Construction Note 7th March 2011-r[1]

8/6/2019 Construction Note 7th March 2011-r[1]

1/13

ICRA Rating Services Page 1

INDIAN CONSTRUCTION SECTOR: OPPORTUNITIES EXPAND BUT

EXECUTIONREMAINSACONCERN

Contacts

Anjan [email protected]+91-22-30470006

Vikas [email protected]+91-124-4545301

Shubham Jain

[email protected]+91-124-4545306

Mandeep [email protected]+91-124-4545386

Websitewww.icra.in

Background

The Indian construction sector is an integral part of the economy and aconduit for a substantial part of Indias development investment. Theconstruction industry is primarily driven by Government of India (GOI)investments on core infrastructure projects and creation of urbaninfrastructure; industrial capital expenditure (capex) by corporate sectorand development activities of real estate/housing sector. The sector playsa pivotal role in developing the countrys infrastructure, a pre-requisite forhigh levels of economic growth and an area of focus for the GoI.

Construction sector accounts for nearly 45% of the total investment ininfrastructure and is expected to be the prime beneficiary of the surge ininfrastructure investment in the near to medium term. The importance thatthe GoI places on bridging the countrys acute infrastructure deficit isevident from the two fold increase in the planned outlay for theinfrastructure sector in the XIIth five year plan. Significant infrastructureinvestments, along with revivial in industrial capex and improvment in realestate scenario, are likely to catalyse growth for construction companies inIndia, going forward.

The construction sector, however, continues to face challenges from landacquisition issues, adverse political and structural changes, shortage oftalent, design and constructability issues, and rising material and labourcosts. Further, deficiencies in project planning, use of inappropriateprocurement contracts and faulty contract management also contribute todelays in project implementation. The financial impact of delays onconstruction companies is worsened by the absence of an efficientarbitration mechanism. In addition, the flow of funds to the sector isconstrained by sectoral caps/exposure norms, asset-liability mismatches,and the absence of an active corporate bond market.

This paper discusses the opportunities and challenges faced by the Indianconstruction sector against the backdrop of increasing investments, bothpublic and private, in the Indian infrastructure. It also highlights theproblems impeding the timely execution of infrastructure projects, issuesthat have been holding back growth of the construction sector, and the

recent policy initiatives taken to address some of these issues. ICRAclosely tracks developments in the construction sector and rates manycompanies in it (refer Annexure IIfor list of construction companies ratedby ICRA).

ICRARating

Feature

M

arch2011
mailto:[email protected]://www.icra.in/http://www.icra.in/mailto:[email protected]


2/13

ICRA Rating Feature Indian Construction Sector


Significant infrastructure investments envisaged over the near to medium termDevelopment of adequate infrastructure to achieve/sustain high GDP growth is a priority for the GoI.Despite slippages from targets, investments in infrastructure reported a compounded annual growth rate(CAGR) of 18% over the last three years, with the spending increasing to Rs. 4.0 lakh crore in FY 2009-10from 2.4 lakh crore in 2006-07. According to the Mid-Term Appraisal of the XI th Five-Year Plan (MTA XIthFYP), Rs. 20.5 lakh crore is likely to be invested during the XIth Five Year Plan, with the private sectorcontribution at 36.2%. The power sector received the highest allocation in the total outlay at Rs. 6.6 lakhcrore (32.1% of total allocation), followed by roads and bridges at Rs. 2.8 lakh crore (13.6% of totalallocation). Significant investments are also expected to be committed in the Mass Rapid Transport System(MRTS) in the near to medium term as MRTS expands its footprint to include various cities. The stronginfrastructure outlay envisaged during the XII th Five-Year Plan is expected to drive the inflow of orders toconstruction companies. As Table 1 shows, there is a potential construction opportunity of Rs. 17.7 lakhcrore during the XIIth Plan period, with the GoI seeking to raise the countrys infrastructure capabilitysignificantly.

PPP model to be implemented across sectorsThe PPP model has gained prominence as the GoIs preferred means to underatake infrastructuredevelopment. Facing significant debt and fiscal challenges that limit its ability to fund the requiredinvestments, the GoI expects the private sector to partner it in bridging the count rys infrastructure deficit.The GoIs focus on private participation in infrastructure development is expected to lead to a significantincrease in the share of PPP projects in the total investment outlay. According to the MTA XI th FYP, 292projects worth Rs. 2.4 lakh crore are being implemented under the PPP model, while 404 projects worthRs. 3.8 lakh crore are expected to be awarded in the near to medium term. The roads and ports sectorshave garnered the highest shares of 35.4% and 15.9% respectively, of the total PPP investment. This isexpected to provide an impetus to the order book going forward, thereby lending visibilty to revenue growthfor the construction sector.

Table 2: Details of PPP Projects by Sector

Projects in Pipeline Project under Implementation

No. of Projects Project Cost(Rs. crore)

No. of Projects Project Cost(Rs. crore)

Roads 167 115,822 133 102,775

Ports 47 35,902 50 62,058

Airports 7 4,120 3 19,277

Railways 53 90,312 5 5,217

Power 34 62,032 15 29,448

Urban Infrastructure 65 45,708 69 18,690

Other 31 22,534 17 3,575

Total 404 376,430 292 241,040

Source: Planning Commission, GoI

Table 1: Estimated Construction Opportunity during XIIt

Plan Period

Investment(Rs. crore)

Share (%) ConstructionIntensity

@

(% of Total Cost)

Construction Opportunity(Rs. crore)

Xth

Plan

XIth

Plan

XIIth

Plan#X

th

PlanXI

th

PlanXII

th

PlanX

th

PlanXI

th

PlanXII

th

Plan

Electricity 340,237 658,630 1,314,320 38% 32% 32% 40% 1,36,095 2,63,452 5,25,728Roads &Bridges

127,107 278,658 556,072 14% 14% 14% 65% 82,620 1,81,128 3,61,447

Railways(incl. MRTS)

102,091 200,802 400,708 11% 10% 10% 75% 76,568 1,50,602 3,00,531

Irrigation 106,743 246,234 491,369 12% 12% 12% 75% 80,057 1,84,676 3,68,527

Water Supply 60,108 111,689 222,879 7% 5% 5% 60% 36,065 67,013 1,33,728

Ports 22,997 40,647 81,113 3% 2% 2% 70% 16,098 28,453 56,779

Airports 6,893 36,138 72,115 1% 2% 2% 30% 2,068 10,841 21,634

Total 766,176 1,572,798 3,138,575 85% 77% 77% 429,570 886,164 1,768,373

# Assuming similar allocation among sectors during the XIthFive-Year Plan

@ Based on past estimatesSource: Planning Commission, GoI


3/13



The share of the private sector in infrastructure spending has reported a significant increase over the years.According to the MTP XIth FYP, the share of private investment is expected to increase to 36.2% over theXIth Five Year Plan from the initially envisaged 30.1%, considering the better-than-expected response fromthe private sector during the first three years of the Plan. Private participation in the infrastructure spendinghas also received support from favourable policy changes, dismantling of entry barriers, and sharing ofrisks by the GoI. The GoI has introduced several incentives such as tax exemptions, and duty-free import

of road building equipment and machinery to encourage private sector participation in infrastructureprojects. Further, several policy reforms, such as early exit for project sponsors and merging of equity andoperations & maintenance (O&M) grants for road projects, have been introduced to encourage privateinvestment in the infrastructure sector. Overall, given the substantial capital invested in infrastructureprojects, stake sale at the project level and monetisation of exisiting operational assets are expected to risein the future.

Increasing size of order book drives revenue visibility

The construction sector has witnessed robust growth in order inflows during the last few quarters,benefiting from increased spending on transportation, power, and urban infrastructure, besides from anincrease in the award of build-operate-transfer (BOT) contracts. As Charts 3shows, the ratio of Order Bookto Operating Income (OB/OI) for construction companies has exhibited an increase over the past six toeight quarters, which translates into strong revenue visibility, going forward. The companies covered in thisnote (ICRA Sample)1 reported a CAGR of 27% in their order book over the last three years, with theaverage OB/OI ratio rising to 3.59 in September 2010. Growth in the size of the order book was muted inthe second half (H2) of FY2009 and in H1 FY2010 because of economic slowdown and the generalelections, but has picked up since H2 FY2010, driven mainly by infrastructure spending. The two-foldincrease in the plan outlay envisaged for infrastructure during the XII th Five-Year Plan is likely to furtheraugment order inflows for construction companies in the near to medium term.

1The construction sector in India is highly fragmented and is characterised by the presence of organised as well as unorganisedplayers. The ICRA Sample includes 15 leading listed construction companies as follows:

Ahluwalia Contracts (India) Limited (ACL), Ashoka Buildcon Limited (ABL), B L Kashyap & Sons Limited (BKSL), ConsolidatedConstruction Company Limited (CCCL), Era Infra Engineering Limited (EIEL), Gammon India Limited (GIL), Gayatri Projects

Limited (GPL), Hindustan Construction Company Limited (HCC), IVRCL Infrastructure and Projects Limited (IVRCL),Madhucon Projects Limited (MPL), Nagarjuna Construction Company Limited (NCC), Patel Engineering Limited (PEL),Sadbhav Engineering Limited (SEL), Simplex Infrastructure Limited (SIL), Unity Infraprojects Limited (UIL)

Please refer Annexure I for the brief profile of the companies under coverage

Chart 1: Trend in Infrastructure Investments

Source: Planning Commission, GoI


4/13



Trends in the financial performance of construction companies in ICRA SampleDuring the last six to eight quarters, the slowdown in the economy, land acquisition and client specificissues, and a muted execution rate for projects in Andhra Pradesh led to the ICRA Sample reportingsubdued growth in operating income. However, the recent increase in orders, along with an improvement inthe execution rate and the better availability of funds, is expected to push up the operating income, goingforward. The sector reported stable profitability margins during the last few years on the strength of adecline in raw material prices and a favourable order mix. The working capital requirement for constructioncompanies had increased in the recent past because of the economic slowdown, slower payments fromclients, and an increase in loans and advances/investments in subsidiaries (executing BOT/real estateprojects). Consequently, the debt levels and financial charges had increased significantly during this period.However, although the debt level for the sector has been rising, the gearing remains stable because ofdilution of equity through Qualified Institutional Placements (QIPs).

Table 3: Consolidated Key Financials of Companies in ICRA Sample

FY2009 FY2010 H1 FY2011

Net Sales 34,397 39,636 19,208

Change in Net Sales 34% 15% 12%

PBDIT 3,786 4,708 2,291

Change in PBDIT 24% 24% 9%

Interest 1,101 1,425 780

Change in Interest 65% 29% 17%

PAT 1,617 1,710 728

Change In PAT 15% 6% -4%

PBDIT/Net Sales 11% 12% 12%

PAT/Net Sales 5% 4% 4%

Net Worth 12,118 14,848 15,938

Change In Net Worth 21% 23% 17%

Total Debt 12,191 15,790 20,311

Change in Debt 42% 30% 43%

Gearing (Total Debt/Net Worth) 1.01 1.06 1.27

Interest Coverage (PBDIT/Interest) 3.44 3.30 2.94

PBDIT: Profit before Depreciation Interest and Taxes; PAT: Profit after Tax; Gearing: Total Debt/Net Worth;Interest Coverage: PBDIT/InterestSource: Annual Reports of Companies

Source: Annual Reports of Companies, Quarterly Results, ICRA Research

Chart 3: Cumulative Order Book and OB/OI for Companies in ICRA Sample


5/13



Overruns and disputes during construction make for significant execution risks Indian construction companies are increasingly bidding for large-size projects to enhance their credentialsand their profitability. However, the strategy also exposes them to execution risks, including risks related toland acquisition, resource adequacy, and securing of environmental/regulatory clearances, which canimpact their profitability and liquidity profile adversely. Construction projects have invariably faced delays inthe past on account of problems over land acquisition, legal issues and regulatory bottlenecks. In severalprojects, these issues have led to significant delays in project execution, rendering them unviable.

Problems over land acquisition persistThe problems associated with land acquisition and liaising with multiple authorities for the requisiteapprovals often causes delays in the commencement of construction activity, thereby affecting projectviability. Lack of clear land titles, the fragmented nature of landholding, protests over land compensation,and inconsistencies in regulatory framework continue to impede the development of various infrastructure

projects. Along with this, the absence of an efficient arbitration mechanism to compensate for such delaysalso increases the risks for construction companies. While disputes during project execution require quickand effective settlement, in most cases, they end up in courts and usually remain unresolved for longperiods. Although the GoI has taken steps to facilitate land acquisition2, more needs to be done on thisfront to attract private capital towards infrastructure projects like ports and airports.

Table 5: Cost and Time Overruns in Road Projects in India

NHAI & State Govt Projects Completed Projects Completed + Ongoing Projects

% Overrun (over original estimates of time and costs) Time Cost Time Cost

100% 7.6% 0.0% 12.3% 0.0%

Source: World Bank

Resource base remains limitedWhile the order books of construction companies have reported robust growth in the recent past, not allplayers have been able to scale up their resources to the extent required. Growth in the supply of skilledand semi-skilled manpower in India has not kept pace with the growth of the infrastructure sector. Attractingand retaining skilled manpower is one of the key challenges for contractors. According to the industry, theconstruction sector employs nearly 340 lakh persons and creates an average demand of 32 lakh peoplewho need to be trained, tested and certified. The industry needs to add around 10% of the manpower everyyear to sustain the growth momentum, which at present appears to be an overwhelming task. Training ofhuman resources has also gained importance in view of the increasing complexity of projects. Along with

skilled manpower, relationships with labour contractors and adherence to local labour laws are necessary

2For instance, the National Highways Authority of India (NHAI) requires 80% of the land to be acquired before the contract can

be awarded. It has also set up 150 Special Land Units (SLUs) in various States to facilitate land acquisition.

Table 4: Progress in Infrastructure Projects -Target vis--vis Achievement

Target Achievement

FY2010 FY2010

Power

Capacity Addition (MW) 14,507 9,585 66%

Transmission Lines Commissioned (circuit km) 17,563 13,721 78%

Roads & Highways

Construction Completed (km) 3,166 2,674 84%

Contracts/Concession Awarded (km) 9,806 3,359 34%

Railways

New Lines (km) 250 85* 34%

Doubling of Lines (km) 500 196* 39%

* Data till December 2009Source: Planning Commission, GoI


6/13



for uninterrupted operations. Besides adequate manpower, appropriate mechanisation of operations isrequired to optimise construction time and achieve the desired quality levels.Lengthy approval process affects project executionRegulatory approvals have to be obtained at every stage of an infrastructure project, right from projectinitiation till completion. Infrastructure projects require multiple clearances at the Centre, State and locallevels, which affects project execution. Bureaucratic complexities and a protracted process for securing thenecessary regulatory approvals are often serious disincentives for project sponsors. Although many states

have introduced the facility of single-window clearance, it is still a fact that project sponsors need to securemultiple approvals through various nodal agencies. Government/nodal authorities need to come up with aclear policy framework and reduce uncertainties arising out of policy implementation and frequent changesin contractual commitments.

Risks inherent in BOT projectsWith PPP projects in the infrastructure sector gaining momentum, many contractors are increasinglyturning into project developers/concessionaires, in the process exposing themselves to the commercialrisks inherent in such projects. The PPP projects are generally executed on a BOT basis which are typicallycharacterised by long concession periods and back-loaded debt structures, and rely on project revenues togenerate the expected returns. In addition to project execution risk, these projects are exposed to severalother risks, including time and cost overrun risks, market risks, and funding risks. To assess the viability ofany BOT project, developers forecast revenues over the concession period. For instance, in the case ofroad projects, the developer use estimates of base traffic volumes, traffic growth rates, and toll rates to

forecast revenues. However, all such parameters are prone to estimation errors, and are closely linked withbusiness cycles and various macro-economic factors. Significant negative deviations in any of theparameters can adversely affect the projects viability and profitability.

BOT projects are implemented by project-specific special purpose vehicles (SPVs) and generally thedeveloper (who is also a contractor) also enters into a fixed-price engineering, procurement andconstruction (EPC) contract with the SPV. While on the one hand, the operating profits earned from theEPC contract partly fund the equity contribution made by the contractor in the SPV, on the other, the fixednature of the contract limits the contractors ability to recover costs in case there are overruns because ofprice escalation.

Table 6: Details of BOT Projects being implemented by Select Companies in ICRA Sample

Company No. of Projects@

Project Cost

(Rs. crore)

Committed Investments*

(Rs. crore)ABL 6 4,985 570

EIEL 6 5,040 800

HCC 4 4,651 790

GIL 10 8,170 1,550

GPL 2 2,802 446

IVRCL 7 10,872 2,030

MPL 1 820 205

NCC 6 11,062 1,550

SEL 5 5,942 796

SIL 1 1,047 286

@ includes projects undertaken by associate/group companies*Approximate amountSource: Annual Reports of Companies, ICRA Research

Diversification into real estate development entails additional risksMany construction companies in the past have turned into real estate developers to enhance theirprofitability during periods of economic upturn. Construction companies like IVRCL, HCC and NCC, inorder to take advantage of the buoyancy in the real estate sector during 2005-08, accumulated significantland banks and diversified into real estate development. However, diversification into real estatedevelopment also brings in such risks as market risks, funding risks, and regulatory risks, in addition tothose that characterise the regular contracting business. Significant capital investments for real estateprojects are required to be committed upfront for land acquisition and asset creation, even as the returnson the same are realised over a longer time frame. Moreover, profitability and liquidity could be adverselyimpacted during cyclical downturns, which affect bookings and collection efficiencies, as has been

witnessed in the recent past.


7/13



Funding constraints remain an impediment for capital intensive infrastructure projectsConstruction companies require regular funding to meet their working capital and capital expenditurerequirements. They also require funding to meet their equity commitments in BOT and real estate projects.The working capital intensity for the sector has increased in the recent past due to longer execution cycleson account of issues in land acquisition and lengthy approval process; delay in payments from clients;blockage of funds in the form of retention money and margin money required for availing the non-fund

based limits (bank/performance guarantees). Consequently, the debt levels for the construction companieshave increased over the years. Moreover, the increasing proportion of BOT and real estate projects in theportfolios of construction companies has also added to the uncertainty for sponsors/lenders. These projectsare complex, capital intensive, and long-gestation undertakings that pose multiple and often unique risks toproject sponsors/lenders. The funding problems are aggravated by the lack of alternatives to bankfinancing because of limited exit options, complexities in the terms of contracts, ambiguous legal structures,and weak corporate governance systems. As a result, many infrastructure projects in the recent past havewitnessed overruns because of delays in achieving financial closure. As many as 36 out of 42 projectsawarded by NHAI last year were marred by delays because of their inability to achieve financial closureagainst the backdrop of the tight liquidity conditions and challenging credit environment.

Debt funding for the sector is largely confined to banks (45-50%), which are constrained by sectoral capsand exposure norms, beside asset-liability mismatches. In addition, an underdeveloped corporate bondmarket and restrictive investment norms for pension/infrastructure funds serve to curtail financing for

infrastructure projects in India. Construction companies/project developers intends to raise long-tenureloans extending to 10-15 years, given the relatively long tenures of Infrastructure/BOT projects (15-30years). However, the appetite of Indian lenders for long-tenure loans is low because such loans createasset-liability mismatches in their books, given that the average maturity of their funding sources is three tofour years. Moreover, limited participation of insurance companies and pension funds, which have tocomply with restrictive investment guidelines even as they remain risk averse, have also curtailed the flowof funds into the infrastructure sector.

Considering the large number of projects that are set to be awarded over the XII th Plan period, the amountof debt financing would have to increase substantially, as Table 8brings out.

Table 8: Bank Funding required for Infrastructure Sector during XIIt

Plan

(Rs. crore)

Total Investments in XIIth Five-Year Plan* 4,099,240

Private Investments in XIIth Five-Year Plan# 1,475,726

Expected Debt Funding for XIIth Five-Year Plan (FY2013-FY2017)@ 1,033,008

Gross Bank Lending to Infrastructure Sector$ 365,617

Annual Growth required for Credit to Infrastructure Sector 16%

* Includes Telecommunications and Oil & Gas#Assuming the same proportion (36%) as in the XIthFive-Year Plan@Assuming 70% debt funding for the project$As on February 26, 2010Source: RBI, Planning Commission

Gross bank credit to the infrastructure sectors reported a CAGR of 45% from Rs. 0.6 lakh crore in 2004-05to Rs. 3.6 lakh crore in 2009-10. Given the past trends, the annual growth rate of 16% required for the

sector (refer Table 8) appears achievable.

Table 7: Land Bank Details of Select Companies in ICRA Sample

Company (Approx. Acres)@

CCCL 600

EIEL 500

HCC 15,000

IVRCL 3,400

NCC 250

PEL 1,100

UIL 40

@ includes projects undertaken by associate/group companiesSource: Annual Reports of Companies, ICRA Research


8/13



ConclusionIn ICRAs view, the extent to which infrastructure investments is stepped up along with revival of industrialcapex and real estate development activity would be the key growth drivers for the construction sector.Amidst the potential opportunities, execution risks for the sector are increasing given the land acquisitionproblems, lenghty approval processes and shortage of manpower and resources. Further, the sectorcontinues to face challenges from adverse political and structural changes, cost overruns and difficulties insecuring the necessary funding. Moreover, diversification into BOT projects/real estate development is

expected to involve additional risks for the construction companies. On the whole, as the Indianconstruction sector embarks on expanding opportunities, there is a pressing need to review and enhanceproject execution capabilities to realize the envisaged benefits and growth.


9/13



Annexure I Brief profile of companies included in the ICRA Sample

Ahluwalia Contracts (India) LimitedAhluwalia Contracts (India) Limited (ACIL) was incorporated in1979 as Ahluwalia Contracts (India) PrivateLimited and subsequently converted into a Public Limited Company in 1990. ACIL is a medium-sizedconstruction company engaged in civil construction and turnkey projects. It is actively engaged in

construction of institutional buildings, corporate office complexes, industrial buildings, multi-storeyedhousing complexes, township development projects, hospitals, hotels & sport complexes etc. ACILsclientele includes central and state government departments along with various private clients.

Ashoka Buildcon Limited

Established in 1993, Ashoka Buildcon Limited (ABL) was initially engaged in civil construction activities,mainly for the construction of industrial and institutional buildings. Presently, ABLs business comprises theBOT road projects and EPC divisions, besides the ready-mix concrete and bitumen division. In the BOTdivision, the company has 12 projects in the tolling phase, 5 in the construction phase, and 6 foot overbridges from which it generates advertising revenues. In the EPC division, ABL constructs roads andbridges for its own BOT projects as well as for third parties.

BL Kashyap & Sons Limited

BL Kashyap & Sons Ltd. (BKSL) was incorporated in 1989 by Mr. Vinod Kashyap, Mr. Vineet Kashyap andMr. Vikram Kashyap as a private limited company. The Company undertakes industrial, commercial,residential, hospitality and infrastructure construction projects for public and private customers. Its serviceportfolio extends across the construction of manufacturing facilities, information technology campuses,commercial and residential complexes, retail malls and hotels. BKSL had three subsidiary companies viz.,Soul Space Projects Limited, B L K Lifestyle Limited and Security Information Systems India Limited.

Consolidated Construction Consortium Limited

Consolidated Construction Consortium Limited (CCCL) was incorporated in 1997 as a public limitedcompany by four former employees of Larsen & Toubro: Mr. R. Sarabeswar, Mr. S. Sivaramakrishnan, Mr.V. G. Janarthanam, and Mr. T.R. Seetharaman. Since inception, the company has concentrated onconstruction and related activities in the commercial, infrastructure, industrial and residential sectors. Toprovide turnkey construction solution to clients, CCCL has set up three subsidiaries: Consolidated Interiors

Limited (for interior contracting and fit-out services); CCCL Infrastructure Limited (for development ofSpecial Economic Zones); and Noble Consolidated Glazings Limited (for glazing services).

Era Infra Engineering Limited

Era Infra Engineering Limited (EIEL), the flagship company of the Era Group was incorporated inSeptember 1990. It was promoted by Mr. H.S Bharana, a civil engineer by profession, having more thantwo decades of experience in the construction industry. EIEL is a growing construction company, involvedin the construction of industrial and institutional complexes, infrastructure projects, housing complexes,hospitals and related civil & structural works. EIELs clients are diversified acro ss Public Sector Units(PSUs), private sector and Central Public Works Department (CPWD). They include NTPC Limited, PowerGrid Corporation of India, Airport Authority of India, Public Work Department, Rail Vikas Nigam etc.

Gammon India Limited

Gammon India Limited (GIL) was initially established in 1922 as J.C. Gammon (Bombay) Limited andsubsequently in 1962 was renamed as Gammon India Limited. GIL is a civil engineering and constructioncompany specialised in the areas of transportation engineering projects; power projects; industrial andcommercial structures; marine projects and pipeline projects. Apart from India, the company also executespower transmission and distribution projects in countries such as Oman, Ethiopia, Nigeria, Algeria, Kenyaand Afghanistan. The company also undertakes infrastructure projects such as roads, bridges, ports,hydroelectric power and biomass power projects on PPP basis through its subsidiary namely GammonInfrastructure Projects Limited.

Gayatri Projects Limited

Gayatri projects Limited (GPL), promoted by Dr. T. Subbirami Reddy, was initially formed as GayatriEngineering Company in 1975 and subsequently converted into a public company in 1994. GPL isengaged in execution of civil works including construction of concrete/masonry dams, earthen dams, roads

and highways, bridges, canals, airports and ports etc. The company also has presence in the PPP space ofinfrastructure development through its subsidiaries Gayatri Infraventures Limited and Thermal PowertechCorporation Limited.


10/13



Hindustan Construction Company Limited

Hindustan Construction Company Limited (HCC) is one of the leading construction companies in India,engaged in the construction of roads, bridges, ports, power stations, water supply & irrigation projects etc.It is actively engaged in major segments of the construction sector, including heavy engineering, powerprojects, and roads & highways. HCC has completed a number of projects in various sectors like irrigationand water supply, tunnels & underground works, bridges and dams, power and piling & embankments.

IVRCL Infrastructures & Projects Limited

IVRCL Infrastructures & Projects Limited (IVRCL) is engaged primarily in providing engineering,procurement, construction and commissioning services in major infrastructure segments includingurban/rural water supply, irrigation & environment related projects, pipelines, power projects (substationsand transmission & distribution lines), buildings & industrial structures, roads & bridges. During the year2009-10, IVRCL restructured its business operations in order to undertake all its real estate andinfrastructure development projects through its subsidiary, IVRCL Assets and Holdings Limited. Anotherimportant group company of IVRCL Group is Hindustan Dorr-Oliver Limited in which IVRCL holds about55.28% and is engaged in turnkey projects across industries.

Madhucon Projects Limited

Madhucon Projects Limited (MPL) was initially incorporated in 1990 as Madhu Continental Constructions

Private Limited and subsequently converted into a public limited company in March 1995. MPL waspromoted by Mr. N Seethaiah and Mr. N Krishnaiah. It is engaged in a diverse range of businessconstruction and turnkey activities like building construction, deep excavation, heavy rock cuttings, highrailway embankments, major canals and earthen dams, dykes and tunnels. MPL s clientele includes centraland state government departments, banks and financial institutions along with various private clients.

Nagarjuna Construction Company Limited

Nagarjuna Construction Company Limited (NCC), set up by Mr. A V S Raju in 1978, provides constructionservices in diversified sectors, including industrial structures, transportation, water and environment,electrical installations, irrigation, hydropower, real estate, and property development. The company hasformed several JVs with Indian and overseas construction companies for BOT and civil constructionprojects. With operations in construction, real estate and infrastructure development, the companyundertakes diverse activities in India and abroad.

Patel Engineering Limited

Founded in 1949, Patel Engineering Limited (PEL) is an established construction company in India. Itsservices portfolio includes heavy constructions; massive earth and rock excavations; housing complexes;and building projects, dams, tunnels, bridges, refineries, factories, steel projects, thermal, hydro powerhouses, and pre stressed and pre cast concrete facilities, as well as marine works and public health works.The company offers its services to power, irrigation and water supply, urban infrastructure development,and transportation sectors.

Sadbhav Engineering Limited

Sadbhav Engineering, Limited (SEL) was incorporated in 1988 as a private company in Gujarat, by Mr.Vishnubhai M. Patel. SEL is one of the prominent players in the construction sector in India. SEL operates

in four distinct business areas in the infrastructure sector viz. BOT road projects, cash contract based roadprojects, canal and mining. The company's key clients include NHAI, Gujarat Industries Power CorporationLimited, state governments of Gujarat, Andhra Pradesh, Karnataka, among others. In its line of business,company has executed projects in joint venture with various organizations such as HCC, GIL, PBAInfrastructure Limited etc..Simplex Infrastructure Limited

Simplex Infrastructure Limited (SIL) incorporated in 1924, is one of the leading construction companies inthe country. The company is mainly engaged in foundation work, turnkey services and general civilconstruction. SIL provides various services including civil and structural construction activities, turnkeyprojects comprising layout plan, detailed civil & engineering design, architecture, structural construction,and commissioning. The company has strong expertise in concrete pilling, road & railways, bridges, power,urban infrastructure, building & housing, marine and industrial structures.


11/13



Unity Infraprojects Limited

Unity Infraprojects Limited (UIL) was incorporated as Unity Builders Limited on August 9, 1997. It providesengineering, procurement, and construction services for real estate and infrastructure projects, such asdams, tunnels, bridges, flyovers, subways, roads, and buildings to public and private sector. The companyhas executed various projects in the state of Maharashtra, Delhi and other north eastern states. UIL hasalso ventured into real estate development and BOT projects through its wholly owned subsidiaries UnityRealty and Developers Limited and Unity Infrastructure Assets Limited.


12/13



Annexure II

List of Construction Companies with ICRA-Assigned Ratings Outstanding

Company Name Ratings (As on 7th

March 2011)

Long Term Short Term

Afcons Infrastructure Limited LAA (Stable) A1+

B G Shirke Construction Technology Private Limited LBBB (Stable) A3+

Brahmaputra Infrastructure Limited LBBB (Stable) A3

Brahmaputra Infraproject Limited LBBB- (Stable) -

BSCPL Infrastructure Limited LA (Stable) A1

Consolidated Construction Consortium Limited LA+ (Stable) A1

D.S. Contractors Private Limited LBB (Stable) A4

Dilip Buildcon Private Limited LBBB -

Durha Constructions Private Limited LBBB -

East Coast Constructions & Industries Limited LBBB- A3

ETA Constructions (India) Limited LBB+ (Stable) -

Hariharan Foundations Private Limited LBBB- (Stable) A3

Indu Projects Limited LBBB (Stable) A3+

ITD Cementation India Limited LBBB+ (Negative) A2+

IVRCL Infrastructures & Projects Limited LA+ A1

Larsen & Toubro Limited LAAA -

M S Khurana Engineering Limited LBBB+ (Stable) A2+

Mackintosh Burn Limited LBBB+ (Stable) A2+

Madhucon Projects Limited LA+ (Stable) A1

Mahalakshmi Infraprojects Limited LBBB+ (Stable) A2

Navayuga Engineering Company Limited LA (Stable) A1

NKG Infrastructure Limited LBBB+ (Stable) A2

Progressive Civil Construction Company Private Limited LBB+ (Stable) A4+

R G Buildwell Engineers Limited LBBB- (Stable) A3

Raj Buildcon Buildcon Construction Limited LBB+ (Stable) A4+

Roman Tarmat Limited LBB+ A4+

SRK Construction and Projects Private Limited LBBB- (Stable) A3

Shapoorji Pallonji & Company Limited LAA+ (Stable) A1+

Soma Enterprises Limited LBBB- A3

Subhash Projects & Marketing Limited LBBB- (Stable) A3

Sun Nirman Infrastructure Private Limited LBB+ (Stable) A4+

Tirupati Buildcon Private Limited LBBB- -

Vijai Infrastructure Limited LBBB+ (Stable) A2+

Vijay Nirman Company Private Limited LBBB+ (Stable) A2+

Vijeta Projects & Infrastructure Limited LBB+ (Stable) A4+


13/13



ICRA LimitedAn Associate of Moody's Investors Service

CORPORATE OFFICEBuilding No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002

Tel: +91 124 4545300; Fax: +91 124 4545350Email: [email protected], Website: www.icra.in

REGISTERED OFFICE1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001

Tel: +91 11 23357940-50; Fax: +91 11 23357014

Branches: Mumbai: Tel.: + (91 22) 24331046/53/62/74/86/87, Fax: + (91 22) 2433 1390 Chennai: Tel + (91 44)2434 0043/9659/8080, 2433 0724/ 3293/3294, Fax + (91 44) 2434 3663 Kolkata: Tel + (91 33) 2287 8839 /22876617/ 2283 1411/ 2280 0008, Fax + (91 33) 2287 0728 Bangalore: Tel + (91 80) 2559 7401/4049 Fax + (91 80)559 4065 Ahmedabad: Tel + (91 79) 2658 4924/5049/2008, Fax + (91 79) 2658 4924 Hyderabad: Tel +(91 40)2373 5061/7251, Fax + (91 40) 2373 5152 Pune: Tel + (91 20) 2552 0194/95/96, Fax + (91 20) 553 9231 Copyright, 2011 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.

All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable.

Although reasonable care has been taken to ensure that the information herein is true, such information is provided asis without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied,as to the accuracy, timeliness or completeness of any such information. All information contained herein must beconstrued solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use ofthis publication or its contents.

Documents

Construction Note 7th March 2011-r[1]