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Presentation on Construction sector in India

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  • Construction

    1. 1. Infrastructure <ul><li>Transportation </li></ul><ul><li>Roads, Railways, Airport </li></ul><ul><li>Power </li></ul><ul><li>State- 52%, central- 34%, Private- 14% </li></ul><ul><li>Fuel </li></ul><ul><li>Thermal- 64.5%,Hydro-24.8%, Nuclear-3.1%, Renewable-7.6% </li></ul><ul><li>Water Supply </li></ul><ul><li>Sanitation, Desalination, Potable Water, Irrigation, Industrial </li></ul><ul><li>Agriculture production and distribution </li></ul><ul><li>Cold Storage, Distribution Channel </li></ul><ul><li>Public Health </li></ul><ul><li>Security Service </li></ul>
    2. 2. The Global Infrastructure Sector <ul><li>The construction/infrastructure industry is generally considered as being the world’s largest industrial employer. </li></ul><ul><ul><li>Total Annual Output worldwide – USD 3000 billion </li></ul></ul><ul><ul><li>Employment: 111 million employees </li></ul></ul><ul><ul><li>7% of total employment </li></ul></ul><ul><ul><li>The construction industry has a significant multiplier effect on the economy. It is considered that one job in construction gives rise to two further jobs in other parts of the economy. As a result, 20% of all employment may be linked to construction activities in some way. </li></ul></ul><ul><ul><li>It is estimated that 97% of all firms are in fact SMEs. </li></ul></ul><ul><ul><li>Global biggies in construction sector include Bechtel ($20.5 Billion), Fluor ($14 Billion). </li></ul></ul>
    3. 3. India’s Infrastructure Sector In Construction Sector, India ranks 12 th globally and the industry is worth $50 billion. By 2012, it is forecasted to be a $320 billion industry. Of which 34% is estimated to be in Power Sector, 19% in Railways, 14% in roads and 33% in others. Private sector is expected to contribute 20% of the investment. It contributes 7% to our GDP. It accounts for 2% of the world’s construction market.
    4. 4. Government Schemes <ul><li>Bharat Nirman – Focus on rural infrastructure. Budget allocated is 24600 Crores. </li></ul><ul><li>National Highway Development Programme – Focus on connecting major cities (Golden Quadrilateral). Budget allocated is 58000 Crores. </li></ul><ul><li>Jawaharlal Nehru National Urban Renewal Mission – Focus on urban infrastructure. Budget allocated is 8000 Crores. </li></ul><ul><li>Government has launched a SPV to fund Infrastructure projects under the name of IIFC (India Infrastructure Finance Company). </li></ul><ul><li>Government has levied a cess of Rs.1/litre on petrol/diesel to fund infrastructure development. </li></ul><ul><li>PPP </li></ul>
    5. 5. Why PPP <ul><li>Budgetary constraints </li></ul><ul><li>Development of assets of world class standards </li></ul><ul><li>Improved maintenance and management of assets </li></ul><ul><li>Provision of efficient services </li></ul><ul><li>Affordable prices through greater competition </li></ul><ul><li>Risk Sharing </li></ul><ul><li>Returns </li></ul><ul><li>India scores because of its large untapped markets </li></ul><ul><li>Example: India is a telecom success story despite low Average Revenue per User- there is comfort in numbers </li></ul><ul><li>High economic growth rate has translated into a larger disposable income and larger spending capacity </li></ul>
    6. 6. Industry Characteristics <ul><li>Highly Capital Intensive </li></ul><ul><li>Industry PE is higher compared to other sectors </li></ul><ul><li>The Union Budget 2007-08 has removed the 80IA tax benefits for construction companies with retrospective effect from 1 April 2000 </li></ul><ul><li>Private participation witnessing explosive growth </li></ul><ul><li>Construction company is financially valued by its order book and its BOT asset </li></ul><ul><li>Value unlocking in BOT Assets </li></ul><ul><li>Companies are developing its niche area of operation </li></ul>
    7. 7. Strength & Weakness <ul><li>Strength: </li></ul><ul><li>Consistent Growth rate of 9%. </li></ul><ul><li>Rapid Industrialization. </li></ul><ul><li>Huge Foreign Inflows. </li></ul><ul><li>Governments thrust on Infrastructure development. </li></ul><ul><li>Weakness: </li></ul><ul><li>Corruption. </li></ul><ul><li>Interest rate hikes. </li></ul><ul><li>Increasing raw material cost. </li></ul><ul><li>Dependence on global economic cycles. </li></ul>
    8. 8. Major players in Infra. <ul><li>L & T </li></ul><ul><li>Gammon </li></ul><ul><li>IVRCL infra </li></ul><ul><li>GMR infra </li></ul><ul><li>Nagarjuna Constructions </li></ul><ul><li>Simplex </li></ul><ul><li>HCC </li></ul><ul><li>JP Associates </li></ul><ul><li>Lanco Infra </li></ul>
    9. 9. Sales and EBITDA
    10. 10. Order Book Position
    11. 11. OPM of Companies
    12. 12. Airports <ul><li>The airports sector in India is set to continue its recent high levels of development activity. </li></ul><ul><li>• Modernization of airports is not to be limited to Delhi and Mumbai. </li></ul><ul><li>Among others, Chennai, Kolkata and 35 non-metro airports will be </li></ul><ul><li>modernized. </li></ul><ul><li>Delhi Airport – GMR - Fraport </li></ul><ul><li>Mumbai Airport – GVK - ACSA </li></ul><ul><li>• Further, Greenfield airports are proposed, following new airports </li></ul><ul><li>already being built at Bangalore and Hyderabad. </li></ul><ul><li>Second International Airport at Navi Mumbai SEZ. Private parties </li></ul><ul><li>will hold a 74 per cent stake, while the remaining 26 per cent will </li></ul><ul><li>be held by the State Government. Deal Value estimated at almost </li></ul><ul><li>3000 Crore. </li></ul><ul><li>• The total cost of upgrading and building these new airports is </li></ul><ul><li>estimated to be US$10 billion. </li></ul>
    13. 13. Power <ul><li>According to World Bank, India could lose MILLIONS of dollars in revenue unless India introduces reforms in power sector!!! </li></ul><ul><li>Total installed capacity in state, central and private sectors is 1,35,006.63 MW. State sponsored companies have dominant 53% share. </li></ul><ul><li>Coal is the major source of power production which accounts for 53.4%. </li></ul><ul><li>The problems plaguing the electricity generation is due to irregular availability of fuel for thermal power stations. This is one of the reasons the focus has shifted towards nuclear and hydro energy. </li></ul><ul><li>Rising per capita electricity is due to strong economic growth & govt. reforms working as major driving forces. </li></ul><ul><li>FDI allowed in power generation is 49% according to act released in 2006. </li></ul><ul><li>Generation, Transmission and Equipment manufacturers </li></ul>
    14. 14. Facts and figures <ul><li>For FY06-07 NTPC, the PAT is expected to grow @ almost 20%. Expected PE range is 10.91 – 18.94 </li></ul><ul><li>For NTPC operating margin is expected to rise from 29.8% to 36.3% </li></ul><ul><li>For Kalpatru Power Transmission Limited PAT is expected to grow by almost 150% </li></ul><ul><li>And the PE range is 8.28 – 32.45 </li></ul><ul><li>Tata Power Company registered a 56.09% growth in net profit to Rs 1902 million for the quarter ended June 2007!!! (see the size of actual growth) </li></ul><ul><li>PFC has seen a spectacular run on exchange after listing. </li></ul><ul><li>Currently Reliance Energy is India's top listed private companies on all major financial parameters, including assets, sales, profits and market capitalization . </li></ul>
    15. 15. Major players in Power <ul><li>GVK Power (Trailing PE of 218.79) </li></ul><ul><li>NTPC (Trailing PE of 19.74) </li></ul><ul><li>Tata power (Trailing PE of 21.68) </li></ul><ul><li>Reliance energy (Trailing PE of 27.47) </li></ul><ul><li>CESC (Trailing PE of 15.66) </li></ul><ul><li>JP Hydro (Trailing PE of 18.48) </li></ul><ul><li>PTC (Trailing PE of 39.79) </li></ul><ul><li>Suzlon (Trailing PE of 44.60) </li></ul><ul><li>Nevyeli Lignite (Trailing PE of 27.16) </li></ul><ul><li>PFC (Trailing PE of 20.77) </li></ul><ul><li>Essar Power </li></ul><ul><li>Nagarjuna </li></ul><ul><li>Foreign players as Sumitomo, AES corporation, CLP group </li></ul>
    16. 16. Food for thought <ul><li>Forex usage for Infrastructure development. </li></ul><ul><li>Current SEZ policy </li></ul><ul><li>Importance of Nuclear deal with USA </li></ul><ul><li>Future of coal and thermal energy based plants given emission levels. </li></ul><ul><li>Subsidized power to farmers </li></ul><ul><li>Privatization of power distribution </li></ul>
    17. 17. Power (Estimated investment: USD 60 billion) <ul><li>Over 67000 MW capacity to be added in the 11 th plan period (2007-08 to 2011-2012) </li></ul><ul><li>9 UMPPs to be implemented during the 11 th and 12 th plans </li></ul><ul><li>Transmission capacity augmentation through JVs for new generation </li></ul>
    18. 18. Roads (Estimated investment: USD 49 billion) <ul><li>NHDP-II: 4569 km, </li></ul><ul><li>$103800 mn. </li></ul><ul><li>NHDP-III: 10000 km </li></ul><ul><li>$155200 mn. </li></ul><ul><li>NHDP-IV: 20000 km </li></ul><ul><li>$66100 mn. </li></ul><ul><li>NHDP-V: 6500 km </li></ul><ul><li>$98100 mn. </li></ul><ul><li>NHDP-VI: 1000 km </li></ul><ul><li>$39700 mn. </li></ul><ul><li>NHDP-VII: $38000 mn. </li></ul><ul><li>State Roads programme are in addtion </li></ul>
    19. 19. Railways (Estimated investment USD 67 billion) <ul><li>Dedicated Freight Corridors with PPP sub-projects envisaging more than USD 7 billion investment for the North South, East West Corridors alone </li></ul><ul><li>Container operations </li></ul><ul><li>Rail side warehousing </li></ul><ul><li>Logistics Parks </li></ul><ul><li>Development of Rail links to Ports </li></ul><ul><li>Dedicated rail links for evacuation of specific industrial items </li></ul><ul><li>Modernization of Railway Stations </li></ul><ul><li>Development of new routes </li></ul>
    20. 20. Airports (estimated investment USD 9 billion) <ul><li>Metro Airport development through PPP </li></ul><ul><li>Greenfield Airports </li></ul><ul><li>Concept of Merchant Airports being examined by Government </li></ul><ul><li>City side development in 24 Non-metro Airports </li></ul><ul><li>Provision of Services within airports </li></ul>
    21. 21. Ports: (Estimated investment USD 11 billion) <ul><li>National Maritime Development Programme </li></ul><ul><li>387 port projects </li></ul><ul><li>All new berths on PPP basis </li></ul><ul><li>Gradual transition of old berths to PPP </li></ul>