Dear Fellow Stakeholders
On behalf of the Board of ARSS it is my pleasure to present the 19th AnnualReport and Audited Financial Statements for the year ended 31st March 2019.It's always a pleasure to speak with you to reflect on the performance of your Company inthe year and share with you our aspiration for the future.
The standalone result for 2018-19 is as under:
- Turnover of ' 459.10 crores.
- EBITDA is ' 32.72 crores.
- PAT (loss) is ' (11.21) crores.
- EPS (basic) is ' (4.93).
India's GDP in FY2019 is estimated to have grown by around 7 per cent. While this is alaudable achievement in the global context it falls marginally short of expectations dueto an interplay of macro-economic and political factors. These include the uncertaintieswhich invariably accompany our General Elections volatility in crude prices andunpredictable currency fluctuations. The economy also had to grapple with a funding crunchfor NFBCs precipitated by the IL&FS debt default deceleration in the agriculture andmining sectors and widening of fiscal and current account deficits. On a positive notethe country has largely got back on track after the initial disruptive effects of twinreform measures viz. Demonetisation and GST. The longer-term benefits of both thesemeasures are gradually being realised through an uptick in tax collections on an expandingbase of tax payers. We also see the light at the end of the tunnel in the case ofoverleveraged corporate balance sheets and high bank loan delinquencies. Imaginative stepssuch as the resolution of stressed businesses under the Insolvency & Bankruptcy Codebank recapitalisation and more stringent application of NPA credit provisions norms shouldhelp the sector back on its feet.
Though corporate earnings have registered reasonable growth during FY 2019 FIIs havebeen withdrawing significant tranches of money from secondary markets for the better partof the year. Domestic money managers also rebalanced their portfolios by favouringdefensive sectors and reducing allocations to cyclical sectors like Infrastructure. Thelast few months of FY 2019 have however witnessed a rebooting of confidence in thefuture of the economy with markets too recording a significant inflow of FII money. Whilethe private sector has been somewhat tentative in increasing spends in FY 2019 (in areasof PPP industrial capex and certain segments of urban infrastructure) the public sectorhas been far more forthcoming with vigorous investments in key sectors. These includewater metro rail networks railways roads and road adjacencies (special bridgesexpressways and city flyovers) power transmission & distribution and hydrocarbon. Thestrong underlying macro drivers of investments in these sectors are expected to sustaininto FY 2020 and beyond. Encouragingly the private sector also seems to have overcome itsbashfulness and begun to show signs of revival in road concessions airports healthcaremetals mining and cement capacity augmentation.
The Infrastructure segment - especially the EPC sector - has witnessed a decent orderinflow in the last four quarters driven mainly by Government Capex. On the other sideprivate / corporate Capex has declined for 7 years in succession over FY 2012- FY 2018.The Power sector especially faces an over-supply situation with corporate in the sectorhaving created significant capacity over the past decade in transmission and distributionto drive investments. Given the favourable macro situation the implementation rate ofinfra projects has improved considerably in FY 2018-19 also driven by general electionsin Q1 of FY 2019- 20.On the irrigation front apart from Telangana Andhra PradeshKarnataka Gujarat Haryana and Madhya Pradesh Odisha has also significantly enhanced itsirrigation investments. Urban Infrastructure which is the key focus of the currentGovernment played a key role over the years and is likely to continue in future withimplementation of Smart Cities Water Infrastructure Housing for All under Pradhan MantriAwas Yojana. The Railways always a key focus area received a decent share of India'soverall Budget and have been a consistent spender of almost its entire budget amountduring the last few years. In the Roads sector the EPC mode which contributed 65-70% ofthe total cost of projects awarded by NHAI during the FY 2014-2016 periods has taken abackseat. Single-segment road players have seen a relatively lower inflow of new'orders - on the back of slowdown in order award activity by NHAI. NHAI has awarded only550 km of projects in FY 2018-2019 as compared to 7400 km in the previous year - leadingto muted inflows. Moreover over the last two fiscals the HAM Model has taken the sweetspot with EPC projects forming just 30-35% of the cost of projects awarded. A comeback ofthe EPC mode in FY 2019-20 will be a game changer for the sector.
The Infrastructure Sector in India was after independence completely in the hands ofthe public sector and this hampered the growth of this sector. India's less spending onreal estate power telecommunications construction and transportation prevented thecountry from sustaining very high rates of growth.
The government plans to restructure the national highways programme to create networkof highways grid of a desirable capacity for better connectivity government envisionsusing rivers for cargo transporation a move that will decongest roads and railways andgovernment expect that Railway infrastructure will need investment of '50 lakh crorebetween 2018 and 2030 and their move towards Public Private Partnerships (PPP) will beused to unleash faster development and delivery of passenger freight services.
Another major plans of the government to launch station modernization programmeProjects such as industrial corridors DFC Bharatmala Sagarmala and UDAN schemes haveand will continue to improve connectivity and increase competitiveness. Road corridorproject Bharatmala port-linked industrialization plan Sagarmala and UDAN will help inbridging the rural-urban divide and improve transport infrastructure.
The government has set an investment target of '80250 crore for phase three of thePradhan Mantri Gram Sadak Yojana under which the government wants to build 125000 km ofvillage roads. The earlier phases of this scheme led to the construction of 30000 km ofvillage roads with green technology. The finance ministry had allocated the highest-everbudgetary support of '83016 crore to the highways sector in the interim budget announcedearlier this year in February and '64587 crore for railways.
The country has raised '24000 crore by monetizing public infrastructure throughinfrastructure investment trusts real estate investment trusts and thetoll-operate-transfer scheme of the National Highways Authority of India. To boostinvestment the government will encourage foreign portfolio investors to invest ininfrastructure debt funds introduce credit default swaps for the infrastructure sectordeepen the corporate bond market and encourage equity investment by non-residentialIndians.
Our Board processes from the activities of the board committee's right through to theregular functioning of the Board itself were externally reviewed during the year and I amconfident that they deliver the highest levels of corporate governance. Though there areopportunities galore we need to be very cautious of the present volatile and uncertainenvironment and need to make very cautious decisions which add value to all thestakeholders.
I would like to place on record my sincere gratitude to you our valued shareholdersfor having given me this privilege. I would also like to place on record my deepestappreciation of the tireless efforts of all my colleagues past and present who havetravelled with me in this journey lending their shoulder to build this greatorganization. I draw solace that with team of professionals in our group our sharedaspiration is surely within reach. Here I would like to express my special gratitude toall the employees I am really thankful for their cooperation and support.
Before I conclude I would like to extend my thanks to Customers vendors andsuppliers Central and State Governments Regulatory Authorities investors bankers andfinancial institutions for their continued faith and trust without whom our continuedgrowth momentum would not have been possible. I would also like to thank my fellow Boardmembers for their unstinted support and encouragement and helping me in creating goodgovernance culture across the organization and fulfilling the responsibilities of Board. Iwould like to place on record the sincerity hard work commitment and dedication of theentire Team of ARSS. I seek your continued support in making the Company more sustainableand resilient to external challenges.
With warm and very best regards