM projects, efficient cost management, selective bidding, and successful execution of major projects. As of March 31, 2023, the Company's outstanding order book stands at Rs 70,921 Million.

Within the order book, EPC Road Projects and HAM projects account for 77% of the total, while irrigation projects make up the remaining 23%. In terms of clients, 50% of the order book comes from third-party clients, while the remaining 50% is derived from captive HAM projects. The third-party order book represents noncaptive orders, with 36% attributed to state government contracts, 11% from the Central Government, and the remaining 3% from other private players.

Overall, the current order book position remains strong, providing clear visibility for project execution over the next two years.

Poised for Growth

At KNRCL, we prioritise corporate social responsibility, placing a strong emphasis on environmentally friendly practices and initiatives. Our aim is to minimise our carbon footprint and create a positive impact in the communities where we operate. With substantial investments in state-of-the-art machines, equipment, and vehicles, combined with a skilled workforce and effective risk management, our Company can adapt swiftly to market challenges, ensuring timely project delivery and cost control. We remain committed to pursuing excellence, exceeding expectations in our projects, strengthening our financial position, and delivering exceptional results for our clients while generating favourable returns for our shareholders.

Closing Note

I express my heartfelt gratitude to our employees, clients, bankers, government agencies, and business partners for their invaluable support. I also acknowledge the valuable contributions of our Board members. It is through our combined expertise, passion, and dedication that we will propel the infrastructure industry forward and shape a brighter future for generations to come.