KNR CONSTRUCTIONconstruction industry is evolving rapidly with the integration of new technologies and growing demand

The construction industry is one of the largest and most essential sectors globally, involving the development, renovation, and maintenance of infrastructure such as residential and commercial buildings, roads, bridges, and utilities. This sector is a significant driver of economic growth and job creation.

Market Size: The global construction market is valued at trillions of dollars, with strong growth projected in the coming years due to urbanization, population growth, and infrastructure development needs.
Segments:
Residential Construction: Involves housing developments, apartment buildings, and individual homes.
Commercial Construction: Office buildings, shopping centers, hotels, etc.
Infrastructure: Roads, bridges, tunnels, public transportation systems.
Industrial: Factories, warehouses, power plants.
2. Market Trends
The construction industry is undergoing significant changes influenced by technological, economic, and environmental factors.

Technological Advancements: Adoption of technologies like Building Information Modeling (BIM), drones, robotics, and 3D printing for design, construction, and management.
Sustainability and Green Building: There is a strong shift towards sustainable construction practices, including energy-efficient designs, eco-friendly materials, and green certifications like LEED.

1. Ritik Gupta 2023-0509-0001-0009 KNR Constructions Ltd

2. Executive Summary KNR Constructions Limited, a prominent participant in India's infrastructure market, has grown from a mechanical and construction contractor to a force in multi-domain infrastructure development. Based in Hyderabad, Telangana, KNRCL focuses on railway and elevated metro rail projects. market capitalization of ₹ 7,353 Crore and a stable share price, KNRCL has a strong financial standing, with a 15.5% Return on Equity and 20.8% Return on Capital Employed. The company's success is attributed to government initiatives like " Bharatmala Pariyojana " and " Sagarmala “. Roads and Highways: This segment forms a significant chunk of KNRCL's portfolio, encompassing national highways, expressways, and flyovers. Irrigation and Water Management: With a growing population and increasing water scarcity, KNRCL plays a crucial role in developing irrigation systems and managing urban water infrastructure. This ensures water security for communities, a critical aspect of sustainable development.

3. Shri K. Narasimha Reddy (Founder Promoter & Managing Director) Holds over 50 years of experience in the highway sector Started career in 1968 and engaged in the business of undertaking civil and mechanical contracts Has extensive knowledge and experience in multi-project planning scheduling, cost controls in addition to overall construction and multi-project management Driving force in taking our Company towards greater heights Shri K. Jalandhar Reddy (Promoter & Executive Director) Holds over 25 years of experience in the highway and infrastructure sector Started his career with the organization as a project manager and was elevated to Executive Director on April 1, 1997 Heads the tendering and bidding activities and oversees most of the projects Company Founded & Founder Details

4.   1995 Incorporated and commenced EPC business 2006 Bagged 1st BOT project in Karnataka worth ` 4,420 million Entry into urban water infrastructure with contract in Bangalore 2007 Received 2nd BOT project worth ` 5,920 Million in Telangana 2008 Launched IPO and got enlisted on BSE and NSE 2010 Crossed revenue of ` 10,000 Million on standalone basis 2012 Obtained the biggest work order of ` 8,250 Million from Sadbhav Engineering Limited for construction of the Bijapur Hungund Road project 2013 Bagged an EPC project worth ` 9,371 Million for the Madurai– Ramanathapuram Section of NH-49 in Tamil Nadu under NHDP Phase-III Received 3rd BOT toll project worth ` 9,005 Million in Kerala Achieved early completion of biggest road project – Bijapur Hungund Section worth ` 8,250 Million – 11 months ahead of schedule HISTORY

5. 2016 Crossed net worth of ` 10,000 Million on standalone basis 2018 Received 5 HAM projects worth of ` 56,112 Million (BPC) 2019 Signed SPA with Cube Highways for 3 SPVs (HAM project) Surpassed revenue of ` 20,000 Million on standalone basis 2020 Transferred 100% stake of KNR Walayar Tollways Private Limited (SPV) to Cube Highways and Infrastructure III Pte. Limited for an enterprise value of ` 5,117.8 Million 2021 Crossed net worth of ` 20,000 Million on standalone basis Transferred 49% stake in 2 SPVs (KNR Tirumala Infra Private Limited and KNR Shankarampet Projects Private Limited) to Cube Highways and Infrastructure III Pte. Limited for a value of ` 2,453.2 Million 2022 Transferred balance 51%/100% stake in 3 SPVs (KNR Tirumala, KNR Shankarampet and KNR Sriranagam ) to Cube Highways and Infrastructure III Pte. Limited. for value of ` 2,794.3 Million

6. RoC Details CIN L74210DL1995PLC238364 Date of Incorporation 11-07-1995 Registered State Delhi Registrar of Companies RoC -Delhi Category Company limited by Shares Sub Category Non-govt company Company Class Public Company Status Active Share Capital Information Authorized Capital 350000000.00 Paidup Capital 281234600.00

7. Organisation structure  

8. VISION & MISSION Vision To develop KNRCL as a Centre of Excellence in the field of infrastructure services by striving continuously to provide eco-friendly solution, adopting state-of theart practices and commitment to quality through motivated human resource Mission We would aim to add more business verticals to the organisation in the fields of construction of Elevated Metro Rail and Railway Projects.

9. Key Business Highlights of the Year KNR Constructions Limited   Credit rating upgraded by CRISIL Upgraded the long-term rating from AA-/Positive to AA/Stable Reaffirmed short-term rating as A1+   Signing of the concession agreement for KNR Sriranganatha Infra Private Limited (Mysore to Kushalnagara Section of NH-275 – Package V) Letter of award issued on March 10, 2023 Concession agreement signed on May 22, 2023 Total bid project cost of ` 6,903 million   Signing of the concession agreement for KNR Ramatheertham Infra Private Limited ( Marripudi to Somvarappadu of Bengaluru-Vijayawada Economic Corridor) Letter of award issued on February 28, 2023 Concession agreement signed on April 27, 2023 Total bid project cost of ` 6,650 million Signing of the concession agreement for KNR Kaveri Infra Private Limited (Mysore to Kushalnagara Section of NH275 – Package IV) Letter of award issued on March 10, 2023 Concession agreement signed on June 28, 2023 Total bid project cost of ` 6,500 million

10. Shareholding Pattern Kamidi Narasimha Reddy 32.51 Jalandhar Reddy Kamidi 13.43 Kamidi Yashoda 2.85 Mereddy Rajesh Reddy 2.31 FII 7.1 DII 30.5 PUBLIC 11.3 OTHER

11. Company CAGR   E xpected to witness CAGR of 9.9% during 2023-2027. The sector is further expected to reach ` 66,954.8 Billion by 2027 CAGR of around 18.6% for revenue and 30.35% for profit over the past 3 years. A median sales growth of 17.0% for the last 10 years.

12. Business model

13.   SWOT Analysis of KNR Construction limited Threats Changing political environment Changing demographics

14. Sector information Between April 2000 and September 2022, India’s construction sector received a total of $26 billion in foreign direct investment (FDI According to reports, in 2023, India’s commercial real estate market size is USD 20.71 billion and is expected to grow at a CAGR of 21.20% during 2023-2028. This sector contributes 9% of India’s GDP and employs 51 million people and thus is the second largest employment sector India has an investment budget of $1.4 Tn on infrastructure - 24% on renewable energy, 18% on roads & highways, 17% on urban infrastructure, and 12% on railways Mission of PMAY-U to start a new era in Indian construction technology sector.

15. Union Budget 2023 Highlights: INR 10 Lakh Cr: 33% Increase in capital Investment Outlay The outlay for PM Awas Yojana is being enhanced by 66 % to over INR 79,000 Cr Urban Infrastructure Development Fund: INR 10,000 Cr Outlay per year to create urban infrastructure in tier 2 & 3 cities Contribution to GDP and employment generation The construction sector in India is considered 3rd among the 13 major economic sectors and is the second-largest employment generator after the agriculture sector. If everything goes well, the construction industry’s contribution to the GDP of India will be 12-15% by the end of 2025

16. Construction Industry Porter Five Forces Industry Competitors: Strong Construction companies are mostly involved in submitting competitive tenders to win contracts Overcrowded market dominated by the big five construction companies as well as the major Q.S firms New Entrants: Weak Capital requirements for property development are high The construction industry is highly risky and filled with uncertainty Substitutes: Strong New and emerging innovative methods and processes within construction industry. New innovative methods are at a lower cost than traditional methods Suppliers Bargaining: Weak Industry members such as the principal contractors’ e.g Grinaker are integrating backwards into the business of suppliers Construction materials are readily available from many suppliers Switching costs of contractors Q.S firms are low Buyers Bargaining: Strong Construction developers have a high quality of information for decision making There are few developers and construction clients compared to the many service providers available to deliver project

17. Pestile analysis Political: Government Initiatives:   Increased government spending on infrastructure projects (roads, highways, irrigation) benefits KNR, a major player in this sector. (Example: KNR securing a ₹1163 crore highway project under a government initiative). Policy Changes:  Stringent environmental regulations might delay KNR's projects and raise costs if obtaining clearances becomes complex. Economic:   Economic Growth:  A booming Indian economy with rising disposable incomes can lead to higher demand for commercial spaces and housing projects, potentially increasing KNR's workload. Interest Rates:  High-interest rates can make borrowing for new projects expensive for KNR, impacting their ability to bid competitively.

18. Social: Urbanization:   Rapid growth of Indian cities creates a demand for more infrastructure (roads, bridges, water systems), which aligns with KNR's expertise. Skilled Labour Shortage:   The industry-wide lack of skilled workers can affect KNR's project timelines and potentially inflate labour costs. Technological: Adoption of New Technologies:   KNR can leverage Building Information Modelling (BIM) for efficient project design and prefabrication methods to reduce construction time and costs. Disruptive Technologies:   Automation using robots in specific tasks might become a threat in the long run, potentially displacing some KNR workers.

19. Environmental: Sustainability Regulations:   Stricter green building norms might increase KNR's construction costs due to the use of eco-friendly materials and energy-efficient practices. However, this can also position them well for sustainable projects. Climate Change:   Extreme weather events can disrupt KNR's construction schedules and damage infrastructure projects, leading to financial losses. Legal: Land Acquisition Laws:   Complex land acquisition procedures can cause delays and uncertainties for KNR's projects, especially in urban areas. Lab our Laws:   Changes in labour laws regarding minimum wages and worker benefits can impact KNR's operational costs.

20. Profit and Loss Analysis   Item Percentage Increase (%) Revenue from Operations 14.40% Other Income -23.02% Cost of materials consumed 26.60% Construction expenses 6.74% Employee benefits expense 18.11% Finance costs 43.07% Depreciation and amortisation expense 9.54% Other expenses 9.09%

21. Profit and loss Total Assets increased by 4.77% from ₹3,32,945.75 in 2022 to ₹3,49,962.49 in 2023. Total Equity increased by 18.64% from ₹2,73,427.52 in 2022 to ₹3,24,196.94 in 2023. increase in total liabilities (14.07%) which is lower than the increase in total equity (18.64%).

22. INTERNAL AUDITOR & CONTROLS The Board of Directors at their meeting held on May 29, 2023, based on the recommendation of the Audit Committee, has reappointed M/s. K. P. Rao Associates , Chartered Accountants, Hyderabad, as the Internal Auditors of your Company. COST AUDITORS M/s Dendukuri & Co. SECRETARIAL AUDITOR M/s. VCSR & Associates

23. Credit Rating Ratio Analysis KNR Constructions Limited Long-term rating upgraded to 'CRISIL AA/Stable'; Short-term rating reaffirmed Rating Action Long Term Rating CRISIL AA/Stable (Upgraded from 'CRISIL AA-/Positive') Short Term Rating CRISIL A1+ (Reaffirmed) Indicator Mar '23 Mar '22 Book Value Per Share 97.2 79.7 RoA % 13.48% 11.46% ROE % 18.24% 17.02% ROCE % 21.94% 25.77% EBDIT Margin % 20.13% 21.98% EBIT Margin % 16.19% 17.87% PBT Margin % 18.83% 17.68% Net Profit Margin % 13.32% 11.66% Asset Turnover % 1.10X 1.00X Current Ratio 2.60X 2.00X Quick Ratio 2.30X 1.80X

24. DU PONT ANALYSIS KNR CONSTRUCTION LIMITED Return of equity (ROE)   Mar-20 Mar-21 Mar-22 Mar-23 Net Profit 244.18 381.80 498.83 424.25 Average shareholding equity 1,519.10 1,745.86 2,054.90 2,488.13 Return of equity 16.07% 21.87% 24.28% 17.05%     (ROE)- Du pont Equation   Mar-20 Mar-21 Mar-22 Mar-23 Net Profit 244.18 381.8 498.83 424.25 REVENUE 2,244.24 2,702.63 3,272.59 3,743.80 Net Profit margin(A) 10.88% 14.13% 15.24% 11.33%     REVENUE 2244.24 2702.63 3272.59 3743.8 AVERAGE TOTAL ASSET 2,494.06 2,819.24 3,125.08 3,514.54 Asset turnover Ratio(B) 0.90X 0.96X 1.05X 1.07X     AVERAGE TOTAL ASSET 2494.055 2819.235 3125.075 3514.54 Average shareholding equity 1,519.10 1,745.86 2,054.90 2,488.13 Equity multiplier(c) 1.64X 1.61X 1.52X 1.41X     Return om Equity (A*B*C) 16.07% 21.87% 24.28% 17.05%     Return of Asset Mar-20 Mar-21 Mar-22 Mar-23 Net Profit 244.18 381.8 498.83 424.25 AVERAGE TOTAL ASSET 2,494.05 2,819.23 3,125.07 3,514.54 Net Profit Margin (A) 9.79% 13.54% 15.96% 12.07%     ROA-Dupont Equation   Mar-20 Mar-21 Mar-22 Mar-23 Net Profit 244.18 381.8 498.83 424.25 REVENUE 2244.24 2702.63 3272.59 3743.8 Net Profit margin(A) 10.88% 14.13% 15.24% 11.33%     REVENUE 2244.24 2702.63 3272.59 3743.8 AVERAGE TOTAL ASSET 2,494.055 2,819.235 3,125.075 3,514.54 Asset turnover Ratio(B) 0.90X 0.96X 1.05X 1.07X     Retrun on Asset(A*B) 9.79% 13.54% 15.96% 12.07%

25. Concall Notes - Feb 2024 Infrastructure Projects: Government increasing budget allocation for infrastructure Plans to bid out projects totalling 5,200 kilometres on BOT toll mode MoRTH spearheading 14 new expressways and high-speed corridors Financial Performance: Order book position of INR 4,965 crores with potential increase to INR 6,745 crores Revenue growth of 9% in Q3 FY '24 EBITDA margin at 16.3% due to lower revenue contribution from irrigation projects Net profit of INR 85.5 crores in Q3 FY '24

26. Management discussion Investment in infrastructure contributed around 5% of the GDP in the 10th five-year plan as against 9% in the 11th five-year plan. USD 1 tn investment in infrastructure was proposed by India’s planning commission during the 12th five-year plan, with 40% of the funds coming from the private sector. The government allocated ` 10 Lakh Crores (USD 130.57 bn) to enhance the infrastructure sector. The government allocated ` 134,015 Crores (USD 17.24 bn) to National Highways Authority of India (NHAI).  The NIP project count stands at 9,142 covering 34 sub-sectors, with 2,476 projects under development phase and an estimated investment of USD 1.9 tn.

27. Conclusion   KNR Constructions Ltd has faced significant challenges in the global economy due to the COVID-19 pandemic and geopolitical conflicts. The company has shown a focus on diversification in operations and pursuing bids in various sectors such as micro irrigation projects, railways, mining, energy, pipeline, and metro development. There has been an increase in total liabilities, but the company is financing its growth more through equity than debt. The credit rating of the company has been upgraded by CRISIL, indicating stability and positive outlook. KNR Constructions Ltd aims to add more business verticals to the organization in the fields of construction of Elevated Metro Rail and Railway Projects.

28. Reference https://www.ibef.org/ https://financialservices.gov.in/beta/en https://www.statista.com/studies-and-reports/industries-and-markets http://www.knrcl.com/ https://www.screener.in/