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Industry Analysis

Industry Analysis

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  • 1. Contractors SME Presentation
  • 2. Structure Contractors Small Concerns Medium Concerns Large and Big Concerns Sub-contractors, Material Suppliers & Helpers Security Agencies & Architects State Govt. Contractors & Equipment Suppliers Petrol Pump Contractors Big Builders & Construction Co.s
  • 3. Segmentation of Contractors
    • Building Contractors
    • - Take work on project basis like building construction etc
    • - Undertake only construction work where material is supplied by client or some
    • other contractor.
    • - This category includes Govt. construction contractors who does work for State Govt. like MCD, NDMC etc.
    • Material Supplier Contractor
    • - Supply only material to builders, pvt construction, interior decorators etc
    • - Act as a catalyst between owner of land and builder or architect who is doing actual construction work.
    • - Help in providing electrical fittings, plumbing work for residential and official constructions.
    • - Providing furniture and fittings in the constructed house and office.
    • Equipment Supplying Contractors
    • - Supply different types of equipments used in construction to architects and builders like dumpers, concrete mixers, cranes etc
    • - Supplying of office equipments like photocopier, fax machine cum printer etc to companies
    • - Furnishing and beautification of offices like providing plants, show pieces, big mementos in offices and big office complexes.
  • 4. Cont..
    • Contractors for Petrol Pumps and Oil companies
    • - Construction and set up petrol pump stations for Govt Sector companies like
    • IOCl, BPCL, HPCL etc.
    • - Beautification of petrol pumps like lighting boards etc at initial stage and on
    • regular intervals.
    • - Beautification of petrol pumps like lighting boards etc at initial stage and on
    • regular intervals.
    • Security and Fleet Supplying Agencies
    • - Those who supply workers and labours to companies on contract basis like
    • Group 4, Peregrine Securities etc.
    • - Supplying Fleet of Cars, maintenance systems to big Corporates and MNCs as
    • and when required by them.
  • 5. Features of Contract (ors) Contract can be taken for full work or any part thereof. No limit for amount of contract to be undertaken Work is done on commission or some incentive structure Big contractor allotted on tender basis or bidding mechanism Work can be handled thru single or multiple contractors Any service which can be outsourced comes under contract
  • 6. Empanelment Process
    • Can be engaged through references in case of small time concerns.
    • Tender and bid based contract allotted to state govt. contractors and private builders.
    • Consortium building contracts to be allotted where the project is huge and cost involved is much.
    • Architects are hired on goodwill basis and thru mouth advertisement.
    • Security agencies and fleet supplying agencies through costing basis , no. of items and time of supply.
    • Post Empanelment Process
    • Half-Yearly / Yearly monitoring of performance
    • Renewal of Contracts on completion of tenure or mostly automatically renewal where the work is satisfactory.
    • Raising of some percentage of Charges as decided in contract like 5% etc.
  • 7. Profit Margins
    • Material Supplying Contractors earn margins in range of 5% - 20%.Major variation depends on material and deal.
    • Equipment Hiring Contractors’ range varies from 10% - 20% as there are few people supplying equipment due to their high investment
    • State Govt. Contractors gets 7% - 15% which is on tender basis so competition plays major role.
    • Private builders and construction Companies earn on basis of Project value and Project size which ranges from 20% - 40%
    • Security and Fleet supplying agencies earn 7% - 18 % but sometimes goes up to 25% depends on skilled and unskilled labour etc.
    • Architects charges as per client specific requirement which contains huge variation of 15% - 40%.
  • 8. Payment Mechanism/ Credit Cycle
    • Credit norms for Small Concerns
    • - Advance payments and day to day payments.
    • - Credit period of only 2-3 days to 15 days as work cycle is small.
    • Credit norms for Medium Concerns
    • - Credit Period of 30-60 days in Security Agencies as workers are involved.
    • - Ranges from 60-90 days in case of Equipment Supplies.
    • - Govt. Contractors/Petrol Pump Contractors comes in payment cycle of 90- 180 days or sometimes after project completion with retention of 10% EMD.
    • Large Enterprises
    • - Construction Companies credit period is on mutual consent and on part by
    • part completion which can be any cycle like 180- 360.
    • - Advance payments of some portion where the builder is booking the units before completion as the Project cost involved is too high.
  • 9. Issues & Challenges
    • Commercial Risk in terms of elimination faced from big Corporates and MNCs.
    • Delay in payments resulting in stoppage/delay in project completion.
    • Bad debts resulting in closure of small concerns.
    • Adverse impact on margins due to competition and taxation policies.
    • Challenges to complete work before time to build goodwill and to avoid escalation in costing.
    • Irregularity in terms of work allocation as totally dependent on tender in Govt. contractors.
    • Have to adjust and work hand in hand with competitors to get contracts.
    • Curtailment of Credit for future projects due to procedural delays by
    • corporates/clients.
  • 10. Industry specific traits
    • Outward Bounce of 3-5% over 6-month Banking
    • - Due to payments received from small parties and number of parties.
    • - The amount of bounced cheque is small which gets cleared within
    • representation in 7 days or so.
    • Inward Bounce of up to 3% depending upon case to case.
    • Rising trend for acquiring unsecured loan from financial institutions due to delayed payments and hunger for business.
    • Good margins and profitability in actual but showing less margins depending on taxation policies of IT Act.
    • Classification in Govt. Contractors on basis of value and order size makes them recognized in market.
    • Sudden Jump in T/O depending on contracts allocation and completion in diff financial years.
  • 11. Thanks Presented by: Nitin Gupta