About Ceigall India Limited

Ceigall India Limited is an infrastructure construction company with experience in undertaking specialized structural work such as elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways. The Company had been incorporated in the year July 2002. Started the journey with one of their initial road projects that they executed for the Punjab Public Works Department, Ludhiana division, was awarded in 2006 with an aggregate project cost of ₹62.94 million for 20.42 lane km. In 2014, they were awarded the first four lane highway EPC project from NHAI for 24.08 lane km. Thereafter, in 2014, they were awarded the first four lane highway EPC project from NHAI for 24.08 lane km with a project cost of ₹ 378.10 million. Now they are undertaking a four lane elevated corridor EPC project which is one of the longest four lane elevated corridor portion of 14.26 kms in India. 

The Company has completed over 34 projects, including 16 EPC, one HAM project, five O&M and 12 Item Rate Projects, in the roads and highways sector. Currently, ther Company has 18 ongoing projects, including 13 EPC projects and five HAM projects which includes elevated corridors, bridges, flyovers, rail over-bridges, tunnels, expressway, runway, metro project and multi-lane highways. Ceigall have demonstrated track record of completing the Projects ahead of schedule. As on date, Ceigall have completed seven EPC projects out of 16 before the schedule completion date.

As on March 31, 2024, they have constructed over 1,739.88 lane kms of roads and highways, which also includes specialized structures such as elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways. As on March 31, 2024, we have 1,488.17 lane kms of ongoing projects. As on March 31, 2024, we have completed 2,158.72 lane kms of O&M projects. They have diversified their geographical presence in construction, development and execution of major multi-lane highway projects with specialised structures in various states of India, including Punjab, Haryana, Rajasthan, Uttar Pradesh, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Delhi, Maharashtra and Bihar. Their projects were spread across six states in Fiscal 2022, whereas now they have expanded to ten states by Fiscal 2024. They have an efficient management team and an operation team with the total staff strength exceeding 2256 numbers.

INFRASTRUCTURE INDUSTRY IN INDIA
The Indian infrastructure to play major role with around 3% contribution to GDP as on FY23. CareEdge estimates India’s infrastructure industry investments of Rs. 52,962 billion between FY24-FY28. India’s economic growth is fueled by a diverse range of sectors, of which infrastructure is a vital sector. In recent years, the government has taken several steps to accelerate infrastructure development, wherein, the key focus areas are transportation, energy, smart cities, water, social infrastructure, and digital infrastructure. There have also been efforts to attract foreign investors in the infrastructure sector through policy reforms. 

Infrastructure projects are often expensive and have a long gestation period. To address this issue, fundraising and generating returns, the government is continuously striving to create a favorable operating environment for its players. Accordingly, national and state-level agencies like the National Highways Authority of India (NHAI), state-level bodies, and private sector companies (both domestic and international), are actively participating in infrastructure development.

With the growing population, the long-term need for robust infrastructure is necessary for economic development. This generates the need for massive investments in the development and modernization of infrastructure facilities which will not only cater to the growing demand but will also ensure competitiveness in the global market. 

Gross Fixed Capital Formation (GFCF), which is the measure of a country’s investment in fixed assets witnessed significant improvements over the years. It is a key indicator considered to assess the trend in investments in an economy. In FY23, the ratio of investment (GFCF) to GDP climbed up to its highest in the last decade at 34%.

In coming years, the support of public investment in infrastructure is likely to gain traction due to initiatives such as Atmanirbhar Bharat, Make in India, and Production-linked Incentive (PLI) scheme announced across various sectors. Considering all these factors, the GFCF is projected to increase at a CAGR of 7%-8% in the forecast period of FY24-FY28.

National Infrastructure Pipeline (NIP)
NIP was launched in December 2019 with a focus on infrastructure development in order to enable the country to achieve its target of USD 5 trillion economy by FY2025 and USD 10 trillion by FY2030. Infrastructure to play a major role with 3% contribution to the GDP by FY25 (Rs 11.11 trillion) and is expected to remain same or increase its share by FY30 (Rs 25.00 trillion). 

A taskforce was created to set up the pipeline. In the final report submitted by the task force in April 2020, the pipeline covers multiple sectors such as urban infrastructure, renewable and conventional energy, roads and railways that constitute nearly 71% of the projected total capex of Rs 111 trillion. It also includes investments in other sectors such as rural infrastructure, ports, airports among others. The proposed investments will be implemented by both the government and the private sector.

During FY20-25, sectors wise breakup of NIP investment is with energy contributing the highest at Rs 26,900 Bn around 24% of the total plan followed by roads Rs. 20,338 Bn at 18%, urban Rs. 19,193 Bn at 17%, and railways with an investment of Rs. 13,676 which contributes 12% amount to ~71% of the projected infrastructure investments in India.

Road Infrastructure in India
The road transport sector contributed 2.5% to GVA in FY21, after been in the range of 3.2%-3.3% from FY12 to FY20. Post the pandemic effect in FY21, the sector's growth rate has returned to pre-pandemic level of 3.2% of India’s GDP in FY22. The road transport sector has grown on a CAGR of about 5.20% against the total CAGR growth of the GVA of about 5.5% during the period FY12-FY22.

PPP Framework and Modelsin Operation
Connectivity has been the priority of the government and roads are the best and cheapest way of increasing last mile connectivity. Construction of roads in every corner of the country by only government agencies is difficult as it will increase both time and cost. Accordingly, the government partnered with the private players under Public Private Partnership (PPP) to achieve complete connectivity by way of roads. Initially, PPP road projects broadly fell into one of the two categories of toll or annuity. 

However, private sector participation gradually became subdued post-2012 due to various issues including aggressive bidding, the over-leveraged balance sheet of developers, shortcomings in project preparation activities, and land acquisition issues. To attract private participation in the road sector, the government introduced the Hybrid Annuity Model (HAM). It focused on the proper allocation of risk among partners. On the other hand, the operational asset monetization model has gained prominence recently with the advent of the TOT. Other asset monetization options like the use of InvITs and securitization of toll revenue have also been introduced.

Indian Airports Infrastructure
The Indian airport sector has witnessed significant growth and transformation during the period driven by a confluence of factors like rising passenger traffic, private sector participation, technological advancements, and government focus on improving the airport infrastructure. There have been several notable developments in the sector, such as the construction of big-ticket greenfield airports, the privatization of airports, the launch of a new airline, and the formulation of a drone policy, which have contributed to the positive sentiment. 

Airport infrastructure, as part of the aviation industry, plays a significant role in the development of the national economy due to its globalized nature. Entry of private players in the Indian airport sector introduced the concept of ‘Airport Retailing’. Whereas the Regional Connectivity Scheme “Ude Desh ka Aam Nagrik” (RCS UDAN) scheme, has helped air traffic grow, with new routes being awarded, and more and more airports being operationalised. 

Besides, technology has become an integral part of the aviation sector. Airports and airlines are extensively using technology and digitalization, including plane boarding procedures, contactless screening, and biometrics to make travelling more efficient and smoother for passengers. 

Further, the swift rebound of the Indian aviation industry post-COVID-19 highlights its resilience and adaptability. Additionally, with the continuous expansion of the domestic market and the resurgence of international travel, the aviation sector in India is poised to strengthen its position on the global stage. This includes expansion of terminal buildings, setting up new domestic cargo terminals, provision of navigational facilities, and development of greenfield airports. Whereas passenger and cargo traffic are expected to continue its growth momentum, driven by economic development, rising disposable income, and an e-commerce boom. 

Moreover, there is an increasing focus on sustainability, technological advancements, and regional connectivity. For instance, the Ministry of Civil Aviation (MoCA) has taken initiatives to work toward carbon neutrality and achieving net zero carbon emissions at airports in the country by way of standardising the Carbon Accounting and Reporting framework of Indian Airports. For this purpose, airport operators with scheduled operations have been advised to map the carbon emission at their respective airports and work toward carbon neutrality & net zero emission in a phased manner. MoCA has also advised developers of the upcoming Greenfield Airports and the respective state governments to work toward achieving Carbon Neutrality & Net Zero, which inter-alia includes the use of green energy. 

Airports at Delhi, Mumbai, Hyderabad, and Bengaluru have achieved Level 4+ and higher Airports International Council (ACI) Accreditation and have become carbon neutral. Additionally, 66 Indian airports are operating on 100% Green Energy. These government initiatives and private investments will play a crucial role in further infrastructure development and modernization. 

In the interim budget 2024, the government focused on the development of new airports and the extension of current airports that will continue expeditiously going forward. Over the last ten years, there has been a surge in the aviation industry. There are now 149 airports, which is a twofold increase. With 517 new routes conveying 1.3 crore passengers, the Ude Desh ka Aam Naagrik (UDAN) initiative has widely expanded air connectivity to Tier II and III cities. Indian airlines have taken the initiative to order more than a thousand new aircraft. The government would carry on developing the airport infrastructure in the future. The development of new airports and the extension of current airports will continue expeditiously going forward.

Urban Infrastructure Sector

Water Supply and Sanitation (WSS)
Given India’s increasing population, the need for water and its management is on the rise. Water availability is projected to become a major concern in the future. In addition, the damage to water resources done by pollution is another concern. Releasing industrial waste, discharge of untreated or partly treated municipal wastewater through drains, discharge of industrial effluent, improper solid waste management, illegal groundwater abstraction, encroachments in flood plains/ river banks, deforestation, improper water shade management, and non-maintenance of e-flows and agriculture run-off are some of the major reasons for pollution of water bodies. 

Accordingly, the Government of India (GoI) has come up with various schemes that emphasize water conservation and restoration. As a result, the number of polluted river stretches has reduced from 351 in 2018 to 311 in 2022 and improvement in water quality has been observed in 180 out of 351 Polluted River Stretches (PRS) during 2018. As per a report by the Ministry of Jal Shakti, the assessment of water quality over the years discloses that in 2015, 70.00% of rivers monitored were identified as polluted, whereas in 2022 only 46.00% of rivers monitored were identified as polluted. The water requirement is only estimated to grow higher in the coming years.

The Central Water Commission (CWC) periodically assesses the country’s overall water resources and it has accorded water supply for drinking purposes as the top priority under water allocation.

Urban Waste Generation and Treatment
In India, the sewage generation in the urban region was 72,368 Million Litres per Day (MLD) for 2020-21, while the installed sewage treatment capacity was 31,841 MLD. The operational capacity is 26,869 MLD, which is lower than the load generation. As per a NITI Aayog report, as of August 2022, of the total sewage generation, only 28.00%, i.e., 20,236 MLD is treated. This implies that 72.00% of the wastewater is left untreated and disposed of in various water bodies like rivers, lakes, or underground water. Some capacity additions like 4,827 MLD sewage treatment have been proposed, but a gap between the wastewater generation and treatment of 35,700 MLD, i.e., 49.00% remains. 

Additionally, as per the CPCB (2021) in the city-scale assessments, the wastewater generation from Class I cities and Class II towns (as per the 2001 census) is estimated at 29,129 MLD. Under the assumption of a 30.00% decadal increase in urban population, it is expected to be 33,212 MLD at present. Conversely, the existing capacity of sewage treatment is only 6,190 MLD. There is still a 79.00% (22,939 MLD) capacity gap between sewage generation and existing sewage treatment capacity. Another 1,742.6 MLD wastewater treatment capacity is being planned or built. Even with this added to the current capacity, there is still a sewage treatment capacity shortfall of 21,196 MLD.

CEIGALL INDIA LIMITED STRENGTHS
1. One of the fastest growing EPC company with an experience in executing specialised structures
2. Healthy orderbook giving long term revenue visibility
3. Demonstrated project development, execution and operational capabilities
4. Efficient business model
5. Experienced management team

CEIGALL INDIA LIMITED STRATEGIES
1. Diversification by leveraging existing capabilities
2. Selectively expand our geographical footprint
3. Continue to explore hybrid annuity based model to optimize our project portfolio
4. Continue focusing on enhancing execution efficiency
5. Continue to grow and benefit from the robust future growth of India’s economy and infrastructure

CEIGALL INDIA LIMITED RISK FACTORS & CONCERNS
1. The business is primarily dependent on contracts awarded by governmental authorities.
2. Delays in the completion of construction of ongoing projects could lead to termination of their contracts or cost overruns or claims for damages.
3. All projects they operate have been awarded primarily through competitive bidding process.
4. They entered into the hybrid annuity model (“HAM”) segment in 2021 for implementing highway projects which are different from the engineering procurement contract (“EPC”) projects. They cannot assure us if they will be successful in executing these HAM projects.
5. Their business is relatively concentrated in north, west and central region of India and any adverse development in these regions may adversely affect their business.
6. The Securities and Exchange Board of India received a complaint alleging coercion, financial instability and fraudulent practices.
7. Market conditions may affect their ability to complete their HAM and EPC projects at expected profit margin.