ARSS Infrastructure Projects Ltd

Dear Fellow Stakeholders,

On behalf of the Board of ARSS it is my pleasure to present the 21st Annual Report and Audited Financial Statements for the year ended 31st March, 2021. I am addressing you all at a time when the nation has been impacted by the second wave of the Corona virus, leading to widespread distress and tragic loss of life. The unexpected scale and intensity of this year's surge threatened to overwhelm India's healthcare systems and undermine the prevailing macro-economic narrative. Undoubtedly, this is the most severe test ever faced by all of us – households, corporates, civil society and the Government.

At this critical juncture, as important as observing health and safety measures is to remain psychologically strong, guard against cynical despair and stay united in our shared sense of purpose. As they say, the darkest hour is before dawn, and we are already beginning to glimpse early signs that give rise to cautious optimism. The declining trend in cases across the states as well as the prospects of the vaccine rollout gaining pace should help us look forward to happier times.

This year I intend to commence my communication with how we intend to protect our business. This statement has acquired a deeper connotation following the sweeping resurgence of the second pandemic wave in India. Any discussion about our business must therefore begin with what needs to be done to protect our people. These are challenging times for a knowledge intensive business like ours; there is a premium on the ability to protect talent from the effects of the pandemic.

At ARSS, we believe that there has never been a moment when our business model has been more relevant than it is now. The Indian government is investing more than ever in infrastructure creation; there is a need to build the India of tomorrow with more roads, more bridges and more rail networks, in addition to the rejuvenation of existing infrastructure. There are a number of realities that make the scenario attractive and compelling. India is building infrastructure larger and faster. The standards of infrastructure building are rising. The government has recognized the need for vendors and service providers to be remunerated with speed. The Indian government has introduced various liquidity measures for the businesses and especially for construction companies like ours, wherein proportionate bank guarantees have been released for partly completed contracts.

This has also been supported by the accommodative stance of the Reserve Bank of India by maintaining interest rates at around the historically lowest levels seen in this country. At ARSS, we applaud the Government's initiative to retrieve the Indian economy out of the shock induced by the pandemic through liquidity measures and feel that this, coupled with low tax rates as introduced in the last Union Budget, will incentivize businesses to invest and grow in a sustainable manner. These realities are attracting serious long-term players. The scenario has evolved from a singular focus on profits to liquidity. The industry's needs are no longer about profitability as much as they are about sustainability.

Performance 2020-21

For this year, ARSS faced some difficulties in growth due to stressed economic environment and accrued a loss of Rs. (-) 52.65 cr. during the year. Your Company's standalone performance for the financial year 2020-21 are as follows:

- Turnover of Rs 248.45 crores.

- EBITDA is Rs (-) 37.52 crores.

- PAT (loss) is Rs (-) 52.65 crores.

- EPS (basic) is Rs (-) 23.16

Outlook

The outlook for FY2021-22 is one of cautious optimism, with the country's GDP regaining positive territory thanks to the base effect in the first half, followed by robust growth in the second. While the current resurgence of COVID-19 may dent prospects in the initial part of the year, vigorous vaccination efforts and improved adherence to safety protocols should spark a revival in the latter half. We therefore believe the recovery is ‘delayed' and not ‘derailed'.

One unintended but welcome consequence of the pandemic has been the rapid adoption of digital technologies. This was a lifeline which ensured that economies do not get paralysed due to lockdowns and other constraints. Another positive fall-out has been an increased awareness of sustainability and a more stringent emphasis on Environment Protection, Social Responsibility and Governance frameworks. The Covid-19 pandemic and its fallout makes it difficult to forecast the future with any degree of certainty. While we are hopeful that the 2nd half of FY 2021-22 will herald better economic and business activity in terms of tendering, good liquidity and revival of labour and supply chains, it would be premature to predict the Company's business outcomes for FY 2021-22. The company is putting in enormous efforts to mitigate the impact of the pandemic, and register enhanced performance in FY 2021-22 and coming years.

At this point in time, we see prospects in the areas of Government buildings, data centres, healthcare infra, airports, metro railways, water projects including wastewater treatment and irrigation, hydel projects, expressways as well as onshore and offshore hydrocarbon projects. We are uncertain, however, of the timelines when these projects will take off.

Despite the challenges, the Government's thrust areas continued to provide a business opportunity basket for the Company, which was in the pole position to capitalize on the business prospects that came to fruition during the year. The continuing weakness in the Realty sector was countered with a Government focused boost to the affordable mass housing and health segments. With the Government's focus on improving air-connectivity, opportunities in the airport segment continue to arise at periodic intervals.

Budgetary provisions 2021-22: Railways

The Finance Minister Nirmala Sitharaman allocated Rs. 1.1 Lakh Crore for Indian Railways to improve infrastructure, out of which INR 1.07 Lakh Crore will be allocated for capital expenditure. Indian Railways announced National Rail Plan for 2030, with the objective of creating capacity before demand.

Roads and bridges:

The other growing opportunity in India is related to roads and bridges. There is a growing conviction that new roads and bridges are possibly the quickest infrastructure drivers of economic growth. They encourage new settlements to emerge along the road network while bridges make is possible to shorten conventionally long commutes. In 2020-21, the allocation towards road and bridge construction by the government was INR 48,777 Crore, 6% higher than the revised estimates of 2019-20 (INR 45,897 Crore). Expenditure under roads and bridges includes development of national highways, projects related to expressways, increasing the number of lanes under various projects, and development of road connectivity in left-wing extremism-affected areas.

ARSS Infrastructure to gradate to a virtuous cycle of sustainable profitability, enhancing value in the hands of all those who hold shares in our company. Let me end with a word on the second wave of the pandemic. In view of the uncertain nature of the next few months, one will not venture to provide a financial guidance. At ARSS, we have assured the employees that they and their immediate family members will be vaccinated by the Company free of cost and therefore they need not worry about the economic impact on their households. In addition, ARSS has pledged to support local communities where it operates by offering to run free vaccination camps, free distribution of Immunity Booster medicines for the underprivileged. We hope to reach the marginalized who need to be vaccinated at the earliest, helping eradicating the pandemic. At ARSS we donated ventilators and ECMO Machine to the Hospitals for helping the needy peoples to survive their lives. The only resolution that one will make is that we will invest our every resource in ensuring that all our employees and their family members remain safe until they are vaccinated, In today's uncertain environment, there can be no higher priority.

Before I conclude, I would like to extend my thanks to Customers, vendors and suppliers, Central and State Governments, Regulatory Authorities, investors, bankers and financial institutions for their continued faith and trust, without whom our continued growth momentum would not have been possible. I would also like to thank my fellow Board members for their unstinted support and encouragement and helping me in creating good governance culture across the organization and fulfilling the responsibilities of Board. I would like to place on record the sincerity, hard work, commitment and dedication of the entire Team of ARSS. I seek your continued support in making the Company more sustainable and resilient to external challenges.