About Deepak Builders & Engineers India Limited

Deepak Builders & Engineers India is an integrated engineering and construction company, specializing in execution and construction of administrative & institutional buildings, hospitals and medical colleges, industrial building, historical memorial complex, stadium and sports complex, residential complex and various developmental and other construction activity (“Construction Projects”). While their primary focus and strength are deeply rooted in Construction Projects, they have diversified in undertaking specialized structural work such as flyovers, rail under bridge, rail over bridges, approach roads and development and redevelopment of railway stations (“Infrastructure Projects”) (Construction Projects and Infrastructure Projects collectively referred to as “Construction & Infrastructure Projects”). They undertake Construction & Infrastructure Projects both, as EPC services on a fixedsum turnkey basis as well as on an item-rate basis/percentage basis. As an engineering and construction company, they have a proven track record of executing turnkey projects comprising of architectural & structural work, civil works, HVAC, Mechanical Electrical & Plumbing (“MEP”) works, firefighting & fire alarm systems, public health services, information technology system, modular operation theatre, medical gas pipeline systems and external development work, including landscaping work. Since incorporation, they believe they have transitioned into an established EPC player, demonstrating their expertise in various construction and infrastructure development projects including specialized structures across four (4) states of India, i.e. Punjab, Haryana, Rajasthan, Uttarakhand and two (2) Union Territories i.e. Chandigarh and National Capital Territory of Delhi. 

Currently, the Company has twelve (12) ongoing projects, including seven (7) EPC projects and five (5) itemrate/percentage rate contracts. Of the total ongoing projects, their Construction Projects comprises of four (4) hospital and medical college projects, one (1) administrative & institutional buildings; one (1) industrial building; and their Infrastructure Projects comprises of four (4) projects relating to upgradation/development/redevelopment of Railway Station and related work, and two (2) roads & bridges projects relating to rail over bridges. They are accredited as a Class I – (Super) Contractor with Central Public Work Department, Government of India.

Construction Industry in India
India's construction industry is on a phenomenal growth trajectory, projected to reach a staggering USD 1.4 trillion by 2025, accounting for 8%-10% of India's GDP. This represents a significant leap from its current size of approximately USD 820 billion, showcasing the dynamism and potential of this sector. The Indian government's ambitious Gati Shakti National Master Plan plays a pivotal role in propelling the construction industry forward. This comprehensive roadmap aims to seamlessly integrate infrastructure development across various sectors, creating a national logistics network that will boost efficiency and reduce costs. The Bharatmala Pariyojana initiative complements Gati Shakti by focusing specifically on developing a world-class highway network spanning over 83,000 kilometers. This ambitious project comprises several expressways, ring roads, and economic corridors, aiming to improve connectivity, boost regional development, and facilitate trade. The booming construction industry is a significant job creator, directly employing millions of workers across various disciplines like engineering, construction, architecture, and skilled labor. Additionally, the sector indirectly supports numerous job opportunities in associated industries like manufacturing, transportation, and logistics.

With its robust growth trajectory, fueled by government initiatives and private sector participation, the Indian construction industry is poised for an exciting future. Continued focus on technological advancements, sustainability practices, and skilled workforce development will be crucial to unlocking the sector's full potential and contributing to India's overall economic prosperity. The industry is expected to double in size within the next six years. Projections indicate the construction sector's contribution to India's GDP could rise to 15% by 2030, further solidifying its role as a critical economic driver.

Railway Infrastructure in India: overview on track and station network
Ranked fourth globally, India possesses an extensive railway system, trailing only the United States, Russia, and China. The affordability and efficiency of railways persist as the favoured choice for long-distance travel among the majority of Indians. 

Acknowledged as one of the world's largest railway systems under unified management, India's railway network excels in facilitating extended journeys and transporting bulk goods. Beyond being an economical mode of conveyance, it stands out as an energy-efficient means of transport. 

As of March 31, 2023, India's railway tracks span 1,32,310 kms, encompassing broad gauge, meter gauge, and narrow gauge. Notably, the total double-line track extends to 26,578 kms. The commitment to expansion is evident in the achievement of 5243 km of New Line during FY 2022-23, with an average daily track laying rate of 14.4 kms – a historic high. 

The railway infrastructure further encompasses 13,523 passenger trains and 9,146 freight trains operating daily. In the financial year 2022-23, the Indian Railways recorded its highest-ever loading of 1512 MT, showcasing the system's efficiency and capacity growth. 

With approximately 7,335 railway stations spread across 17 zones and 68 divisions, India's railway network stands as a testament to its scale, efficiency, and crucial role in the nation's transportation landscape.

Railway modernization in India: focus on expansion / modernization of railway station network
India's railway journey began in 1832 with proposals in Madras. The first passenger train ran between Bombay and Thane on April 16, 1853, covering 34 kilometers with 400 passengers. The country's first electric passenger train operated between Victoria Terminus (VT) and Kurla on February 3, 1925. The reorganization of India's railways into regional zones began in 1951. In 1952, fans, lights, and sleeping accommodations were mandated across all classes of passenger accommodations. 

Today, it has come very far. India's railway network is one of the largest in the world, serving millions of passengers and transporting goods across vast distances every day. As the backbone of the country's transportation infrastructure, Indian Railways plays a crucial role in connecting people, businesses, and regions. In recent years, there has been a concerted effort towards modernizing and expanding the railway station network to meet the evolving needs of passengers and freight traffic. 

The modernization of railway stations in India encompasses a wide range of initiatives aimed at enhancing infrastructure, amenities, and services to provide passengers with a world-class travel experience. This includes the construction of modern waiting halls, waiting rooms, restrooms, and passenger lounges equipped with amenities such as Wi-Fi connectivity, charging points, and digital display boards providing real-time information about train schedules and arrivals. Additionally, efforts are underway to improve accessibility for passengers with disabilities by installing ramps, elevators, and other facilities to ensure equitable access to railway services. Some of the developments are as mentioned below: 

According to the latest report of Ministry of Railways in FY 2022, a total of 181 stations spread across various states have been earmarked for redevelopment under the oversight of the Railway Board's Rail Land Development Authority (RLDA). Among these, construction activities have been successfully concluded at Gandhinagar Capital and Rani Kamlapati railway stations, marking significant progress in station modernization endeavors. Additionally, construction projects are currently underway at several key locations, including Bijwasan, Gomtinagar (in collaboration with NBCC), Delhi Safdarjung (in partnership with IRCON), and IMS, Ajni/Nagpur (in association with NHAI), leveraging the Engineering, Procurement, and Construction (EPC) mode to expedite implementation.

Road Infrastructure in India
India has a road network spanning approximately 6.6 million kms, making it the second largest in the world. This network – which comprises of national highways, state highways, district roads, and rural road – carries approximately 65% of country’s freight traffic and nearly 90% of passenger traffic.

India also has the second largest highway network in the world1 , after the United States, spanning approximately 146,145 kms. The crown jewels of the network, NHs constitute only 2% of the total length but carry over 40% of traffic. These high-quality, multi-lane highways connect major cities, ports, and industrial centers. Since the 1990s, India has prioritized road development. Over 35,000 kilometers of four-lane expressways have been constructed, connecting major economic and cultural centres. The National Highways and Infrastructure Development Corporation Limited (NHIDCL) and the National Highways Authority of India (NHAI) have played crucial roles in this expansion.

Growth Prospects in Indian Road Infrastructure
The Indian Road sector is experiencing significant growth and is set to expand further in the future. The government has recognized the importance of improving transportation infrastructure and has taken initiatives to enhance the road network in the country. It is estimated that India will need to spend $4.51 trillion on infrastructure by 2030 to achieve its vision of becoming a $5 trillion economy by 2025. 

In line with this, the National Infrastructure Pipeline (NIP) has allocated a total capital investment of Rs 20.34 trillion for the highways sector by 2025. Under the NIP, the government has already allocated INR 20.33 trillion for road infrastructure development during the period of FY 2020-2025. The budget for 2023-24 includes 100 critical transport infrastructure projects to improve last- and first-mile connectivity for various sectors such as ports, coal, steel, fertilizers, and food grains. These projects, with an investment of Rs 75,000 crore, including Rs 15,000 crore from private sources, have been prioritized. 

The government has set ambitious targets for the highway sector, with plans to spend approximately Rs 17 trillion within the five-year period of FY 2020-2025. This investment will be focused on the construction of expressways, economic corridors, coastal and port connectivity highways, and border roads or strategic highways. The aim is to increase the total highways network to two lakh kilometers by 2025. 

Furthermore, the government is emphasizing the need to adopt green technology in road construction. The National Rural Infrastructure Development Agency is targeting the construction of 50,000 km of rural roads by 2030, with a focus on utilizing green technology. In addition, the government plans to construct 26 Green Highways in India by 2024, highlighting its commitment to sustainable infrastructure development. The growth potential of the Indian road sector is immense. The highway construction industry is projected to experience a significant growth rate of 133% by 2025. India aims to achieve a target of 60 km of road construction per day, already building a record-breaking 30 km per day. The government has also set specific targets for expressways and expects to see reduced travel time between major cities such as Delhi, Dehradun, Haridwar, Jaipur, Chandigarh, and Amritsar. 

The Indian Road sector is poised for substantial growth in the coming years. With increased capital expenditure, improved infrastructure, and a focus on sustainability, India aims to enhance connectivity, boost economic development, and create more efficient transportation systems. The government's commitment to the development of the road sector will play a vital role in realizing its vision for a $5 trillion economy and meeting the growing infrastructure needs of the country. 

The Government has taken various measures to reduce delays and fast track many stuck projects to increase the per day construction target in the current fiscal . In the Union Budget 2023, the government has proposed an outlay of nearly INR 1,991.1 Bn for the Ministry of Road Transport and Highways. This is 51.8% higher than the revised estimates for 2021-22. The increasing government expenditure on the road network development in the country will give boost to the industry in coming years.

Basis the historical growth trend in road construction, the various demand drivers that are directly & indirectly impacting the road construction segment, the new growth forecast / targets set by the relevant Government agencies / ministries, D&B anticipate the national highway network to reach approximately 200,000 kms by FY 2025.

Undeterred by ongoing challenges, the Ministry has set an ambitious target of constructing 18,000 kms of national highway in FY 2023 increasing the per day construction target to 40 Kms per day. NHAI Chief also conveyed that all the balance work of Bharatmala phase-1 will be tendered out by FY 2024 that will push the road construction. As per the target specified, the total national highway length that is planned to be achieved by FY 2025 is 2,00,000 kms which translate into a CAGR of 12.2% between FY 2022-25.

Airport Infrastructure in India
India has witnessed massive growth in air travel in the recent years, with annual rate of growth in air passengers trumping the growth rate in passengers carried by railways. India is today the third largest civil aviation market in the world, in terms of total number of air passengers carried per annum. As per, total passengers carried by Indian airlines peaked 344 million in FY 2019 while it hovered near same range in FY 2020 at 341 Mn before falling to 115.38 million in FY 2021 due to Covid induced restriction in travel. However, strong growth in airline traffic (both passengers and cargo) prior to FY 2021 have resulted in massive expansion in commercial aircraft stock in the country. During FY 2022, overall passenger air travel carried by schedule commercial aircraft surged by 64% to 188.9 Mn.

The air passenger traffic in India is expected double its 2019 market size by 2035 ( as per IATA estimates it is predicted to reach 442 Mn by 2035) on the back of growing economy and expanding middle class. This has put pressure on the existing civil aviation infrastructure in the country. 

In addition, the Indian government is investing heavily in the aviation sector. The government is building new airports, expanding existing airports, and improving air traffic management systems. According to the Airports Authority of India (AAI), in the last eight years, the number of airports in the country has increased from 50 to 148 in 2023, and over the next five years, 89 new airports are expected to be opened.

Industrial Construction
India's industrial landscape is undergoing a transformative journey, fueled by ambitious government initiatives like "Make in India" and rapid economic growth. Amidst this transformation, the industrial construction segment stands as a key driver, laying the foundation for factories, power plants, logistics hubs, and other crucial infrastructure. The Indian industrial construction market is estimated to grow at a robust CAGR of 12% by 2027. This immense potential attracts both domestic and global players, leading to a vibrant and competitive landscape. Government spending on infrastructure development, rising automation in manufacturing, and expansion of sectors like chemicals, pharmaceuticals, and electronics fuel the demand for state-of-the-art industrial facilities. 

The China Plus One strategy is an approach adopted by companies and countries to diversify their supply chains away from excessive reliance on China as a manufacturing and sourcing hub. The strategy emerged as a response to various factors, including rising labour costs in China, geopolitical tensions, trade uncertainties, and the need to mitigate risks associated with being overly dependent on a single country for production and sourcing.

India, being one of the largest economies in the world and home to a vast workforce and diverse manufacturing capabilities, has been actively leveraging the China Plus One strategy to attract investments and businesses looking to diversify their supply chains away from China. 

India's vision of becoming 'Atmanirbhar' (self-reliant) and enhancing its manufacturing capabilities and exports has led to significant efforts and investment in the form of Production Linked Incentives (PLI) schemes. An outlay of INR 1.97 lakh crore (over US$ 26 billion) has been announced in Union Budget 2021-22 for these schemes across 14 key manufacturing sectors from FY 2021-22. These PLI schemes are aimed at attracting companies looking to diversify their supply chains away from China. The incentives offered by the government, such as tax breaks and regulatory reforms, make India an attractive destination for businesses seeking to move their production from China to India. This proactive approach has further strengthened India's position as a preferred manufacturing base under the China Plus One strategy.

Additionally, The Indian government's commitment to creating a business-friendly environment has resulted in increased foreign direct investment (FDI) inflows in the country over the years. Since 2014-2015, when FDI inflows stood at US $ 45.15 billion, now have shown consistent growth reaching a record high of US$ 84.84 billion in the financial year 2021-22. The government's pro-business reforms, coupled with investment incentives offered under the PLI schemes, have played a vital role in attracting foreign investments and businesses seeking alternatives to China. Moreover, India has signed 13 Free Trade Agreements (FTAs) and six Preferential Trade Agreements (PTAs) so far, with ongoing FTA negotiations with the U.K, Canada, and the European Union expected to conclude, potentially opening up further opportunities for businesses exploring the China Plus One strategy. 

However, global uncertainties in FY 2023 resulted in a temporary drop in FDI inflows to US$ 70.97 billion. Nevertheless, India's proactive measures, investment incentives, and access to FTAs remain valuable drivers for businesses considering the China Plus One strategy. Other factors that India leverages include it’s access to domestic market, where India's large and diverse consumer base provides significant opportunities for companies exploring the China Plus One strategy. By establishing a presence in India, companies can access and serve this vast market, offering a compelling reason for incorporating India in their diversification plans. The 'Atmanirbhar' vision also emphasizes boosting domestic manufacturing to cater to local demand, making India an appealing market for businesses aiming to tap into the country's consumption potential. 

Another factor adding to this is India's location in South Asia, which makes it a strategic hub for companies looking to expand their operations beyond China. Its proximity to both the Indian subcontinent and Southeast Asian markets provides a unique advantage for businesses seeking to serve a wide geographical area. In addition to the geographical advantage and manufacturing capabilities, India's growing technology and innovation sectors are another significant draw for businesses diversifying their supply chains. With India increasingly investing in research and development (R&D) and innovation-oriented operations, companies have access to high-value opportunities to establish a presence in India and access its pool of skilled talent and cutting-edge research facilities. 

Lastly, recognizing the importance of ease of doing business in attracting foreign investments, the Indian government has taken numerous steps to simplify regulations, reduce bureaucracy, and streamline approval processes. These efforts are aimed at creating a more business-friendly environment, making it easier for companies to set up and operate in India.

Hotel Industry in India: Capital Expenditure
India's tourism sector is a rapidly growing economic force, exerting a substantial impact on employment and regional development while fostering a multiplier effect on associated industries. Projections indicate that by 2028, the country's tourism and hospitality industry is poised to generate revenue exceeding USD 59 billion, with Foreign Tourist Arrivals (FTAs) anticipated to reach 30.5 million. The hospitality sector is experiencing a notable resurgence in investment activity, rebounding from pandemic challenges. In the first half of 2023 alone, the industry saw a remarkable total deal volume of USD 175 million, building on the positive trend initiated in 2022 when the total deal volume reached USD 73 million. This positive trajectory is expected to continue into the second half of 2023, with an estimated transaction volume of around USD 88 million, extending into 2024. 

In 2022, hotel signings reached a record-breaking 19,860 keys, with greenfield projects dominating the landscape, although brownfield projects gained ground, comprising 32% of the total signed rooms. The year 2022 also witnessed a record number of hotel openings, totaling 9,961 keys, with the midscale segment leading the market share, followed by the upscale, upper upscale, and luxury segments. The investment landscape remains enticing, supported by favourable macroeconomic factors, an expanding commercial market, and enhanced air connectivity, with expectations of heightened diversification into the hotel asset class by High-Net-Worth Individuals (HNIs). 

The hospitality landscape in India is witnessing dynamic growth, notably marked by the prolific announcements of hotel projects by key players in the last year. A closer look at the ownership structures reveals a notable trend, with 40 out of 63 projects spearheaded by private Indian companies, emphasizing the robust participation of domestic entities. Additionally, 11 projects are attributed to The Lemon Tree Group, followed by 6 & 4 projects announced by Tata Group and ITC Ltd. A total of 3 projects received backing from state governments, the rest projects were announced by Birla Aditya Group, Mahindra & Mahindra Group, Thapar, and Brigade Group. 

The overwhelming majority of these endeavours, specifically 62 out of 63, are dedicated to establishing new hotels, reflecting the industry's forward-looking approach. This surge in hotel projects extends beyond major cities, with 34 out of 63 strategically located in Tier 2 or Tier 3 cities, a testament to the increasing demand for accommodation in these burgeoning urban centres. Furthermore, the diversity in hotel types is evident, with 22 out of 63 projects focusing on budget hotels, and 16 on luxury establishments. 

In essence, these substantial investments underscore the resilience and adaptability of the hotel industry in India, positioning it as a key player in the global hospitality landscape. As the nation continues to attract diverse demographics of travellers, the strategic expansion and varied offerings herald a promising era for the hospitality sector, contributing significantly to India's economic growth.

National Highway Network in India.
Implementation of favourable policy measures / programs, and aggressive push by the Government to increase the road network has accelerated the pace of road construction in the country. The switch to a corridor-based highway development strategy adopted by the Government, beginning 2014 – 15, has improved the pace of construction. The annual addition in road network reached its fastest during FY 2021, when the pandemic induced a lockdown in the country. Between FY 2015 and FY 2023, nearly 54,000 kms of road was added to the national highway network in the country, thereby taking it from approximately 91,000 kms to its present stretch of approximately 145,000 kms. 

Average daily construction rate reached its highest level of nearly 36.5 kms/day in FY 2021, as the industry was benefitted by the lockdown measures imposed after the spread of Covid-19 pandemic. Since then, the average daily rate has dipped, to nearly 24 kms in FY 2023.

DEEPAK BUILDERS & ENGINEERS INDIA LIMITED COMPETITIVE STRENGTHS
1. Decent order book with a government client base
2. Continuous Focus on equipment ownership
3. Strong financial performance
4. Experienced Promoters and Strong Senior Management Expertise

DEEPAK BUILDERS & ENGINEERS INDIA LIMITED STRATEGIES
1. Establish their position in Northern India and expand their foot print in other geographies
2. Constant expansion of their pre-qualification and bid capacities
3. Further enhance their project execution capabilities
4. Leverage core competencies with enhanced in-house integration

DEEPAK BUILDERS & ENGINEERS INDIA LIMITED RISK FACTORS & CONCERNS
1. The revenue is majorly concentrated from projects undertaken or awarded by government, semigovernment and government-controlled entities.
2. The project portfolio has historically been concentrated in Punjab, India and any changes affecting the policies, laws and regulations or the political and economic environment.
3. Construction & Infrastructure Projects are typically awarded to them on satisfaction of prescribed qualification criteria and following a competitive bidding process.
4. Their in-house integrated model may fail which may affect the operations, reputation and profitability.