My dear fellow stakeholders
I am extremely happy and proud to share with you that FY 2019 was another remarkableyear in our journey. We delivered on our promises and continued to establish adifferentiated asset-light business model in the infra segment. We have built a solidbalance sheet with net cash balance and have also built an exceptional team focused onoperational excellence. This helped us stand firm even in a challenging environment and Iam quite confident that Welspun Enterprises will deliver significant value in the comingyears.
Year in review
After record awarding of projects in FY 2017 and FY 2018 the year FY 2019 was a yearin which the Ministry of Road Transport and Highways & NHAI focused more on execution.This can be seen from the fact that FY 2019 was the best year in the last decade as far ashighway construction in the country was concerned. As a Company our focus was alsoaligned with our priority being execution of the projects in our portfolio.
In the first quarter of the year our first HAM project the Delhi-Meerut ExpresswayPackage-1 was completed in record time well ahead of schedule. It was a matter of greatpride for the Company when it was inaugurated by the Honorable Prime Minister ShriNarendra Modi and dedicated to the nation. We have been operating and maintaining thisroad with great care which has helped reduce travel time from 45-50 minutes to 8 minutes.
This road has a long-list of FIRSTS to its name including: India's FIRST 14-LaneExpressway India's FIRST Green Expressway India's FIRST completed HAM project India'sFIRST HAM project to be awarded AAA (SO) Credit Rating India's FIRST HAM project toreceive annuity India's FIRST HAM project to receive early completion bonus
Beautification and sustainable projects initiated along the way include a2.5-meter-wide cycle track on either side a vertical garden on Yamuna Bridge solarlighting system watering of plants through drip irrigation only wall art and replica offamous monuments. This adds further charm to the project and makes it truly a landmarkproject in the country.
Execution of other projects has also been progressing well. Two other HAM projectsGagalheri-Saharanpur-Yamunanagar as well as Chutmalpur-Ganeshpur-Roorkee-Gagalheri are at an advanced stage of completion. Both these projects are running ahead of scheduleand we plan to complete both of them in calendar year 2019. Execution in the other two HAMprojects Aunta-Simaria and Chikhali-Tarsod is also progressing well and weexpect to complete them well in time.
Execution of the Dewas Water project our BOT project in the water domain was also infast track mode during the year and we were able to complete it ahead of schedule. Theproject received its COD in April 2019.
While we were focused on execution we did not lose sight of opportunities to grow ourbusiness and diversify our risks. We added two more projects to our portfolio during theyear.
The first one was an NHAI project in Tamil Nadu: Sattanathapuram Nagapattinam.This is by far our biggest HAM project by value till date and it demonstrates ourgrowing confidence in taking up larger projects.
With NHAI awarding relatively lower number of projects in the year we decided toexplore opportunities in state HAM projects as well. There were primarily three reasonsfor the decision this would help us diversify from one client keep our growthmomentum going and also give us better returns given the lower competition in theseprojects. We were successful in winning one state HAM project AM-2 package inAmravati Maharashtra during the year taking our total HAM portfolio to more than Rs. 85Billion.
The second half of the year however was very challenging for the financing market.The IL&FS crisis snowballed into a major financial crisis with many other financialinstitutions especially NBFCs facing challenges in raising debt from the market thusfreezing their lending. Even in this challenging environment I am happy to share that wewere able to achieve financial closure for both our new projects well in time and at verycompetitive rates. This was possible only due to our strong balance sheet robust creditrating and our prudent approach to bidding.
Our operational excellence also translated into strong financial performance. Ourrevenues were up 74% YoY while the improvement in Operating EBITDA was even better at121%. The revenue growth was driven by the robust execution in our under-constructionprojects while the margin improvement was driven by the fixed costs getting apportionedover a higher base.
Welspun believes in doing business which is not only consistent with the environmentbut also helps sustain in the long run. Known for its various social initiatives Welspunhas played its part responsibly in and around the region it operates. This includesinitiatives like health check-up camps potable water supply and educational initiativesfor children in the areas which it operates.
The Year Ahead
I am very optimistic about the future of our Company. We remain primed to anticipateIndia's future infrastructural needs amidst a challenging business environment. With thenew Government coming into power we expect the activity in infrastructure sector to pickup pace. The opportunity in roads remains significant with the Bharatmala program beingthe key driver. Apart from roads we are also analyzing the water sector for future growthopportunities and for diversification.
We believe that the water sector will be the next thrust area for the Government giventhe precarious position of our water resources. With our experience in water supplyprojects such as Dewas water I firmly believe that WEL is at an advantageous position totap these opportunities and fuel future growth.
Welspun Enterprises starts the year with a robust order book of more than Rs. 52Billion which sets a strong foundation for future growth of the Company. The order bookprovides significant visibility for the next 2 years i.e. FY 2020 and FY 2021.
We will also look at unlocking value from our completed road projects. With threeoperational projects expected before the end of the year we will have more options toexplore in terms of our asset monetization. We will also look at unlocking value from ourOil & Gas investments at the right time. There are some promising blocks in ourportfolio which could yield significant returns at the right stage of the developmentcycle.
Vision for the future
At Welspun Group we always aim to be among the Top-3 in any business we operate. Thecase is no different in this business as well. In infra have chosen to be a HAM playerand our endeavor is to become a Top-3 player in HAM. Currently we might be in Top-10 asfar as HAM is concerned but I am pretty confident that we should be in the Top-3 in thenext 3 years.
We are not only focused on completing our projects in the earliest possible time andwithin anticipated costs but also withstand all complexities demonstrating ourrock-solid foundation. We are proud of our project management capabilities and compliancewith the highest quality standards. We are dedicated to delivering high-performanceassets while achieving the functional objectives. Our infrastructure solutions are aimedat not only meeting the needs of today but for decades to come. We intend to be enduringand relevant to India's growing infrastructure needs.
Your Company intends to continue its approach of prudent bid/buy strategy to strengthenits HAM project portfolio. The Company will continue to work on an asset-light model withfocus on Return on Capital Employed (RoCE) free cash flow and risk management.
My Sincere Thanks
At WEL growth has been possible with support and encouragement from all ourstakeholders including shareholders bankers customers and our committed employees. Aswe step back and assess what we accomplished during FY 2019 we couldn't be more proud ofthe employees who made it all happen.
I would also like to express gratitude on behalf of the Board of the Company to all ourstakeholders for their unstinted support in shaping the performance of the Company.
We strongly believe the best is yet to come.
With Best Wishes
B. K. Goenka