Analysis of Construction Company, India

analytic thinking of Construction Company, IndiaAnnual accounting abbreviation ofHindustan Construction Company checkTejas VaidyaConstruction Sector AnalysisConstruction in India has become a key contributor to the sparing of India in the recent divisions. It ranks 2nd in employment and division to the economy only after the agriculture ara. This welkin also ranks 2nd when it comes to FDI inflows. However the last three years dupe been a challenging period for this empyrean. This sector has now come into the nous with the Make in India campaign being driven actively by the Prime Minister of India. primal aspects of the sector are as followsThe Indian Construction is valued at about USD 126million and projected to grow to USD 140million by 2017.The Construction industry contributes about roughly 10% to the GDP, a contribution of Rs. 6708 billion in the year ending March 2013. 50% of the complex body part industry demand comes from infra coordinate and the rest comes fro m industrial activity, railways, residential and m 1y fashioning(prenominal) phylogeny combined.Being a labour intensive sector, it employs 3.5crore people including forthwith and indirect jobs.The government has highlighted infrastructure as a key sector to turn around and sustain the momentum of GDP harvest that had slowed bulge in the last 3 years.This industry is skewed in damage of major players there are a handful of companies from two prevalent and private sector. The public sector players are IRCON, NBCC, RITES and EIL. The major private sector players are LT, HCC, MN Dastur Co and Ansals.There is immense scope for breeding in this sector and it is seen as a booming sector, primarily due(p) to the following reasonsThe estimated shortage for housing in urban India is 18.8million units whilst that in agrarian India is 47.4million units.The current standards of infrastructure are unable to sustain the growing existence and there is hence a dire affect for re-gene b alancen and renovation to gather demands in urban areas.The Government of India has released a new urban schooling campaign that will help develop carbon smart cities crossways India. Cities will be support to gain investments from private capital and trade name effective use of PPP model to strengthen their infrastructure and services.100% foreign direct investment (FDI) is permitted in plait and infrastructure development projects. Apart from this, a high degree of recent regulatory advancements confirm been seen in this sector which include the followingJawaharlal Nehru National Urban successor MissionThe National Urban Housing and Habitat Policy, 2007Real nation Investment Trusts (REITS) Infrastructure InvestmentReal Estate Regulation suppuration Bill, 2013Model State Affordable Housing Policy for Urban Areas, 2013 some HCCHidustan Construction Company was established in 1926 by Seth Walchand Hirachand Doshi. It is an corpo pasture group that operates in the areas o f manifestation, infrastructure development and real estate. Being one of the largest private sector twisting companies in India, it has been involved in projects ranging from highways and link to hydel- post projects to nuclear facilities.HCCs standalone turnover stands at Rs. 4,113.5 crore and net profit stands at Rs. 80.6 crore, after reporting losses for the last two years.Financial incubate AnalysisHCC has a multitude of ongoing, new and fuckd projects in this year across various states in India and also in Bhutan. A numerate of 202 projects are listed. The state wise spread of the projects is as followsChairmans Address to ShareholdersThe chairman starts by highlighting the terrible state of the economy, of governing and of the infrastructure sector over the last two years. However he shares a spirit of optimism over the formations of the stable NDA government. He states that the GDP growth has been languishing at the sub 5% levels this year 2013-14. As a entrust the construction sector is also badly hit. Overall, HCC endures in a discreditable frame realise in India since the sector that is most affected by economic slow low is infrastructure. The chairman, Ajit Gulabchand lists the problems endemic to the construction industry and they are environsal clearances to new infrastructure projectsLack of effective decision makingNon-payment of claims by government public sector clientsThe chairman also highlights the performance of HCC as a standalone union which has been impressive amidst turbulent economic conditions. Turnover has change magnitude 7.2% to Rs. 4113cr and has seen an increase for 67% to 640.7cr. The company has been successful in driving down comprises. A key project Lavasa is back on track and interpreted up by Steiner AG, a wholly owned subsidiary which has remained bankable since the last 3 years. The chairman ends with sharing his optimism with respect to a stable BJP-led NDA government below Prime Minister Narendra Modi .Management Discussion AnalysisIn this section various aspects of the backing and descent environment of HCC, both inner(a) and outdoor(a) is discussed.The macro economic reviewThe performance of the economy coming into the year 2013-14 is analysed. Chart A highlights the GDP growth rate in the 5 preceding years. Chart B highlights the growth of the construction sector. It is observed that current account deficit as a ratio to GDP has narrowed significantly and there as also been an increase in foreign inflows.Indias Infrastructure SectorThe current site of the infrastructure sector is analysed. It is observed that the sector faces several challenges in hostility of long term demand being consistent. The lethargic decision making of the old government has negatively affected the sector. Infrastructure financing need to improve significantly by dealing effectively with internal and external factors. Delays are also observed on 15-20% projects along with rise in number of proje cts without commissioning date.HCC- Key developmentsTraditional focus on transportation, power and piss supplies has continued. Areas like industrial construction projects, complete engineering, procurement and construction (EPC) have been explored. The improvements implemented in efficiency of project trading operations, inventory management, structure of the organisation and liquidation of receivables have been noteworthy. The company has also undertaken re-evaluation projects to expedite slow-moving financially challenging projects.Performance HighlightsThe company has been successful in maintaining its decease line at par with 2012-13 amidst adverse economic, financial regulatory environment primarily due to its thrust on cost control. Revenue from operations stands at Rs. 4113cr up 7.2% while EBIDTA stands at Rs. 641cr up by 64.1%. The company has also successfully paid of its dues from the Corporate Debt Restructuring package availed last year.Investee CompaniesIncludes HC Cs portfolio of ancestry through subsidiariesInfrastructure focuses on investment and asset concept through PPPs. During 2013-14, the business focused on executing existing projects and gentility capital.Real Estate The focus area of this business has been the development of complete integrated townships.Total Service Contractor An extension of engineering construction division driven primarily by Swiss acquisition Steiner AG.IT refinement into IT done with Highbar Technologies.Engineering Construction segmentationThis division is distributed across power, transport, water and industrial sectors.TransportTwo major contracts were win viz. cut into T49 in Udhampur Srinagar Baramulla railway line and RCC Bridge over river Sone in Bihar. In addition progress is satisfactory on Delhi metro projects won earlier. strengthThis sector has been affected in terms of new undertakings however projects under execution performed advantageously. This includes Hydro and Nuclear Power pro jects.Water Supply IrrigationThe company has complete water supply projects in Gujarat. New contracts secured at Yettinahole, Karnataka as well as in Pune.IndustrialIncludes civil and fabrication contracts in Hindalco-Orrissa, Reliance-Jamnagar, ISPRL-Visakhapatanam and Padur, Karnataka. devil dog WorksA contract for reconstruction of a dry roselle and wharves is progressing satisfactorily in Mumbai.Infrastructure DivisionHCCs infrastructure business was handled by its wholly owned subsidiary HCC Infra. Projects were majorly developed either on PPP or on DFBOT mode. The companys entire portfolio comprises NHAI highways with yielding periods ranging from 18 years to 30 years. The asset portfolio of HCC is mature which it plans to monetise to rear capital. The asset portfolio is also briefly touched upon.Real Estate DivisionThe real estate division is further divided into two businesses, Lavasa and moneymaking(prenominal) real estate. Having received environmental clearances, 201 3-14 saw the development at Lavasa go into the next phase. A restructuring meant all employees involved in construction were shifted to Steiner India and Lavasa remained a pure developer. Focus has been on collection and salesat Dasve and Mugaon. Dasve in ready even so operational basic infrastructure. Work on infrastructure and utilities development of the secant town Mugaon has gathered pace. Gadle Dam, built to supply water for the construction of Lavasa neared 90% completion.Commercial real estate has also seen satisfactory progress with the work on 247 Business Square and 247 Business Avenue, Vikhroli Corporate Park sort II and Mean Township Developers projects progressing. The company also won bids for Parleshwar CHS, Mumbai and Charosa Wineries.Steiner AGHCC acquired the remaining 34% stake in the Swiss company which make ups Steiner AG a 100% owned subsidiary. Profit level has been maintained as last year at CHF 8.2million. Key undertakings of the company post acquisitio ns are described. Steiner launched its new corporate identity and design in September 2013. The place essence Taking the lead together which is being implemented on all channels.Highbar TechnologiesFocus has been on IT implementation from point of view of business transformation, rather than just technology implementation. 14 new customer added to make the count of customers 78. Multiple awards have been won. Expertise developed in areas of ERP, business intelligence and CRM.Operations SupportThe operations of the different divisions are supported by Management Systems, Intellectual Property Rights, Branding and kind Resources. merged Management System (IMS) adopted based on standards based on standards stipulated by ISO 90012008, ISO 140012004 and OHSAS 180012007 to streamline processes. Re-certification audit for ISO 9001 2008, ISO 140012004 and BS OHSAS 180012007 conducted to confirm compliance. HCC continued to require and protect intellectual property through multiple mediu ms. On the stigmatization front, HCC continued with it brand enhancement initiatives in both external and internal mediums. Brand value was enhanced by standardised brand practices and legal transfer of big and complex infrastructure.Awards won by HCCDuring the year the company won CIDC Vishwakarma Award 2014 for Best Project for Pir Panjal Tunnel, Dun Bradstreet Award for Social repair project of the year 2013 for Nimoo Bazgo Hydel Power Project and Construction Week Award.Human ResourcesSubstantial improvement initiatives like annual turnover per employee, upper pileus on indirect/ preliminary expenses at the sites and Head Office cost being limited to a percentage of turnover were undertaken. The organisation structure, work and people allocation was re-calibrated to further improve efficiency and focus on various business areas. The company is also working towards implementing performance-oriented culture.Financial followupIn this section the abridged profit and loss accou nts have been illustrated. Key financial aspects have been highlighted along with key financial ratio. A detail analysis of the financials has been included in the later part of this report.ReferencesAnnual Report AY 2013-14 http//www.hccindia.com/pdf/HCC_Annual_Report_FY2013_14.pdfhttp//makeinindia.com/sector/construction/http//en.wikipedia.org/wiki/Construction_industry_of_Indiahttps//www.equitymaster.com/research-it/sector-info/construction/Construction-Sector-Analysis-Report.asphttp//www.indiainfrastructure.com/reportpdf/research_catalogue.pdfK.J. Somaiya Institute of Management Studies Research paginate 1