It gives me great pleasure to connect with you through the Annual Report. FY 2018 wasindeed a challenging year as the industry continued experiencing multiple headwindsincluding persistent project delays and higher borrowing costs. These restraints wedgedthe execution of ongoing projects within the industry significantly and your Company'sexperience was no exception.
It is an undeniable fact that India needs substantial amounts of new infrastructuregiven its growing ambitions and vast areas of underdeveloped regions. Past recordsindicate a snail's pace in infrastructure development. There are several initiatives tochange this in play but the main question is to see how well the execution of our plannedprojects pans out. Our journey till date has been very challenging. However I amconfident that our core values will provide us with adequate strength to face them. Yourcompany has been passing through a financial turbulence that is part and parcel of theoverall sluggishness in the sector and the mismatch of cashflows has resulted in theerosion of our profitability.
The key challenges surrounding the business continue to persist. The slow pace ofexecution of existing projects due to several regulatory issues and delay in settlement ofcontractual issues continue to persist. This has resulted in the elongated workingcapital cycles with creating difficulty in debt servicing. Further the ballooningfinancial costs have impaired financial liquidity. Given the financial stress in theindustry the infrastructure sector is witnessing limited support from the financialinstitutions and banks.
Delay in execution of projects and cost overruns on account of delayed decision ofresolution external environment and delay in decision-making process the issues faced bythe road ports and power projects of the Company remained unresolved. These led to delaysin the progress of more than half dozen of our projects for reasons beyond the managementcontrol. Disputes involving large amounts of invested capital have a slow-paced redressal.To further aggravate the Company's financial liquidity arbitration awards issued infavour of the Company are currently in appeal filed by the clients.
The Company has been successful in finding a way forward for its Offshore ContainerTerminal (OCT) Project (the Port Project) developed by its subsidiary namely; IndiraContainer Terminal Private Limited (ICTPL) with the assistance of Mumbai Port Trust (MbPT)and the Ministry of Shipping (MoS) and the issues related to the Port Project should beresolved in the near term.
I am pleased to inform that your company has taken some positive initiatives insourcing prospective and reputed investors and/or strategic partners for 2 (two) of itsoperational road projects developed by its subsidiaries namely; Patna Highway ProjectsLimited (PHPL) and Rajahmundry Godavari Bridge Limited (RGBL). The investors/strategicpartners have shown interest in infusing fresh capital and refinancing the existing debtof the subsidiaries which would help these projects in achieving sustainability in thenear future.
The Company has successfully completed the arbitration process under the Society forAffordable Redressal of Disputes (SAROD) in one of its road project companies namely;Patna Buxar Highways Limited (PBHL) which was sold in March 2016.
The positive response received from Bankers for funding road projects the fundsexpected from Arbitration proceedings and successful resolution plan in one of the SPVswill help the operational projects for further development in operational sectors.
Fortunately with time the Indian infrastructure industry is beginning to witnessmultiple changes at a breakneck pace. In the last few years the government has made itsintent for infrastructure development clear and is investing heavily for developing afirst world country of the future. With a resolve to accelerate the creation of coreinfrastructure the country is striving to remove both construction and operationalbottlenecks with a sound policy framework.
I am hopeful that the government will take all the correct initiatives in the comingfiscal year to rectify the situation and stimulate the recovery process for the sector.However as many of these steps will take time to yield results I suspect that we need tobrace ourselves for another tough year for the industry.
I would like to thank our dedicated management team and skilled workforce for helpingus succeed in sustaining resilience. I also express my sincere gratitude to my colleagueson the Board and to all the shareholders for their patience.
Sushil Chandra Tripathi