Portfolio Analysis of Infrastructure Sector.doc-purvi

PORTFOLIO ANALYSIS OF INFRASTRUCTURE SECTOR

Overview of Indian infrastructure sector:

Will the next decade make the India Inc story strong with further development in the

infrastructure sector? Providing an economic stimulus and also connecting different economies

should be the driving force behind this. The government also has been focusing on infrastructure

spending heavily and the last five years has been worthwhile in this regard. In this context, the

infrastructure companies in India also have been faring strongly and have surpassed all

expectations. A recent survey on the infrastructure companies in India reveals that the sample of

22 companies, based on consolidated revenues have been able to withstand the global meltdown.

The combined revenues of these 22 Indian infrastructure companies have surged up by 32.3% in

2009, mostly driven by government initiatives.

MACRO Analysis

The value of goods exported and imported make up close to 50% of world GDP vs. less

than 20% in the 1980s.

The World Bank launched two new funds The bank's Infrastructure Recovery and Assets

(INFRA) platform and the Infrastructure Crisis Facility (ICF)(over $55 billion)

FDI (Foreign Direct Investment)

Investment from other countries has increased

2008-09 (April-March) 21,413

2009 (April-July) 10673

(Amount Rupees in crores (US$ in million)

Monetary Policy

Reserve Bank has injected large liquidity in the system since mid-September 2009

ACC LTD.

Stock Movements from Oct ’09 to Oct ‘10

MONTH

BSE

DATA

Nov, 09 701.3

Dec, 09 807.65

Jan, 10 913.95

Feb, 10 873.2

Mar, 10 962.65

Apr, 10 948.65

May, 10 903.1

June, 10 818.55

July, 10 866.9

Aug, 10 834.55

Sep, 10 886.8

22 Oct,

10 984.2

COMPANY INFORMATION:

Established in 1936 as a merger of 10 cement companies, ACC Limited (hereafter

called ACC) is the only cement company that figures in India’s list of Consumer Super Brands.

Formerly called The Associated Cement Companies Limited - (the company changed

its name in 2006) - ACC’s corporate office is located in Mumbai. The company has 14 modern

cement factories, more than 30 Ready Mix Concrete (RMX) plants, 20 sales offices and several

zone offices. It has a workforce of about 10,000 persons and a countrywide distribution network

of over 9000 dealers.

The house of TATA was intimately associated with ACC up to 1999, after which the

Tata Group sold all 14.45% of its shareholding in ACC in three stages to subsidiary companies

of Gujarat Ambuja Cements Limited (GACL).

In January 2005, the Holcim Group of Switzerland announced its plans to enter into

a long-term strategic alliance with the Ambuja Group by acquiring a majority stake in Ambuja

Cements India Ltd. (ACIL), which at the time held 13.8% of the total equity shares in ACC.

Holcim simultaneously announced its bid to make an open offer to ACC shareholders, through

Holdcem Cement Pvt Limited and ACIL, to acquire a majority shareholding in ACC. An open

offer was made by Holdcem Cement Pvt. Limited along with Ambuja Cements India Ltd.

(ACIL), following which the shareholding of ACIL increased to 34.69% of the Equity share

capital of ACC.

ACC has 12 captive power generating plants across 7 locations, with a captive

power generating capacity of 241 MW. It also has wind power plants at Madukkarai and

Lakheri, which together generate 16.5 MW electricity from wind power ACC plans to invest Rs.

30 billion as capital expenditure over the next two years. This would result in enhancing the total

cement manufacturing capacity to 30.58 MTPA and the captive power generation capacity to 351

MW by the end of 2010.

ACC has also extended its services overseas to the Middle East, Africa & South

America, where it has provided technical and managerial consultancy to a variety of consumers,

and also helps in the operation and maintenance of cement plants abroad. The overseas contract

with YANBU Cement Company, Saudi Arabia for management and operation of its cement

plants, is an ongoing relationship for the last 29 years and has been renewed up to February 28,

2011.

Balance sheet:

Dec ' 09 Dec ' 08 Dec ' 07 Dec ' 06 Dec ' 05

Sources of funds

Owner's fund

Equity share capital 187.94 187.88 187.83 187.48 184.72

Share application money 0.08 - 0.10 0.28 0.82

Preference share capital - - - - -

Reserves & surplus 5,828.20 4,739.85 3,964.78 2,955.16 1,951.21

Loan funds

Secured loans 550.00 450.00 266.03 720.96 950.12

Unsecured loans 16.92 32.03 40.38 50.20 121.30

Total 6,583.14 5,409.76 4,459.12 3,914.08 3,208.17

Uses of funds

Fixed assets

Gross block 6,826.27 5,835.67 5,464.07 4,816.25 4,628.64

Less : revaluation reserve - - - - -

Less : accumulated depreciation 2,667.98 2,365.97 2,149.35 1,893.76 1,722.29

Net block 4,158.29 3,469.70 3,314.72 2,922.49 2,906.35

Capital work-in-progress 2,156.21 1,602.86 649.19 558.42 290.95

Investments 1,475.64 679.08 844.81 543.09 333.80

Net current assets

Current assets, loans & advances 2,443.61 2,867.44 2,307.94 2,027.47 1,436.45

Less : current liabilities & provisions 3,650.61 3,209.32 2,657.54 2,138.33 1,765.79

Total net current assets -

1,207.00

-341.88 -349.60 -110.86 -329.34

Miscellaneous expenses not written - - - 0.94 6.41

Total 6,583.14 5,409.76 4,459.12 3,914.08 3,208.17

Notes:

Book value of unquoted investments 1,451.99 655.43 821.33 541.33 328.48

Market value of quoted investments 19.58 11.87 43.11 13.59 67.28

Contingent liabilities 840.52 1,734.21 890.62 341.56 282.42

Number of equity sharesoutstanding

(Lacs)

1877.40 1876.82 1876.24 1872.78 1845.08

Profit & loss account


Income

Operating income 8,021.59 7,229.97 6,894.79 5,731.75 3,183.80

Expenses

Material consumed 1,204.68 1,180.15 1,836.72 1,542.80 1,033.58

Manufacturing expenses 1,961.34 1,961.86 861.73 693.43 457.17

Personnel expenses 367.71 413.04 352.73 318.02 184.84

Selling expenses 1,393.87 1,377.31 1,279.48 1,148.03 726.22

Adminstrative expenses 530.88 514.33 622.70 356.99 201.91

Expenses capitalized - - - - -

Cost of sales 5,458.48 5,446.69 4,953.36 4,059.27 2,603.72

Operating profit 2,563.11 1,783.28 1,941.43 1,672.48 580.08

Other recurring income 136.17 211.59 142.24 89.57 45.43

Adjusted PBDIT 2,699.28 1,994.87 2,083.67 1,762.05 625.51

Financial expenses 84.30 39.96 73.87 75.19 66.19

Depreciation 342.09 294.18 305.43 254.61 164.64

Other write offs - - 1.55 6.24 6.46

Adjusted PBT 2,272.89 1,660.73 1,702.82 1,426.01 388.22

Tax charges 688.93 524.60 491.70 369.10 140.17

Adjusted PAT 1,583.96 1,136.13 1,211.12 1,056.91 248.05

Non recurring items 1.23 41.25 227.11 158.30 255.41

Other non cash adjustments 21.54 35.39 -0.16 14.55 46.93

Reported net profit 1,606.73 1,212.77 1,438.07 1,229.76 550.39

Earnigs before

appropriation

4,084.64 3,277.66 2,687.01 1,696.73 851.07

Equity dividend 431.76 375.33 375.02 280.92 147.61

Preference dividend - - - - -

Dividend tax 73.38 63.79 63.74 39.40 20.70

Retained earnings 3,579.50 2,838.54 2,248.25 1,376.41 682.76

Ratios:


Per share ratios

Adjusted EPS (Rs) 84.37 60.53 64.55 56.44 13.44

Adjusted cash EPS (Rs) 102.59 76.21 80.91 70.36 22.72

Reported EPS (Rs) 85.58 64.62 76.67 65.78 29.49

Reported cash EPS (Rs) 103.80 80.29 93.04 79.70 38.77

Dividend per share 23.00 20.00 20.00 15.00 8.00

Operating profit per share (Rs) 136.52 95.02 103.47 89.30 31.44

Book value (excl rev res) per share (Rs) 320.45 262.56 221.33 167.76 115.42

Book value (incl rev res) per share (Rs.) 320.45 262.56 221.33 167.76 115.42

Net operating income per share (Rs) 427.27 385.22 367.48 306.06 172.56

Free reserves per share (Rs) 304.59 247.26 206.60 144.12 91.75

Profitability ratios

Operating margin (%) 31.95 24.66 28.15 29.17 18.21

Gross profit margin (%) 27.68 20.59 23.72 24.73 13.04

Net profit margin (%) 19.69 16.29 20.44 21.16 16.85

Adjusted cash margin (%) 23.61 19.22 21.57 22.63 12.97

Adjusted return on net worth (%) 26.32 23.05 29.16 33.64 11.64

Reported return on net worth (%) 26.70 24.61 34.64 39.20 25.55

Return on long term funds (%) 35.80 31.43 39.98 40.10 15.36

Leverage ratios

Long term debt / Equity 0.09 0.10 0.07 0.19 0.38

Total debt/equity 0.09 0.09 0.07 0.24 0.50

Owners fund as % of total source 91.38 91.08 93.12 80.29 66.59

Fixed assets turnover ratio 1.19 1.25 1.26 1.19 0.68

Liquidity ratios

Current ratio 0.66 0.89 0.86 0.94 0.81

Current ratio (inc. st loans) 0.66 0.89 0.85 0.77 0.57

Quick ratio 0.41 0.60 0.55 0.60 0.42

Inventory turnover ratio 25.22 27.51 24.85 22.40 12.29

Payout ratios

Dividend payout ratio (net profit) 31.43 36.20 30.49 26.00 30.92

Dividend payout ratio (cash profit) 25.92 29.13 25.13 21.45 23.53

Earning retention ratio 68.11 61.35 63.78 69.70 32.15

Cash earnings retention ratio 73.78 69.30 71.10 75.70 59.85

Coverage ratios

Adjusted cash flow time total debt 0.29 0.33 0.20 0.58 2.56

Financial charges coverage ratio 32.02 49.92 28.21 23.43 9.45

Fin. charges cov.ratio (post tax) 24.12 38.71 24.63 20.85 11.81

Component ratios

Material cost component (% earnings) 15.37 16.32 26.73 26.40 33.88

Selling cost Component 17.37 19.05 18.55 20.02 22.80

Exports as percent of total sales 0.69 0.99 1.29 1.20 1.93

Import comp. in raw mat. consumed 15.72 9.83 6.49 3.00 1.36

Long term assets / total Assets 0.75 0.66 0.67 0.66 0.71

Bonus component in equity capital (%) 48.92 48.94 48.95 49.05 49.78

Analysis :-

• The current P/E ratio is 11.51% and EPS is Rs. 85.49.

• A current ratio under 1 suggests that the company would be unable to pay off its

obligations if they came due at that point. Current ratio of ACC in 2009 is 0.66.

• The higher the quick ratio, the better the position of the company.

• Operating margin ratio used to measure a company's pricing strategy and operating

efficiency. A healthy operating margin is required for a company to be able to pay for its

fixed costs, such as interest on debt. It is highest in Dec ‘09 is 31.95%

• The higher the net profit margin is, the more effective the company is at converting

revenue into actual profit. It is highest in Dec ’06 is 21.16%.

• Long-term debt-equity ratio means the company with higher ratio are more risky

because they have more liabilities. It is highest in Dec ‘05 is .38 & lowest in Dec ’07 is

0.07.

• Inventory turnover ratio means how many times a co’s inventory is sold & replaced

over a period. High ratio imples either a strong sales. Highest in Dec ‘08 is 27.51 and

lowest in Dec ‘05 is 12.29.

Life cycle:

Maturity stage: ACC is going through its maturity stage, as its sales are at peak.

Introductory stage: In 1936, when company was established it was its introductory

stage.

Growth stage: 2000-2008 was it growth period because its sales volume got growth year

by year.

Decline stage: It could in next 20-30 years if other alternative or technique has been

developed.

PORTER’S FIVE FORCE MODEL:

THREAT OF NEW ENTRANTS:

ACC has threat from new entrants like TATA; Reliance etc can enter into this industry.

But there are certain barriers to their entry. These are:

Availability of raw material

Restrictions on entry by government into cement industry

Cement industry requires a huge investment

Switching costs are high in cement industry

BARGAINING POWER OF SUPPLIERS:

Suppliers have very much impact on cement industry because of the following reasons:

Raw materials used in cement are gypsum, fly ash and slag. There are few suppliers of

these materials.

Quality of finished goods i.e. cement is very important for ACC ltd.

As already said, there are high switching costs in cement industry.

There is no substitute to the raw material used in cement.

BARGAINING POWER OF BUYER:

ACC ltd plays the role of buyer. It has following bargaining powers:

There are only few buyers of raw material of cement.

ACC has major stake in cement industry i.e. 11% of the world.

THREAT OF SUBTITUES:

It has threat from Ambuja cements, Birla cements etc.

RIVALRY AMONG THE COMPETING FIRMS IN INDUSTRY:

In spite of huge stake in cement industry, it is difficult to be on the top because of the other

competing companies i.e. Ambuja, Birla, and Binani etc.

Competitor analysis

ACC, with an installed capacity of 22.63 MTPA, enjoys an 11% market share in India, which

with its total installed capacity of 207 MTPA, is the second largest cement producing country in

the world. ACC’s nation-wide presence and brand image ensures a competitive edge and helps it

to withstand regional fluctuations in prices and also to adapt its distribution to market place

needs. Its key competitors are as follows:

Company Capacity (in MTPA)

ACC 22.63

Ambuja Cements 18.50

Binani Cements 6.50

Birla Corporation Limited 5.80

CCI 3.85

Century Textiles 6.80

Grasim 16.75

India Cements 8.94

Jaypee Group 13.50

Kesoram Industries 5.60

Lafarge 5.50

Madras Cements 10.00

Ultratech Cement 18.20

Zuari Cement 3.50

SWOT analysis

STRENGTHS.

• People ask for ACC, it is having a good image and brand loyalty among consumers.

• Service is good. “Dhalai karne ke liye” people ask for ACC

• Perceived to be of very superior quality cement when compared to others

• Selling form the very first day the shop came in to being & sells easily

• They have same price prevailing for wholesale at dealers/stockiest retailers end.

WEAKNESS.

• The competitors are doing much promotional activity rather than ACC Limited that’s why it

facing more problems in selling of product in the market.

• Lack of awareness program for consumers. They think Birla Gold contains more FLYASH.

OPPORTUNITY.

• Rapid growth is taking place in Bihar and Madhya Pradesh. People are opting for more stable

structures and intensive use of cement is taking place, even government is spending heavily on

infrastructure projects. Thus, this is the right time to fully tap these markets.As Indian core

industry is also growing at rate of nearly 10% per annum, Birla Gold is having a good future.

• Foreign direct investment in infrastructure sector going to increase in coming years, which will

increase the demand of cement.

• Roads are undergoing through the transformation process through which the traditional method

of road building will be replaced by modern concrete roads

THREATS:

•Large number of players in cement industry makes it more competitive for ACC Limited to

carefully price its product and at the same time satisfy its dealers and customers.

•Players such as Jaypee Cement, Prism Cement, and Birla Samrat are eating up considerable

market share.

•Due to India’s exponential growth many new international cement companies are expected in

coming years which will bring a tide of change and can start price war.

The emergence of small players in this market may increase the competition and start the

malpractices, and heavy discounts to retailers. They can also influence many retailers by giving

better profit margin, and other benefit.

Larsen & Toubro

Current Price (as on 22 oct, ‘10)

BSE: 2020.80

NSE: 2019.35

Stock Movements from Oct ’09 to Oct ‘10

MONTH

BSE

DATA

Nov, 09 1525.60

Dec, 09 1628.50

Jan, 10 1691.30

Feb, 10 1417

Mar, 10 1582.15

Apr, 10 1649.85

May, 10 1591.70

June, 10 1592.95

July, 10 1792

Aug, 10 1812.15

Sep, 10 1832.55

22 Oct,

10 2020.80

NATURE OF BUSINESS:

The company was founded in Mumbai in 1938 by two Danish engineers, Henning Holck-

Larsen and Soren Kristian Toubro

Larsen & Toubro is a $8.5 billion, technology, engineering, construction and

manufacturing

company.

L&T has an international presence, with a global spread of offices, factories and offices

located around the country, further supplemented by a comprehensive marketing and

distribution network.

Turnover of the company:

Larsen and Toubro (L&T) is a public company which founded in Mumbai in 1938 by

Henning

Holck-Larsen and Soren Kristian Toubro. L&T ‘s headquarter is established in Mumbai,

India.

This is a conglomerate industry which provides their services worldwide. L&T deal into

power generation, Refineries, Cement plant, Ships, Switchgear. The services which

provides are Engineering Services, Turnkey Projects, IT Services, Shipbuilding.

The number of employees were working in L&T was 35,000 (2007).

The total revenue was US$ 8.50 billion (2009), Operating income US$ 900 million

(2009), the

net income was US$ 0.58 billion (2009) and total assets in US$ was 9.92 billion (2009).

Larsen & Toubro Infotech Limited (L&T Infotech), a 100% subsidiary of the US$ 3.5 billion

Forbes Global 1000 and BusinessWeek Asia top 50 technology-driven engineering and

construction major, Larsen & Toubro Limited, offers comprehensive, end-to-end software

solutions and services. Leveraging the heritage and domain expertise of the parent company, its

services encompass a broad technology spectrum, catering to leading international companies

across the globe. A Range of Products & Services Committed to a focused business approach,

L&T Infotech offers its services across a wide spectrum of technologies to include:

Focus Areas

Offshore outsourcing of Application Maintenance as well as Application Development

ERP-II implementations, upgrades, rollouts, production support, maintenance and

enhancement

Integration of systems within and across enterprises

Industry Solutions:

Banking & Securities,

Insurance,

Communications

Embedded Systems

Manufacturing.

Before Recession

The turnover were increasing @ 24.2%

Profit before tax were increasing @ 50.6%

After Recession

The turnover now are increasing @ 25.7%.

Profit before tax now increasing @ 30.23%.

Larsen & Toubro has got new order worth about Rs 966 crore

In engineering and construction business, in this quarter, we had more than 60% growth

in new order inflow. It consisted of orders from the power sector, from hydrocarbon

sector and other infrastructure segments

The machinery and industrial products business, has actually de-grown to a large extent

by about 28% in the first six month of the year. Although it constitutes just about 6% of

our total business

They have a 14% growth in the six months period, it could have been slightly higher

In the construction division our budget will be around Rs 30,000 crore for this year,

which is going alright and the budget is in line. They have a lesser order intake in Q1 and

Q2 and have a larger order intake in Q3 and Q4.

Q4 FY09 numbers have been better than what the street expected. It posted a net profit of

to Rs 998 crore, up 3.23% from Rs 966.8 crore YoY.

The Market price Of Share was Rs.790 on 31 Oct 2008 and on 31 Oct 2009 is Rs.1598

Company had a strong presence in project financing like IDFC and had also started

agriculture tractor financing and micro-financing.

The company has assets worth Rs 8,000-8,500 crore, which should rise to Rs 11,000-

12,000 crore by FY10-end

has raised USD 400 million via a qualified institutional placement (QIP) and USD 200

million via foreign currency convertible bonds (FCCBs) issue, it will be used in ship

building, nuclear forging, power plants and ports.

The company has diluted 1.9% equity

SWOT analysis

The Larsen & Toubro Limited - SWOT Analysis company profile is the essential source for top-

level company data and information. Larsen & Toubro Limited - SWOT Analysis examines the

company’s key business structure and operations, history and products, and provides summary

analysis of its key revenue lines and strategy.

Strengths :

• Right products, quality and reliability.

• Superior product performance vs competitors.

• Brand Image

• Products have required Accreditations.

• High degree of customer satisfaction.

• Good place to work

• Lower response time with efficient and effective service.

• Dedicated workforce aiming at making a long-term career in the field.

Weaknesses :

• Some gaps in range for certain sectors.

• Not very popular in the international market

•Delivery-staff need training.

•Customer service staff needs training.

• Processes and systems, etc

• Management cover insufficient.

• Sectoral growth is constrained by low unemployment levels and competition for staff

Opportunities :

• Profit margins will be good.

• End-users respond to new ideas.

• Could extend to overseas broadly.

• New specialist applications.

• Could seek better supplier deals.

• Fast-track career development opportunities on an industry-wide basis.

• An applied research centre to create opportunities for developing techniques to provide added-

value services

Threats :

• Legislation could impact.

• Existing core business distribution risk

• Vulnerable to reactive attack by major competitors.

• Lack of infrastructure in rural areas could constrain investment.

• High volume/low cost market is intensely competitive

Financial information:

Latest Quarterly/Halfyearly Detailed Quarterly

As On(Months) 30-Sep-2010(3) 30-Sep-2009(3) % Change

Sales of Products/Services 93307.60 78661.80 18.62

Other Income 3821.90 2175.50 75.68

Total Income 97129.50 80837.30 20.15

Total Expenses 84462.90 70816.00 19.27

OPBDIT 12666.60 10021.30 26.40

Interest 1931.50 1309.60 47.49

Depreciation 0.00 1001.30 --

Exceptional & Extraordinary Items 708.40 273.80 158.73

Prior Period Adjustments 0.00 0.00 --

Provision for Tax 3793.70 2706.80 40.15

After Tax Profit 7649.80 5804.00 31.80

Equity Capital 0.00 0.00 --

Reserves 0.00 0.00 --

Income Statement

31-Mar-

10(12)

31-Mar-

09(12)

31-Mar-

08(12)

Profit / Loss A/C Rs mn %OI Rs mn %OI Rs mn %OI

Net Sales (OI) 368161.50 100.00 337723.30 100.00 249075.30 100.00

Material Cost 153119.30 41.59 153992.30 45.60 121549.50 48.80

Increase Decrease

Inventories19972.70 5.42 15735.80 4.66 8079.30 3.24

Personnel Expenses 23791.40 6.46 19744.60 5.85 15354.50 6.16

Manufacturing Expenses 110276.70 29.95 92605.40 27.42 61987.40 24.89

Gross Profit 61001.40 16.57 55645.20 16.48 42104.60 16.90

Administration Selling and

Distribution Expenses15431.70 4.19 18085.50 5.36 13430.00 5.39

EBITDA 45569.70 12.38 37559.70 11.12 28674.60 11.51

Depreciation Depletion and

Amortisation4146.00 1.13 3059.90 0.91 2136.30 0.86

EBIT 41423.70 11.25 34499.80 10.22 26538.30 10.65

Interest Expense 5053.10 1.37 4155.60 1.23 1226.60 0.49

Other Income 22436.10 6.09 9059.90 2.68 6222.70 2.50

Pretax Income 58806.70 15.97 39404.10 11.67 31534.40 12.66

Provision for Tax 16408.70 4.46 12312.10 3.65 9820.50 3.94

Extra Ordinary and Prior

Period Items Net1357.20 0.37 7724.60 2.29 0.00 0.00

Net Profit 43772.10 11.89 34818.90 10.31 21713.90 8.72

Adjusted Net Profit 42414.90 11.52 27094.30 8.02 21713.90 8.72

Dividend - Preference 0.00 0.00 0.00 0.00 0.00 0.00

Dividend - Equity 7527.50 2.04 6149.70 1.82 4953.20 1.99

Balance Sheet

31-Mar-10 %BT 31-Mar-09 %BT 31-Mar-08 %BT

Equity Capital 1204.40 0.26 1171.40 0.32 0.00 0.00

Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00

Share Capital 1204.40 0.26 1171.40 0.32 584.70 0.22

Reserves and Surplus 178822.20 38.26 121068.90 33.47 93822.20 34.54

Loan Funds 68008.30 14.55 65560.30 18.13 35839.50 13.20

Current Liabilities 190545.00 40.76 147761.50 40.85 117417.20 43.23

Provisions 21883.60 4.68 19426.30 5.37 20354.20 7.49

Current Liabilities and Provisions 212428.60 45.44 167187.80 46.22 137771.40 50.72

Total Liabilities and Stockholders

Equity (BT)467446.00 100.00 361696.60 100.00 271605.00 100.00

Tangible Assets Net 53199.10 11.38 39663.30 10.97 28069.80 10.33

Intangible Assets Net 1261.40 0.27 1015.30 0.28 617.40 0.23

Net Block 54946.30 11.75 41173.90 11.38 29192.40 10.75

Capital Work In Progress Net 8742.00 1.87 10802.80 2.99 7292.70 2.69

Fixed Assets 63657.60 13.62 51946.00 14.36 36454.40 13.42

Investments 137053.50 29.32 82637.20 22.85 69222.60 25.49

Inventories 14153.70 3.03 14705.10 4.07 43059.10 15.85

Accounts Receivable 111637.00 23.88 99031.30 27.38 73650.10 27.12

Cash and Cash Equivalents 14318.70 3.06 7752.90 2.14 9644.60 3.55

Other Current Assets 63532.20 13.59 43561.00 12.04 143.20 0.05

Current Assets 203641.60 43.56 165050.30 45.63 126497.00 46.57

Loans & Advances 59974.50 12.83 58193.60 16.09 37570.80 13.83

Miscellaneous Expenditure Other

Assets0.00 0.00 2.60 0.00 30.60 0.01

Total Assets (BT) 467446.00 100.00 361696.60 100.00 271605.00 100.00

Ratio Analysis

As on 31-Mar-09 31-Mar-08 31-Mar-07

Return Related

Return on Total Assets (%) 17.30 19.80 20.00

Return on Networth (%) 24.50 22.70 24.30

Return on Capital Employed (%) 24.20 25.40 26.40

Profitability

Gross Margin (%) 16.30 16.90 15.90

Operating Margin (%) 10.00 10.70 9.10

Net Profit Margin (%) 11.40 8.70 7.90

Adjusted Net Profit Margin (%) 9.10 8.70 7.90

Asset Turnover(x) 2.10 2.30 2.50

Leverage

Debt/Equity ratio (x) 0.40 0.40 0.40

Total Debt/Total Assets (x) 0.30 0.30 0.30

Long term Debt/Networth (x) 0.30 0.30 0.20

Interest Coverage (x) -- 23.40 19.20

Liquidity

Current Ratio (x) 1.00 0.90 1.10

Quick Ratio (x) 0.70 0.70 0.80

Cash Ratio (x) 0.10 0.10 0.10

Working Capital

Working Capital to Sales (x) 0.10 -- 0.10

Working Capital Days (days gross sales) 20.10 13.10 29.40

Receivables (days gross sales) 107.50 106.50 111.70

Creditors (days cost of sales) 85.40 95.00 92.30

FG Inventory (days cost of sales) 4.40 5.70 6.10

RM Inventory (days consumption) 21.00 19.30 18.80

Cash Flow Indicator

Operating Cash Flow/Sales (%) 4.40 7.80 12.10

Per Share

Book Value Per Share (Rs) 206.70 320.40 200.70

Earnings Per Share (Rs) 59.50 37.80 50.20

Dividend Per Share (Rs) 10.50 17.00 13.10

Growth(%)

Total Operating Income 35.44 41.05 19.38

EBITDA 27.79 60.79 69.30

EBIT 26.49 64.64 71.95

Net Profit 60.28 55.20 38.43

Total Assets 45.34 66.22 27.72

GMR – Infra

Current Price (as on 22 oct, ‘10)

BSE: 53.60

NSE: 53.65

Stock Movements Oct ’09 to Oct ‘10

MONTH

BSE

DATA

Nov, 09 58.75

Dec, 09 68.25

Jan, 10 66.95

Feb, 10 60.90

Mar, 10 55.35

Apr, 10 62.65

May, 10 64.50

June, 10 57.45

July, 10 59.60

Aug, 10 57.50

Sep, 10 57.20

22 Oct,

10 53.60

GMR INFRA - THE POWER OF DIVERSIFICATION

COMPANY OVERVIEW

GMR Infrastructure Limited is one of the leading infrastructure conglomerates in India having

proven track record in the development and operation of power plants, road projects, and world-

class airports at Delhi, Hyderabad and Istanbul. The company, formerly known GMR Vasavi

Infrastructure Finance Limited, was incorporated in 1996 and is headquartered in Bangalore,

India. GMR Infrastructure Limited is a holding company, which conducts all its business

operations through its subsidiaries in various sectors i.e. airports, energy, highways and urban

infrastructure and others. The company involves in power generation business, as well as

develops airport infrastructure facilities; including the Green field International Airport at

Hyderabad, as well as the modernization of Delhi Airport, through a joint venture with Airport

Authority of India. It also develops expressways and urban infrastructure of special economic

zones. Further, the company is also engaged in agri-business with sugar as its main product line.

The company has its operations in the various regions across India, which include Andhra

Pradesh, Orissa, Punjab, Karnataka and Tamil Nadu; the UK; Spain; and Turkey. In addition, the

company offers carbon ferro chrome, extra low phosphorous ferro chrome. The company

recorded revenues of INR 4,019.22 crore in the fiscal year ended March 2009, an increase of

more than 75 per cent over 2008. The company's operating profit was INR 687.61 crore in fiscal

2009, an increase of around 48 per cent over 2008. Its net profit was INR 259.38 crore in fiscal

year 2009, an increase of around 29 per cent over 2008. Power and Airport provide the major

revenue to the company. Hyderabad and Delhi airports together account for about 27 per cent of

airline passenger traffic. Roads construction provides a very little revenue but it contributes the

highest in terms of margin.

Some of the projects planned for the next several years include:

40,000-MW hydro power generation capacity during the 12th (2012- 17) and 13th (2017-22)

Plans Additional power generation capacity of about 70,000 MW Constructing Dedicated Freight

Corridors between Mumbai-Delhi and Ludhiana-Kolkata Capacity addition of 485 million MT in

Major Ports, 345 million MT in Minor Ports Modernization and redevelopment of 21 railway

stations Developing 16 million hectares through major, medium and minor irrigation works

Modernization and redevelopment of 4 metro and 35 non-metro airports Six-laning 6,500 km of

Golden Quadrilateral and selected National Highways Constructing 1,65,244 km of new rural

roads, and renewing and upgrading existing 1,92,464 km covering 78,304 rural habitations

They will operate Delhi airport for 60 years.Right now, the Delhi airport has aero business

revenue of close to Rs 1,000 crore per year. There will be huge increase in the non-aero

businesses like car-parking, hoardings, duty-free shops and MRO facility. The first phase of the

airport is designed to handle 37 million passengers p/a and will be completed by 31-Mar-10,just

in time for the 2010 Delhi Commonwealth Games.

Developing land around the Delhi international airport. They have about 200 acres available for

development and that could translate to about Rs 2 crore sq feet or 20 million sq feet. It is very

difficult to take a call, because it is ruling at around Rs 12000-15000 a square feet. Even on a

conservative basis, for Rs 1-1.5 crore sq feet the Delhi property alone can give a valuation of Rs

10,000-12,000 crore.

They are developing the Hyderabad international airport and will operate it for 60 years. Current

passenger traffic from Hyderabad is 5.7 million pa. GMR has completed approximately 74% of

construction works of the new airport. The greenfield project, scheduled to be completed in Mar-

08, will have an initial capacity for 12 million passengers p/a.

MR Infra has won a contract to develop Istanbul international airport in Turkey. They have a

40% share in the project and their investment will not be more than Rs 200 crore, They will

operate Istanbul for 20 years The Istanbul Airport or Sabiha Gökçen is the second most

important airport in Istanbul and has 3.5million capacity already. It earned revenues close to

about 88 million euros(490 crores) last year and has been growing at around 45-50% for the last

two years. Ataturk, Istanbul’s main airport, is already having more than 21 million passengers as

against a capacity of 20 million passengers. GMR,Limac and Malaysian Airport consortium will

take over the airport in the next three months(by November or December). Since it is a

brownfield airport, the revenues will get accrued from the very first day onwards. The revenues

from the Turkish airport project may be reflected in FY08 financials.

Stock split of 5:1 to happen by August end. This is another bullish factor.

GMR Group has bagged the Rs 500-crore project for development of the multi-product SEZ at

Hosur in the bidding called for by the Tamil Nadu Industrial Development Corporation (Tidco).

The SEZ is expected to come up in area of 3300 acres.SEZ location is at Krishnagiri district,

about 90 km from the New Bangalore International Airport coming up at Devanahalli.

PEST ANALYSIS

PEST analysis of any industry investigates the important factors that affect the industry and

influence the companies operating in the sector. PEST stands for Political, Economic, Social and

Technological analysis. The PEST Analysis is a tool to analyze the forces that drive the industry

and how those factors can influence the industry.

Political Factors

Budget allocation

Through Infrastructure Investment Finance Company Ltd (IIFCL), the government has planned

to put together a corpus of over $ 8.15 billion for infrastructure project. IIFCL will provide $ 1.2

billion for infrastructure projects during 2009-10, which is nearly double the amount disbursed

by it during 2008-09.

Public-Private Partnership

The government has planned for 30 per cent of the total investment in the 11th Five-year plan to

be invested through the private players. It provides an opportunity to corporate.

Economic Factors

Growing Economy

Indian economy has registered a growth of more than 9 per cent for last three year preceding the

financial year 2009. The government major concern is to fight against the slowdown of the

economy growth rate, and has accepted to increase the spending in infrastructure to climb up the

growth of 9 per cent.

Power production

Now a days, just food, clothes and shelter is not the basis needs but education, power and

infrastructure has also became a part of basis need. In India, still most of the rural areas don’t

have power supply. The different yojna sponsored by the government is to increase the

production of power which will leads to overall enhancement of standard of living. Huge

Capacity additions have been planned in power generation in 11th Five Year Plan to the tune of

79 GW as against 135 GW currently installed. The total investment opportunity is around $ 150

billion over a 5 year horizon.

SWOT ANALYSIS

Strengths

Balanced diversification in different segment

The company has diversified their services to different sector. The company has balanced

revenue which provides the company a safety of margin against any uncertainty to specific

industry risk.

Excellent Track Record

The company has an excellent and continuous track record for executing the project before the

scheduled deadline.

Strong Competencies across all Stages of the Project Life Cycle

The company has a strong knowledge and competencies across all stages of the Project Life

Cycle, which helps to company to get different projects.

Strong management

The company management team consists of strong experienced team backed by strong Global

Partnership.

Weaknesses

Financial Leverage

The company debt to equity ratio has increased in the current year. The further requirement of

cash could leads to high debt, which will ultimately result, into high borrowing cost.

Opportunities

Airport Development Fees

The government has allowed charging an Airport Development Fee (ADF) of INR 200 per

domestic passenger and INR 1,300 per international passenger for next three years departing

from the Delhi Airport.

Threats

Issue with the carrier owner and the government

The private carrier owner, whose market share is around 70 per cent, called off the strike, for a

discussion, which was been decided for 28th August 2009. The private players are facing

problems in operating due to low margin. If any further strike happens, it will have a direct

impact on the company revenue.

Financial information:

Latest Quarterly/Half yearly

As On(Months) 31-Mar-2010(3) 31-Mar-2009(3) % Change

Sales of Products/Services 575.00 255.90 124.70

Other Income 82.40 32.70 151.99

Total Income 657.40 288.60 127.79

Total Expenses 426.80 118.50 260.17

OPBDIT 230.60 170.10 35.57

Interest 352.60 56.50 524.07

Depreciation 3.80 0.30 1166.67

Exceptional & Extraordinary Items 0.00 0.00 --

Prior Period Adjustments 0.00 0.00 --

Provision for Tax -94.50 20.10 NM

After Tax Profit -31.30 93.20 NM

Equity Capital 3667.40 3641.30 0.72

Reserves 0.00 0.00 --

Income Statement

31-Mar-

09(12)

31-Mar-

08(12)

31-Mar-

07(12)

Profit / Loss A/C Rs mn %OI Rs mn %OI Rs mn %OI

Net Sales (OI) 0.00 -- 100.00 100.00 0.00 --

Material Cost 0.00 -- 0.00 0.00 0.00 --

Increase Decrease Inventories 0.00 -- 0.00 0.00 0.00 --

Personnel Expenses 101.24 -- 59.56 59.56 3.44 --

Manufacturing Expenses 0.00 -- 0.00 0.00 0.00 --

Gross Profit -101.24 -- 40.44 40.44 -3.44 --

Administration Selling and

Distribution Expenses270.04 -- 152.04 152.04 83.65 --

EBITDA -371.28 -- -111.60 -111.60 -87.09 --

Depreciation Depletion and

Amortisation1.09 -- 1.29 1.29 1.99 --

EBIT -372.37 -- -112.89 -112.89 -89.08 --

Interest Expense 237.92 -- 253.66 253.66 199.55 --

Other Income 1650.19 -- 1021.96 1021.96 341.35 --

Pretax Income 1039.90 -- 655.41 655.41 52.72 --

Provision for Tax 63.16 -- 28.43 28.43 23.94 --

Extra Ordinary and Prior Period

Items Net0.00 -- 0.00 0.00 0.00 --

Net Profit 976.73 -- 626.98 626.98 28.78 --

Adjusted Net Profit 976.73 -- 626.98 626.98 28.78 --

Dividend - Preference 0.00 -- 0.00 0.00 0.00 --

Dividend - Equity 0.00 -- 0.00 0.00 0.00 --

Balance Sheet

Balance Sheet of GMR Infrastructure------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 264.44 331.08 364.13 364.13 366.74

Equity Share Capital 264.44 331.08 364.13 364.13 366.74

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 104.04 1,308.70 5,240.44 5,338.09 5,473.28

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Networth 368.48 1,639.78 5,604.57 5,702.22 5,840.02

Secured Loans 175.89 177.17 469.18 420.30 1,275.00

Unsecured Loans 106.76 20.00 10.00 0.00 1,300.00

Total Debt 282.65 197.17 479.18 420.30 2,575.00

Total Liabilities 651.13 1,836.95 6,083.75 6,122.52 8,415.02

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds

Gross Block 2.22 1.71 1.71 1.66 25.49

Less: Accum. Depreciation 1.11 0.90 1.03 0.85 1.78

Net Block 1.11 0.81 0.68 0.81 23.71

Capital Work in Progress 0.00 0.00 0.00 0.00 8.48

Investments 438.24 1,344.03 4,780.31 4,061.87 6,252.50

Inventories 0.00 0.00 0.00 0.00 12.68

Sundry Debtors 0.03 0.00 0.00 0.00 37.35

Cash and Bank Balance 1.88 0.91 2.37 146.41 8.53

Total Current Assets 1.91 0.91 2.37 146.41 58.56

Loans and Advances 212.09 174.77 1,215.91 746.31 2,093.35

Fixed Deposits 0.40 318.21 105.78 1,185.51 60.00

Total CA, Loans & Advances 214.40 493.89 1,324.06 2,078.23 2,211.91

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 2.57 1.72 21.26 17.54 71.32

Provisions 0.06 0.06 0.05 0.84 10.26

Total CL & Provisions 2.63 1.78 21.31 18.38 81.58

Net Current Assets 211.77 492.11 1,302.75 2,059.85 2,130.33

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 651.12 1,836.95 6,083.74 6,122.53 8,415.02

Contingent Liabilities 260.16 834.73 3,132.29 7,202.10 8,985.00

Book Value (Rs) 13.93 49.53 30.78 31.32 15.92

Ratios

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Per share ratios

Adjusted EPS (Rs) -0.01 0.52 0.33 0.25 1.33

Adjusted cash EPS (Rs) - 0.52 0.33 0.26 1.34

Reported EPS (Rs) 0.03 0.53 0.34 0.08 1.34

Reported cash EPS (Rs) 0.03 0.53 0.34 0.09 1.35

Dividend per share - - - - -

Operating profit per share (Rs) 0.16 0.69 0.48 0.92 1.98

Book value (excl rev res) per share (Rs) 15.92 31.32 30.78 49.53 13.93

Book value (incl rev res) per share (Rs.) 15.92 31.32 30.78 49.53 13.93

Net operating income per share (Rs) 0.41 0.87 0.56 1.01 2.25

Free reserves per share (Rs) 14.92 29.23 28.67 38.77 2.28

Profitability ratios

Operating margin (%) 39.52 78.98 85.77 91.32 87.77

Gross profit margin (%) 38.91 78.92 85.64 90.73 87.40


Net profit margin (%) 8.33 61.16 60.21 8.49 58.43

Adjusted cash margin (%) -1.08 60.19 58.86 25.52 58.15

Adjusted return on net worth (%) -0.04 1.68 1.09 0.51 9.54

Reported return on net worth (%) 0.23 1.71 1.11 0.17 9.64

Return on long term funds (%) 0.89 2.08 1.49 1.74 8.94

Leverage ratios

Long term debt / Equity 0.30 0.05 0.06 0.07 0.61

Total debt/equity 0.44 0.07 0.08 0.12 0.76

Owners fund as % of total source 69.39 93.13 92.12 89.26 56.59

Fixed assets turnover ratio 5.98 95.91 60.10 19.54 26.88

Liquidity ratios

Current ratio 27.11 113.08 62.15 278.01 81.55

Current ratio (inc. st loans) 2.51 11.61 5.30 3.19 3.72

Quick ratio 26.94 113.06 62.15 277.98 81.53

Inventory turnover ratio 1,038.00 - - - -

Payout ratios

Dividend payout ratio (net profit) - - - - -

Dividend payout ratio (cash profit) - - - - -

Earning retention ratio 100.00 100.00 100.00 100.00 100.00


Cash earnings retention ratio - 100.00 100.00 100.00 100.00

Coverage ratios

Adjusted cash flow time total debt - 4.37 7.82 22.78 7.99

Financial charges coverage ratio 0.97 5.31 3.53 1.55 2.94

Fin. charges cov.ratio (post tax) 1.20 5.11 3.48 1.15 2.96

Component ratios

Material cost component (% earnings) - - - - -

Selling cost Component 0.92 0.47 2.84 2.50 0.08

Exports as percent of total sales - - - - -

Import comp. in raw mat. consumed - - - - -

Long term assets / total Assets 0.73 0.66 0.78 0.73 0.67

Bonus component in equity capital (%) 28.84 29.04 29.04 31.94 39.99

Share Holding:

HCC Infra

HINDUSTAN CONSTRUCTION COMPANY

Company Overview

HCC is one of the largest private sector construction companies in India and the foremost

in infrastructure building. Businessman and nationalist, Seth Walchand Hirachand,

founded the company. With a vision for a modern and prosperous India, Seth Walchand

entered into the core sector of industry and on 27th January 1926 Hindustan

Construction Company Ltd.,(HCC) was born. Company started initially with tunneling

works has today grown to a Company with a dedicated, experienced and expert team of

people achieving remarkable feats in the field of civil engineering construction. The

Subsidiary Companies of HCC are Hincon Technoconsult Ltd, Western Securities Ltd,

HCC Infotech Ltd, Pune Paud Toll Road Company Ltd and Hincon Realty Ltd. The

company has staff strength of over 1250 people, including over 600 people

with technical and engineering skills and experience. HCC's highly trained manpower and

up-to- date machinery are, in large measure, responsible for the quality and excellence of

HCC's project implementation. For its immense contribution in the field of construction,

HCC has won accolades from several prestigious organizations within India and abroad.

Company plans to play a role in a major initiative - that of developing a strong, lease-

based sub-contractor base.

Products & services

Company is one of the largest construction and infrastructure building company in the

country.

HCC specializes in the construction of technologically complex & Long-gestation period

projects. The Company executes various projects from diversified areas like Hydel,

Power, Roads, Bridges, Dams, Barrages, Marine Works, Buildings & Environmental

Projects. The company has also undertaken several projects in Bhutan, Saudi Arabia,

Iraq, Myanmar, Tanzania, Sri Lanka etc. The company also specializes in construction

techniques like pre-cast units for industrial structures and jetties, slip forming for tall

structures and underground shafts, bridge builders for segmented construction of long-

span bridges, three-dimensional computer- aided design technology for bridges, and

dredgers for speedy sinking of monoliths, etc.

HCC has contributed its civil engineering construction expertise with leading edge

technologies for building some of the foremost infrastructure projects in India and abroad.

Among these are over 300 road and railway bridges and several outstanding landmarks

around the country. HCC has been involved in construction of the most diverse projects

ranging from power to road projects.

Major Projects in Progress

Tie-up inNuclear spacewithUKbasedAMEC

HCC has entered into an agreement with Britain-based AMEC to offer consulting and EPC

services

for the establishment of nuclear power plants in India. The tie-up will also enable HCC to

execute

services in the field of mechanical and electrical components of nuclear power plants by sourcing

the latest global technologies through AMEC. The company expects India would add 40GW

through nuclear power and would award around 20 nuclear reactors by 2014. The company

would

benefit fromits expertise of building more than 50%of containment structures.

Margin Protected with around 75% of project under strict cost escalation

For any construction project, price escalation of key raw materials like steel and cement is an

important factor for financial performance of the company. The company has order book

position

as on Sep.09, of Rs. 155.5bn in which 90% of projects are covered under the cost escalation.

Hydro projects and irrigation projects contribute 75% of current order backlog. Mostly hydro

projects and irrigation projects covered under the star rated clause as compared to the other

segments. The pass on of incremental costs in hydro projects is as high as 90% and in irrigation

projects it is in the range of 75%-80%.

Particulars Order Value (Rs.mn)

HCC Infrastructure, wholly-owned subsidiary of Hindustan Construction Co Ltd (HCC), is

entering the business of building and operating airports.

HCC Infra is engaged in the creation and management of assets in the areas of roads and power.

The company also built the landmark Bandra-Worli Sealink in Mumbai.

Deshpande did not share the names of the airport projects they were evaluating but hinted Goa

could be one. “Many smaller cities will see greenfield (new) airports coming up and we will tap

that market,” he said.

HCC Ltd recently acquired a controlling stake in Karl Steiner AG, a Swiss company with

expertise in constructing world-class ‘green’ buildings. Among many others, Steiner has the

experience of building Terminal-3 at the Geneva airport.

“We will use Steiner’s expertise in getting building contracts for airports in foreign countries as

well as using them in India. But we can only look at operating airports out of India once we get

some experience in India,” said Deshpande.

HCC Infra will be the third Indian infrastructure company to enter airport operation and

development, after GMR Infrastructure and GVK Infrastructure. Bangalore-headquartered GMR

Infra-led consortiums operate Hyderabad and Delhi airports. Hyderabad-based GVK Infra-led

consortiums operate Mumbai and Bangalore airports.

HCC Infrastructure Ltd. is a wholly owned subsidiary of HCC Ltd with infrastructure projects in the

transportation (viz, roads, bridges, ports, airports) sector, power sector, and has in its kitty other special

infrastructure projects. Mainly operating through the public-private partnership route, this player has

huge scope. Over US $250 billion needs to be imbibed through varied investments in the infrastructure

sector in the next five years (aggregating to approximately Rs. 200,000 crores every year).

Standalone the power sector needs more than 40% of this investment and the transportation sector

needs a little over 50% of the investment. With these sectors growing at a steady pace of more than 10%

every year, the market has tremendous growth opportunity. In the next five years, HCC has the potential

to come in the list of top 5 infrastructure companies in India.

(Rs in Lakhs)

Particulars Quarter ended 30 Sep, 2009 Quarter ended 30 Sep, 2008

Total Income from operations 86,220.82 69,771.12

Net Profit 551.49 1994.35

Porter Five Force Analysis

Threat of New Entrants

1) Product Differentiation is moderate

2) Capital Requirements is very high

3) Impact of Government Policy is very high

4) Switching Cost is moderate

Bargaining Power of Suppliers

1) There are many players in the Steel and Cement Industry

2) Suppliers of product has no substitute

3) Suppliers product is important input to buyers product

4) Suppliers product have low switching cost

Bargaining Power of Buyers

1) Products are less differentiated

2) Buyer presents a credible threat of backward integration

3) Purchases of buyer is very high

4) Buyer industry earns good profit

Threat of Substitute Products

1) Flat in place of apartment

2) Flat on rent in place of owing a house

Rivalry among Existing Competitors

1) There is competition for strategic position

2) Price competition among competitors

3) Lack of differentiation & switching cost

Ratio Analysis

Particulars Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Operating Profit Margin (%) 11.14 12.7 14.49 15.66 14.12

Net Profit Margin (%) 4.89 8.22 4.23 4.06 4

Return On NetWorth (%) 20.97 14.03 8.77 10.99 12.66

Current Ratio 1.02 2.15 1.75 1.49 1.61

Debt Equity Ratio 1.21 1.46 1.72 1.87 2.35

Inventory Turnover Ratio 2.59 1.38 1.08 1.48 1.25

Return On Capital Employed(%) 16.43 6.7 8.62 11.57 10.36

Return On NetWorth(%) 20.97 14.03 8.77 10.99 12.66

Revenue to growat a CAGRof 26%

The company's turnover has grown at a CAGR of 22.2% over FY05-09 and expects it would

grow at CAGR of 26%over FY10-11 driven by strong growth in order backlog. The company

has

reported 61% growth in order backlog to Rs 16.4bn in FY09 which is 4.9x of FY09 revenue and

provides revenue visibility for next four years. The company would report net sales of Rs 43.2bn

in

FY10 and Rs 52.8bn in FY11.

EBITDAmargin to sustain at higher level

During FY05-08, the company has increased contribution of low margin road sector in order

book to capitalize on growth which has suppressed the margin. The c ompa ny ha s reported

improvement in EBIDTA margin by 110 bps to 13% in FY09 on a ccount of higher

contribution from power sector in revenue. The company would marginally improve its

EBIDTA margin to 13.1%for FY10 on account of again shifting its focus toward higher margin

power projects.

Improving return ratio

During FY05-07, the company's return ratio was in declining mode due to shift toward lower

margin road segment to capture the high growth couple with losses on bandra-worli sea link

project. RoE has fallen froma peak of 20.97%in FY05 to 12.66%in FY09 and ROCE from

16.43%

in FY04 to 10.36% in FY09.We expect the RoE would decline by 200 bps to 8.36%in FY10 due

to

withdrawal of section 80IA tax benefits. However we believe ROE and ROCE would improve

from

FY11 onwards driven by operational efficiency and change in revenue mix toward higher margin

project.

Qualified IntuitionalPlacement (QIP) eases gearing

The company has raised Rs4.80bn by allotment of 47mn shares to qualified institutions at the

price

of Rs 102. It has lead to increase of equity shares by around 18.3%to 303mn shares from 256mn

shares. The company has used this money to partially repay the existing debt which has come

down to Rs 22bn from Rs 23.2bn in FY09.We expect debt: equity ratio would come down to

1.3x

in FY10 from 2.3x in FY09.

Debt Equity Ratio

„h Shareholder equity has remained same. The increase in debt equity ratio is due to

increase in unsecured loans.

„h High debt equity ratio reflect that it is capital intensive industry

„h HCC has large leverage on books, with DER of 2.35, as of March 2009

„h HCC has high DER as compared to the industry average of 0.6

„h IVRCL and Simplex enjoy comfortable financial leverage positions v/s peers

Liquidity Ratio

„h Current Ratio has increased to 1.62 from 1.02 mainly due to increase in inventory and

cash and bank balance.

„h The current liability has also increased

„h Inventory Management need focus as there is opportunity for improvement

„h Low Quick Ratio is a cause of concern for lenders and short term creditors

Return on Capital Employed (ROCE)

„h ROCE has decreased from 16.43% to 10.36%

„h HCC’s ROCE is far lower than industry average of 15%

Hindustan Construction Company (HCC)

Split

(Rs.10

to Rs.1)

Particulars 2004-05 2005-06 2006-07 2007-08 2008-09

2009-10

(E)

Profit After Tax (PAT) 74.02 124.80 79.28 108.77 125.25

Equity Dividend 6.00 0.70 0.75 0.80 0.80 0.86

Original Dividend 6.00 7.00 7.50 8.00 8.00

EPS 32.28 4.87 3.09 4.24 4.89 5.71

Original EPS 32.28 48.7 30.9 42.4 48.9

Growth Rate

PAT 0.69 -0.36 0.37 0.15 0.21

Equity Dividend 0.17 0.07 0.07 0.00 0.08

EPS 0.51 -0.37 0.37 0.15 0.17

Market Price 478.25 172.95 89.5 132.4 39.1

P/E Ratio 14.82 35.51 28.96 31.23 8.00

Average P/E 23.70

Expected Rate of Return 0.15

Current Market Price 135

P/E Average Method 135

Average Price 73.4741

Stock of HCC is fairly valued. It is neither undervalued nor overvalued.

Unitech Infra

Unitech Infra, the demerged entity of Unitech, the second-largest real estate developer in the country, is

looking at an order-book of Rs2,200 crore from just the construction business this fiscal.

The new entity will have an order-book of about 14 million square feet (msf) for the construction business,

primarily from Unitech.

The real estate developer will use its existing relationships to get large government and private contracts

awarded to Unitech Infra.

Unitech had said it has about 35 msf under construction and plans to undertake aggressive launches. It

plans to award most of the construction projects to Unitech Infra.

Unitech is expecting to list the infrastructure business before the end of calendar year 2010. The

infrastructure firm would pursue build-operate-transfer (BOT) opportunities in the highway and power

transmission sectors. It intends to generate and distribute captive power within the existing and future

developments of its parent firm.

The New Delhi-based Unitech Infra has an order-book of about Rs 500 crore from the power transmission

business. Unitech spokesperson was not immediately available to comment.

The demerger is aimed at increasing the focus on the company’s infrastructure businesses and providing

significant financing flexibility for the infrastructure projects in terms of access to longer-term and cheaper

financing as compared to real estate projects.

The company is also expecting the area under management for the facilities and property management

services to increase from 10.3 msf in fiscal 2010 to 35 msf by 2013 and to 50 msf by 2015. Unitech Infra

has valued itself at about Rs 5,000 crore, based on assets it owns and has a debt of Rs 350 crore, which

gives it a low leverage. However, the final valuation is underway and financial details would be available

after it gets approvals from regulatory bodies.

vision

To be India’s leading Real Estate company with a Pan-India Footprint, and be the company of

first choice amongst our customers to address their needs across all realty verticals.

Mission

To satisfy every customer’s need for a better experience through quality construction and

employee contentment. Unitech has a well-managed architectural and engineering team that has

closely partnered and worked with internationally acclaimed architects and many others, to

achieve both aesthetic and efficient designs. We are a customer oriented company and we

believe in putting in our best foot forward in our journey to the pinnacle

BusinessAreas

In a short span of time, Unitech has carved a special niche for itself in the real state sector of the

country. Apart from its residential and commercial housing projects, Unitech is also involved in

the construction of flyovers, highways, city roads, power houses, refineries, transmission lines,

airports, educational institutions, hotels, hospitals etc. It is also the leader in the domain of

building amusement parks in and around Delhi. In merely 30 years of its existence, Unitech has

diversified in various sector successfully.

MajorProjects

Unitech has a list of successful projects in cities like Mumbai, Delhi, Kolkata, Chennai,

Hyderabad, Bangalore, Kochi, Noida, Greater Noida, Agra, Lucknow, Varanasi,Gurgaon, and

Ghaziabad. Some of its well known residential projects are the Heritage Estate Yelahanka, Deja

View, Deja View Park residential, Terrace Garden, Parkway, and Windsor Court in Bangalore,

West End Vihar in Mumbai, Uniworld City and the Gateway are the projects in Kolkata, the

Legacy, Heritage, South City residential projects in Lucknow. Apart from the residential

projects, Unitech has also proved its mettle in commercial projects.

SWOT ANALYS I S

STRENGTH

UCP plc has a very good market share of about 54%

Brand Value

Huge supplier base ensures a fixed raw material cost

A well established and firm base in north India

WEEKNESS

Little or no projects in the other parts of India

No parallel products to support during times of bad economy

OPPORTUNITIES

Expansion of business in other parts of India

It can invest more in Power generation projects like Hydroelectric or Wind power

Investment in raw material ± Backward Vertical Integration

THREATS

A) THREATS OF NEW ENTRANTS

Decrease in profitability due to increase in number of entrants.

Real Estate Sector needs high working capital.

This results in high entry barriers.

Existing firm has an edge over the others due to more industrial experience.

B) THREATS OF ESTABLISHED RIVALS

High competition in the sector.

Established rivals are a threat to upcoming players.

DLF ,Unitech and Ansals are the major players in this sector.

OVERALL ANALYSIS OF FIVE COMPANIES OF

INFRASTRUCTURE SECTOR

Micro Analysis Of ACC

In January 2005, the Holcim Group of Switzerland announced its plans to enter into a long-term

strategic alliance with the Ambuja Group by acquiring a majority stake in Ambuja Cements India

Ltd. (ACIL), which at the time held 13.8% of the total equity shares in ACC. Holcim

simultaneously announced its bid to make an open offer to ACC shareholders, through Holdcem

Cement Pvt Limited and ACIL, to acquire a majority shareholding in ACC. An open offer was

made by Holdcem Cement Pvt. Limited along with Ambuja Cements India Ltd. (ACIL),

following which the shareholding of ACIL increased to 34.69% of the Equity share capital of

ACC.

ACC has 12 captive power generating plants across 7 locations, with a captive

power generating capacity of 241 MW. It also has wind power plants at Madukkarai and

Lakheri, which together generate 16.5 MW electricity from wind power ACC plans to invest Rs.

30 billion as capital expenditure over the next two years. This would result in enhancing the total

cement manufacturing capacity to 30.58 MTPA and the captive power generation capacity to 351

MW by the end of 2010.

ACC has also extended its services overseas to the Middle East, Africa & South

America, where it has provided technical and managerial consultancy to a variety of consumers,

and also helps in the operation and maintenance of cement plants abroad. The overseas contract

with YANBU Cement Company, Saudi Arabia for management and operation of its cement

plants, is an ongoing relationship for the last 29 years and has been renewed up to February 28,

2011.

• The current P/E ratio is 11.51% and EPS is Rs. 85.49.

• A current ratio under 1 suggests that the company would be unable to pay off its

obligations if they came due at that point. Current ratio of ACC in 2009 is 0.66.

• The higher the quick ratio, the better the position of the company.

• Operating margin ratio used to measure a company's pricing strategy and operating

efficiency. A healthy operating margin is required for a company to be able to pay for its

fixed costs, such as interest on debt. It is highest in Dec ‘09 is 31.95%

• The higher the net profit margin is, the more effective the company is at converting

revenue into actual profit. It is highest in Dec ’06 is 21.16%.

• Long-term debt-equity ratio means the company with higher ratio are more risky

because they have more liabilities. It is highest in Dec ‘05 is .38 & lowest in Dec ’07 is

0.07.

• Inventory turnover ratio means how many times a co’s inventory is sold & replaced

over a period. High ratio imples either a strong sales. Highest in Dec ‘08 is 27.51 and

lowest in Dec ‘05 is 12.29.

Micro Analysis Of Larsen & Toubro

Before Recession



After Recession



Larsen & Toubro has got new order worth about Rs 966 crore

In engineering and construction business, in this quarter, we had more than 60% growth

in new order inflow. It consisted of orders from the power sector, from hydrocarbon

sector and other infrastructure segments

The machinery and industrial products business, has actually de-grown to a large extent

by about 28% in the first six month of the year. Although it constitutes just about 6% of

our total business

They have a 14% growth in the six months period, it could have been slightly higher

In the construction division our budget will be around Rs 30,000 crore for this year,

which is going alright and the budget is in line. They have a lesser order intake in Q1 and

Q2 and have a larger order intake in Q3 and Q4.

Q4 FY09 numbers have been better than what the street expected. It posted a net profit of

to Rs 998 crore, up 3.23% from Rs 966.8 crore YoY.

The Market price Of Share was Rs.790 on 31 Oct 2008 and on 31 Oct 2009 is Rs.1598

Company had a strong presence in project financing like IDFC and had also started

agriculture tractor financing and micro-financing.

The company has assets worth Rs 8,000-8,500 crore, which should rise to Rs 11,000-

12,000 crore by FY10-end

has raised USD 400 million via a qualified institutional placement (QIP) and USD 200

million via foreign currency convertible bonds (FCCBs) issue, it will be used in ship

building, nuclear forging, power plants and ports.

The company has diluted 1.9% equity

Micro Analysis Of GMR INFRA

The company recorded revenues of INR 4,019.22 crore in the fiscal year ended March

2009, an increase of more than 75 per cent over 2008.

The company's operating profit was INR 687.61 crore in fiscal 2009, an increase of

around 48 per cent over 2008. Its net profit was INR 259.38 crore in fiscal year 2009, an

increase of around 29 per cent over 2008.

Power and Airport provide the major revenue to the company. Hyderabad and Delhi

airports together account for about 27 per cent of airline passenger traffic. Roads

construction provides a very little revenue but it contributes the highest in terms of

margin.

Some of the projects planned for the next several years include:

40,000-MW hydro power generation capacity during the 12th (2012- 17) and 13th (2017-22)

Plans Additional power generation capacity of about 70,000 MW Constructing Dedicated Freight

Corridors between Mumbai-Delhi and Ludhiana-Kolkata Capacity addition of 485 million MT in

Major Ports, 345 million MT in Minor Ports Modernization and redevelopment of 21 railway

stations Developing 16 million hectares through major, medium and minor irrigation works

Modernization and redevelopment of 4 metro and 35 non-metro airports Six-laning 6,500 km of

Golden Quadrilateral and selected National Highways Constructing 1,65,244 km of new rural

roads, and renewing and upgrading existing 1,92,464 km covering 78,304 rural habitations

They will operate Delhi airport for 60 years.Right now, the Delhi airport has aero business

revenue of close to Rs 1,000 crore per year. There will be huge increase in the non-aero

businesses like car-parking, hoardings, duty-free shops and MRO facility. The first phase of the

airport is designed to handle 37 million passengers p/a and will be completed by 31-Mar-10,just

in time for the 2010 Delhi Commonwealth Games.

Developing land around the Delhi international airport. They have about 200 acres available for

development and that could translate to about Rs 2 crore sq feet or 20 million sq feet. It is very

difficult to take a call, because it is ruling at around Rs 12000-15000 a square feet. Even on a

conservative basis, for Rs 1-1.5 crore sq feet the Delhi property alone can give a valuation of Rs

10,000-12,000 crore.

They are developing the Hyderabad international airport and will operate it for 60 years. Current

passenger traffic from Hyderabad is 5.7 million pa. GMR has completed approximately 74% of

construction works of the new airport. The greenfield project, scheduled to be completed in Mar-

08, will have an initial capacity for 12 million passengers p/a.

MR Infra has won a contract to develop Istanbul international airport in Turkey. They have a

40% share in the project and their investment will not be more than Rs 200 crore, They will

operate Istanbul for 20 years The Istanbul Airport or Sabiha Gökçen is the second most

important airport in Istanbul and has 3.5million capacity already. It earned revenues close to

about 88 million euros(490 crores) last year and has been growing at around 45-50% for the last

two years. Ataturk, Istanbul’s main airport, is already having more than 21 million passengers as

against a capacity of 20 million passengers. GMR,Limac and Malaysian Airport consortium will

take over the airport in the next three months(by November or December). Since it is a

brownfield airport, the revenues will get accrued from the very first day onwards. The revenues

from the Turkish airport project may be reflected in FY08 financials.

Stock split of 5:1 to happen by August end. This is another bullish factor.

GMR Group has bagged the Rs 500-crore project for development of the multi-product SEZ at

Hosur in the bidding called for by the Tamil Nadu Industrial Development Corporation (Tidco).

The SEZ is expected to come up in area of 3300 acres.SEZ location is at Krishnagiri district,

about 90 km from the New Bangalore International Airport coming up at Devanahalli.

Micro Analysis of HCC

Before Recession



After Recession



• Increase in profitability has been brought by 3primary reasons.

- Thrust on costs management across the project execution lifecycle.

- Selection of a more profitable project-portfolio. This included a conscious decision to

move to higher value added works like hydro power projects.

- The easing out of commodity prices, especially cement and steel.

Revenue and profit growth reflects the execution performance of the company in 2008-

09.

That shows in 2007-08, the company was fairly selective in project selection for bidding.

Focus on securing safer projects that were backed by the government and also emphasis

was laid on higher margin projects.

Micro Analysis of Unitech Infra

Before Recession

The turnover were increasing @ 40%(average)

Profit before tax were increasing @ 57%

After Recession

The turnover now decreased @ 29.1%.

Profit before tax now decreased @ 30.3%

Unitech on 31 Oct. reported a 50.44 percent fall in its consolidated net profit at Rs.177.86

crore for the quarter ended on Sep 30.

Unitech said it had reduced its debt by Rs.2,397 crore during the first half of the current

fiscal.

Company has entered into 50:50 joint venture with a local developer for about 100 acres

of mixed-use development on the Western Expressway of Mumbai

Project constitutes the development of 1 million sq. ft. of office space out of the total

developable area of approximately 18 million sq. ft.

During the year, 181 companies were added as the subsidiaries of your Company, thereby

taking the total number of subsidiary companies to 316 as on March 31, 2008.

The foreign exchange earnings and expenditures of the Company during the year under

review were Nil and Rs. 147.73 million as compared to Rs.21.59 million and Rs.154.96

million in the previous year

It succesfully raised nearly USD 900 million via two qualified institutional placement

Unitech Habitat, a residential development, was supposed to be delivered by June 2009.

Construction is still on and will take some time .

It plans to reduce its gearing to 1.33 times in FY09

Summary

Infrastructure was effected initially but now is on a recovery track.

Being Back Bone Of a Country every nation is doing expenditure in this sector to come

out of Recession

Major companies in India has shown positive results in this quarter.

Companies have learn Efficient working after Recession.

Infrastructure Sector Growth Rate in India GDP has been on the rise in the last few years. The

Growth Rate of the Infrastructure Sector in India GDP has grown due to several reasons and this

in its turn has given a major boost to the country's economy.

In July 2010, L&T Infra was classified by the RBI as an Infrastructure Finance Company ( "IFC").

This allows the Company to optimize its capital structure by diversifying its borrowings and

accessing long-term funding resources, thereby expanding its financing operations while

maintaining its competitive cost of funds.

The total income of the Company for Fiscal Year 2010 was Rs. 4,504.23 million. The total loans

and advances outstanding as at March 31, 2010 were Rs. 42,884.99 million and total

disbursements for Fiscal Year 2010 were Rs. 37,955.14 million.

BIBLIOGRAPHY:

http://www.acclimited.com/newsite/finance.asp?tag=sp

http://www.acclimited.com/newsite/finance/profitloss05.asp

http://cmsdata.iucn.org/downloads/due_diligence_report_acc_india.pdf

http://www.indexmundi.com/g/g.aspx?v=74&c=in&l=en

http://www.rbi.org.in/scripts/WSSViewDetail.aspx?TYPE=Section&PARAM1=4%0A

http://www.moneycontrol.com/stocks/marketstats/economic_survey/display_graph.php

http://www.moneycontrol.com/stocks/marketstats/economic_survey/display_graph.php

http://www.rbi.org.in/scripts/WSSViewDetail.aspx?TYPE=Section&PARAM1=4%0A

http://www.indexmundi.com/g/g.aspx?v=74&c=in&l=en

http://cmsdata.iucn.org/downloads/due_diligence_report_acc_india.pdf

http://www.acclimited.com/newsite/finance/profitloss05.asp

http://www.acclimited.com/newsite/finance.asp?tag=sp

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