:: Our Strengths
We believe that we have the following strengths:
Experience and expertise in the construction and management of environmentally sustainable infrastructure projects.
We believe that our experience and expertise in planning, designing and constructing environmentally sustainable infrastructure projects is a competitive strength that differentiates us when bidding for such projects. Constructing and operating environmentally sustainable infrastructure projects, particularly in the area of Water and Waste Water, has been a significant area of focus for our business.
We have an in-house design and engineering team headquartered at Mumbai that specializes in designing Water and Waste Water projects. This team is equipped with the latest design tools, including design software and state-of-the-art computers, and technology that has recently arrived in India. For example, we use C- Tech technology for sewage treatment plants, which is an aerobic biological process whereby aeration, settling and decanting happens in a single tank and thus eliminating the inefficiencies of a continuous system like activated sludge process and extended aeration. The focus of this team enables us to build on our past experience in the Water and Waste Water sector and to maintain our differentiated expertise in this area.
From April 1, 2002 to June 30, 2009, we have completed [103] Water and Waste Water projects and are currently undertaking [83] Water and Waste Water projects. In Fiscal 2009 and three months ended June 30, 2009, the total revenue from external clients generated from Water and Waste Water projects was Rs. [5,323.18] million and Rs. [●] million, respectively, on a consolidated basis.
Examples of environmental projects we have built and managed include a 80 MLD Sewage Treatment Plant at Airoli, Navi Mumbai; Sewage Treatment Plant at Jalandhar; [Bangalore Water Supply and Under Ground Drainage Facility] , Bhanasimal Regional Water Supply Scheme, Gujarat; a 30 MLD sewerage treatment plant constructed on a LSTK basis at Neyveli, Tamil Nadu for Neyveli Lignite Corporation Limited (NLCL); and a 106 MLD sewage treatment plant at Pirana, Gujarat. Our achievements in this area have been recognised with two awards: an Environmental Leadership Award by the United States – Asia Environmental Partnership in 2004 and the Safety, Health and Environment Performance Award by Confederation of Indian Industry in 2005. We believe these awards have enhanced our reputation as a significant player in the Water and Waste Water sector.
Our construction business operates in diverse sectors and has a pan-India presence
We provide engineering, design, procurement and construction services across six industry sectors: Water and Waste Water; Building Construction; Irrigation; Industrial; Transportation; and Power Transmission and Distribution. This variety of project types enables us to keep our construction business diversified and reduces our dependence on any one sector or type of project. In addition, our broad range of clients within the government and private sectors ensures that we are not dependent on a limited number of clients.
In addition to having a diversified portfolio of clients and projects, we are also geographically diversified in our business operations. Our [five zonal offices and three regional offices] enable us to service clients throughout the country and give us the ability to participate in projects in all regions.
The total amount of new orders for our construction business and the average order size for our construction business has been consistently growing.
We have consistently been receiving new orders for our construction business as shown in the table below. While the average order size in our construction business has been consistently increasing and the average amount of new orders per employee have [more than doubled] from Fiscal 2003 to the three months ended June 30, 2009.
Period |
New Orders
(Rs. in million) |
Average Size of New Orders
(Rs. in million) |
Average Number of Employees(1) |
New Orders per Employee(2)
(Rs. in million) |
Fiscal 2003 |
1,519.73 |
31 |
155 |
9.80 |
Fiscal 2004 |
2,363.11 |
45 |
232 |
10.18 |
Fiscal 2005 |
5,771.35 |
125 |
379 |
15.23 |
Fiscal 2006 |
10,210.85 |
133 |
746 |
13.69 |
Fiscal 2007 |
15,279.90 |
218 |
1,008 |
15.17 |
| Fiscal 2008 |
[35,412.26] |
[313] |
[1,208] |
[29.31] |
| Fiscal 2009 |
[39,927.14] |
[712.98] |
[1,414] |
[28.24] |
| Three Months Ended June 30, 2009 |
[3,278.40] |
[546.40] |
[1,446] |
[2.27] |
|
- Calculated by adding the number of employees at the beginning of the period and the end of the period and dividing the sum by two.
- Based on the average number of employees.
Strong and diverse Order Book
The value of our Order Book was Rs. [58,438.62] million as at June 30, 2009. We continued to add new orders to our Order Book at a steady pace, having added orders worth Rs. [6,695.93] million during the period from July 1, 2009 through to September 30, 2009. Our Order Book is additionally diversified across sectors. As at June 30, 2009, none of the sectors in which our construction business is involved contributed to more than [28]% of our Order Book. Our execution capabilities have also seen a steady growth and by leveraging on our planning and execution expertise, we have ensured that our orders are completed within the estimated budget and on schedule. Furthermore, we believe that a large order book will increase our operational efficiency by allowing us economies of scale.
Strategically positioned to realize opportunities in the infrastructure sector
Infrastructure growth in India has been propelled in the past decade with reforms and benefits extended by the government, which has been accompanied by a host of private investments. Our Company believes that the increasing level of investment in infrastructure by central and state governments and private industry will be a major growth driver for its business in the future and its demonstrated expertise and experience in the infrastructure segment will provide our Company with a significant advantage in pursuing opportunities. We believe that our Company is in an advantageous position because of its operating history, industry knowledge, experience and familiarity with civil and infrastructure construction projects.
Qualified and experienced employees and proven management team
We have a qualified and trained workforce consisting of vice presidents, general managers, managers, engineers, technical staff and non-technical staff. As at June 30, 2009, we employed [1448] full-time employees, of which [754] or [52]%, were engineers, including [11] members of our management team. The skill sets of our employees give us the flexibility to adapt to the needs of our clients and the technical requirements of the various projects that we undertake. We are committed to the development of the expertise and know-how of our employees through regular technical seminars and training sessions organized or sponsored by our Company.
[Our management team is qualified and experienced in construction and infrastructure development, and has substantially contributed to the growth of our operations. In particular, Mr. Y. R. Nagaraja, our Managing Director, is a civil engineer who has over 22 years of project management experience, [Mr. A. P. Kurian], our Head-Operations, is a civil engineer with over 20 years of core construction experience in India, South East Asia and the Middle East and Mr. Sanjiv Iyer, our Chief Financial Officer, and has over [●] years of experience in the finance and accounts function. We believe that the strength and quality of our management has been instrumental in the implementation of our business strategy.]
We are well positioned to benefit from the potential success of the Public-Private Partnership, or PPP, model in India
We believe that PPPs are increasingly becoming the preferred mode for construction and operation of highways, integrated townships, industrial parks and other infrastructure services in India. PPPs offer significant advantages in terms of attracting private capital in the creation of public infrastructure as well as in improving efficiencies in the provision of services to users. A number of initiatives have been taken in the last two years of India's 10th Plan by both the central and state governments to promote infrastructure development through PPPs. Our Company has been an actively pursuing PPP projects, particularly through the development of [●] and [●], which are currently being developed as PPPs. We believe our Company is well positioned to benefit from the continued use of the PPP model.
Modern and state of the art equipment
We have modern and state-of-the-art construction equipment that allows us to meet the requirements of a broad spectrum of construction activity. Such an equipment base also gives us the capability to design and execute projects of any scale. Our Company has a skilled employee resource which has the requisite expertise and experience in the use and handling of modern construction equipment and machinery.
Our strategy is to own and manage a fleet of the equipment that we typically require for our projects. This enables us to achieve higher operating margins because equipment ownership is an important parameter determining our margins. We intend to use [Rs. 997.88 million] from the issue proceeds towards the acquisition of strategic assets, such as equipment, as stated in the section entitled “Objects of the Issue” on page [●] of this Draft Red Herring Prospectus. This will enable us to use modern infrastructure and construction methodologies more effectively and efficiently.
:: Our Strategy
Our Company’s objective is to be a world class construction and infrastructure development company by leveraging on our ability to execute environmentally sustainable projects. To achieve our objective, we will continue to improve on and consolidate our position by implementing the following strategies:
Focus on high value projects in the construction business to benefit from economies of scale
In our construction business, we intend to focus on undertaking projects having a high order value, which we consider to be projects above Rs. 1 billion in value. As at June 30, 2009, we had [20] projects in our Order Book with a value higher than Rs. 1 billion. Projects having a high order value typically have a smaller percentage of overhead cost as a percentage of total cost and therefore provide a greater potential for profit.
Projects having a high order value are also, in the current market, subject to less competition. The pre-qualification and financial entry barriers for pursuing such projects result in a limited number of competitors that can bid for such projects. We believe that these high entry barriers make this an attractive sector in which to participate. As our financial condition and pre-qualification capabilities have improved in recent years, our average bidding value has steadily increased. This demonstrates our increasing ability to bid for and undertake high value projects. We aim to firmly establish ourselves by successfully executing high order value projects so that we can take advantage of these higher barriers to entry, lower levels of competition and higher profit margins.
Diversify our construction business into more complex and multi-disciplinary projects, which tend to have a higher contract value and the potential for better margins
Leveraging upon our existing engineering and execution capabilities in diverse areas such as civil, structural, piping, water treatment and electrical engineering, we intend to undertake more complex and multi-disciplinary projects such as power transmission and distribution projects, industrial construction projects and airport terminals. Complex and multi-disciplinary projects tend to have a higher contract values compared with less complex and sector specific projects, and also offer the potential to realize better margins. [We are currently constructing our first power transmission and distribution project in Madhya Pradesh, our first major industrial construction project in Orissa and our first airport terminal at Chandigarh through a 70:30 joint venture collaboration.] Enhance our design capabilities
We currently have design capabilities for the Water and Waste Water and Irrigation sectors, which enables us to provide turnkey construction services in those sectors. We intend to enhance our design capabilities in other sectors such as the institutional Building Construction and the Transportation sectors so as to be able to provide turnkey services in those sectors as well.
Reduce costs of materials through backward integration and importation
The construction industry is subject to periodic shortfalls in the supply of bulk construction materials such as, cement, steel, concrete and pipes. To address this shortfall, we are pursuing two strategies. First, we are seeking to reduce supply costs by importing supplies from overseas suppliers where that is more economical. Second, we have in-house capabilities to producing materials, which enables us to control the quality of the materials we use and ensure timely delivery of materials required for the projects we undertake.
Expand our developer business by undertaking more projects in the sectors in which we are already engaged
In recent years the Government has increased the emphasis on infrastructure development through enhanced Five-Year Plan allocation and encouraging PPPs. BOT/BOOT/BOO projects offer attractive opportunities to developers because such projects provide long-term sources of revenue. Concession periods for a BOT/BOOT/BOO project generally range from 15-99 years. To take advantage of such opportunities, we leveraged the experience of our construction business to establish a developer business. In Fiscal 2009, our developer business generated Rs. [●] million in revenue and in the three months ended June 30, 2009, our developer business generated Rs. [●] million in revenue. Thus far, our development business has engaged in the designing, financing and building of industrial parks, residential and commercial properties, transportation terminals and roads. [We are actively seeking new opportunities in these areas to expand our developer business.]
Expand our developer business into other sectors
A fundamental aspect of our business strategy is to engage in projects from a diversified range of sectors so as to avoid dependency on one or a few sectors. Because BOT/BOOT/BOO projects offer long-term sources of revenue, we intend to apply this philosophy to our developer business in addition to applying it to our construction business. Therefore, we are actively seeking to expand our developer business into other sectors such as power, marine works, mechanized parking, and cargo and bulk handling terminals.
