Description
This is a presentation describes the growth factors and opportunities in the engineering & construction sector.
ENGINEERING SECTOR
Growth Factors
? Well developed demand conditions ? India’s labour cost advantage almost 7 times ? Growing capabilities of Indian engineering firms ? Preferred outsourcing destination, set to overtake
China ? Government bullish on initiatives with respect to power, infrastructure, etc. ? Dilicensing , removal of tariff protection , promotion of SEZ’s
Growing trend of engineering exports Exports ( $ billion ) for a five year period
45 40 35 30 25 20 15 10 5 20.34 Exports ( $ bn ) 26.5 33.3 32.73 40.51
0
2005-06 2006-07 2007-08 2008-09 2009-10 Source : - EEPC India , December 2010 survey
Opportunities in Engineering Services
? Statistical scenario : ? Exports of Engineering Services : ? ?
USD 36588.52mn up to October 2010 Growth of 47.4% during April-October 2010-11 in comparison to the same period in the previous fiscal
? Potential to reach $ 29 bn in 2015
= 20 % of Global market share ? Opportunity for 2009-2014 ( 5 year period) ~ $ 62 billion ? Sectors :? ? ? ?
Automotive Sector = 19 % Aerospace = 8 % Utilities = 3 % Telecom = 30 %
Opportunities in Defence Sector
? Global scenario ? Global military expenditure – 2008 = $ 1464 billion ? 2007 = 4 % increase ? Indian scenario ? Among top ten nations in military expenditure ? Defence budget growth at CAGR =11.5 % between FY06 & FY09 to $ 26.5 bn for FY 09 ? MSME sector outlook ? Now ~ 5000 companies ? 20-25 % of components , sub-assemblies to state owned companies ? Govt & Pvt sector participation ? Major sector = communications & IT equipment
Key Trends
? Entry of International companies ? 100 % FDI route permitted – entry of international players ? Increasing the competiveness of the industry ? Migration to value added products ? Focus on improvising capabilities ? Quality conscious ? Technology up-gradation at par with global market needs ? Focus on R&D and product development efforts ? Diversification of Risk ? Eg. L & T moved into power equipment manufacturing , BHEL plans to exporting to Syria and Vietnam etc.
CONSTRUCTION SECTOR
Present Scenario
? Construction 2nd largest economic activity
? It accounts for 65% of investment in infrastructure
? Cement consumption to touch almost 105%, showing
?
? ?
?
the demand of the sector Valued at about Rs. 2800 bn in 2010 2nd largest employing sector in India Multiplier effect of 5 times on income Present population ‘buy and repay’ with 24.3 mn new dwellings needed in 2015
Current Scenario
? After recession, growth has been phenomenal with the ? ? ?
?
?
4QFY10 witnessing the highest ever order inflow recorded by the construction industry till date. Further boost by the Rs. 1735 bn govt. infra. dev. schemes Increased funding for construction companies through fiscal policy via IIFCL. Today liquidity woes have vanished with prices in all major metros going up 10-30% 100% FDI is now allowed in realty projects SEZ’s boosting demand
INFRASTRUCTURE
Power
? CAGR of 4.6% over the last four years ? India has the fifth largest electricity generation capacity in the world
Roads
? An extensive road network of 3.3 m km – the second largest in the world
? The Golden Quadrilateral (GQ-5846 km of 4 lane highways) North-South & East
Railways
? The premier transport organisation of the country - the largest rail network in Asia and the world’s second largest
? Stations, 300 Yards, 2300 Goodsheds, 700 Repair shops, 1.54 mn Work force
Ports
? 12 Major Ports and 185 Minor Ports along 7,517 km long Indian coastline ? 100% FDI under the automatic route is permitted for port development projects ? Public–Private partnership is seen by the Government as the key to improve
Airports
? India has 125 airports; of these, 11 are designated international airports ? 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74% ? New international airports - Bangalore & Hyderabad built by private consortia – total investment of about €411 million
PORTER’S 5 FORCE FOR CONSTRUCTION INDUSTRY
? Supply - Substantial increase in contractors and builders in past 2-3 years, ? ?
?
?
?
especially in the housing and road construction segment Demand- Demand exceeds supply by a large margin, mainly emanating from the housing, transportation and urban development segments. Barriers to entry- Low for road and housing construction ? However, high working capital requirements can create growth problems for companies with weak financial muscle. Bargaining power of suppliers- Low ? Margins stagnant despite strong growth in volumes due to rapid increase in number of contractors and construction service providers Bargaining power of customers- Low ? The country still lacks adequate infrastructure facilities and citizens have to pay for using public services. Competition- Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development.
GROWTH PROJECTIONS
? Rs. 4200 billion investments by 2015 ? FDI alone will jump 6-folds to Rs. 1400 billion over the
next 10 years ? Projects worth Rs 131 billion are coming up to develop Special Economic Zones. ? As per the ASSOCHAM, the Indian real estate industry size is pegged at Rs. 800 bn and growing at the rate of 30% pa.
Growth in GDP @ Factor Cost (%)
05-06 Construction GDP @ Cost Factor 12.8 9.5 06-07 10.3 9.6 07-08 10.7 9.3 08-09 5.4 6.8 09-10 7.0 8.0 10-11 8.0 8.6
BUDGET HIGHLIGHTS
Infrastructure ? Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation. ? Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore. ? Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year. India Infrastructure Finance Company Limited (IIFCL) ? Disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011. ? Has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double that amount in 2010-11. ? The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs. 25,000 crore in the next three years
FINANCIALS
Name Market Cap. (Rs. cr.) Sales Turnover Net Profit Total Assets Jaiprakash Asso GMR Infra Unitech
12,918.08 8,174.11 5,834.35
12,966.48 727.40 1,805.85
1,166.11 58.88 510.08
30,930.41 9,545.66 14,850.93
Jaypee Infra
Larsen Gammon Infra
5,361.28
75,016.97 883.01
2,778.70
43,495.93 51.20
1,435.06
3,957.89 35.73
11,095.05
29,007.37 756.5
FINANCIALS contd
JP Major Co’s Gammon GMR Infra Unitech Associates Infra
FY Operating Profit PBDIT Interest PBDT Profit Before Tax Reported Net Profit Earning Per Share (Rs) Mar '11 56.26 58.86 10.94 47.92 45.94 35.73 0.49 Mar '11 3,012.27 3,877.31 1,515.41 2,361.90 1,753.67 1,167.78 5.49 Mar '11 201.17 252.51 182.44 70.07 65.16 58.88 0.15 Mar '11 237.10 1,064.06 329.21 734.85 728.17 510.08 1.95
Jaypee Infra
Mar '11 1,813.63 1,833.56 10.30 1,823.26 1,814.63 1,435.06 10.33
Larsen & Turbo
Mar ‘11 5,878.57 7,659.85 1,199.23 6,460.62 5,861.40 3,957.89 65.01
RISKS AND CONCERNS
? Contracts made insist that the contractor take the risks of
?
?
? ?
?
?
performance Lot of unforeseen circumstances results in unexpected expenses Taken care as 15% contingencies in the contract Best case scenario when this is recognized as margins Worst case when risks are over and above contingencies Fixed price contracts mostly Cost hence to cover all expenses of labor, equipment etc
INVESTMENT ANALYSIS
? Based on number of Projects executed
? Operational costs incurred ? Margins gained from the projects
? Experience in the sector
? Diversification of risks in terms of projects and
shareholding patterns
doc_623599406.pptx
This is a presentation describes the growth factors and opportunities in the engineering & construction sector.
ENGINEERING SECTOR
Growth Factors
? Well developed demand conditions ? India’s labour cost advantage almost 7 times ? Growing capabilities of Indian engineering firms ? Preferred outsourcing destination, set to overtake
China ? Government bullish on initiatives with respect to power, infrastructure, etc. ? Dilicensing , removal of tariff protection , promotion of SEZ’s
Growing trend of engineering exports Exports ( $ billion ) for a five year period
45 40 35 30 25 20 15 10 5 20.34 Exports ( $ bn ) 26.5 33.3 32.73 40.51
0
2005-06 2006-07 2007-08 2008-09 2009-10 Source : - EEPC India , December 2010 survey
Opportunities in Engineering Services
? Statistical scenario : ? Exports of Engineering Services : ? ?
USD 36588.52mn up to October 2010 Growth of 47.4% during April-October 2010-11 in comparison to the same period in the previous fiscal
? Potential to reach $ 29 bn in 2015
= 20 % of Global market share ? Opportunity for 2009-2014 ( 5 year period) ~ $ 62 billion ? Sectors :? ? ? ?
Automotive Sector = 19 % Aerospace = 8 % Utilities = 3 % Telecom = 30 %
Opportunities in Defence Sector
? Global scenario ? Global military expenditure – 2008 = $ 1464 billion ? 2007 = 4 % increase ? Indian scenario ? Among top ten nations in military expenditure ? Defence budget growth at CAGR =11.5 % between FY06 & FY09 to $ 26.5 bn for FY 09 ? MSME sector outlook ? Now ~ 5000 companies ? 20-25 % of components , sub-assemblies to state owned companies ? Govt & Pvt sector participation ? Major sector = communications & IT equipment
Key Trends
? Entry of International companies ? 100 % FDI route permitted – entry of international players ? Increasing the competiveness of the industry ? Migration to value added products ? Focus on improvising capabilities ? Quality conscious ? Technology up-gradation at par with global market needs ? Focus on R&D and product development efforts ? Diversification of Risk ? Eg. L & T moved into power equipment manufacturing , BHEL plans to exporting to Syria and Vietnam etc.
CONSTRUCTION SECTOR
Present Scenario
? Construction 2nd largest economic activity
? It accounts for 65% of investment in infrastructure
? Cement consumption to touch almost 105%, showing
?
? ?
?
the demand of the sector Valued at about Rs. 2800 bn in 2010 2nd largest employing sector in India Multiplier effect of 5 times on income Present population ‘buy and repay’ with 24.3 mn new dwellings needed in 2015
Current Scenario
? After recession, growth has been phenomenal with the ? ? ?
?
?
4QFY10 witnessing the highest ever order inflow recorded by the construction industry till date. Further boost by the Rs. 1735 bn govt. infra. dev. schemes Increased funding for construction companies through fiscal policy via IIFCL. Today liquidity woes have vanished with prices in all major metros going up 10-30% 100% FDI is now allowed in realty projects SEZ’s boosting demand
INFRASTRUCTURE
Power
? CAGR of 4.6% over the last four years ? India has the fifth largest electricity generation capacity in the world
Roads
? An extensive road network of 3.3 m km – the second largest in the world
? The Golden Quadrilateral (GQ-5846 km of 4 lane highways) North-South & East
Railways
? The premier transport organisation of the country - the largest rail network in Asia and the world’s second largest
? Stations, 300 Yards, 2300 Goodsheds, 700 Repair shops, 1.54 mn Work force
Ports
? 12 Major Ports and 185 Minor Ports along 7,517 km long Indian coastline ? 100% FDI under the automatic route is permitted for port development projects ? Public–Private partnership is seen by the Government as the key to improve
Airports
? India has 125 airports; of these, 11 are designated international airports ? 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74% ? New international airports - Bangalore & Hyderabad built by private consortia – total investment of about €411 million
PORTER’S 5 FORCE FOR CONSTRUCTION INDUSTRY
? Supply - Substantial increase in contractors and builders in past 2-3 years, ? ?
?
?
?
especially in the housing and road construction segment Demand- Demand exceeds supply by a large margin, mainly emanating from the housing, transportation and urban development segments. Barriers to entry- Low for road and housing construction ? However, high working capital requirements can create growth problems for companies with weak financial muscle. Bargaining power of suppliers- Low ? Margins stagnant despite strong growth in volumes due to rapid increase in number of contractors and construction service providers Bargaining power of customers- Low ? The country still lacks adequate infrastructure facilities and citizens have to pay for using public services. Competition- Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development.
GROWTH PROJECTIONS
? Rs. 4200 billion investments by 2015 ? FDI alone will jump 6-folds to Rs. 1400 billion over the
next 10 years ? Projects worth Rs 131 billion are coming up to develop Special Economic Zones. ? As per the ASSOCHAM, the Indian real estate industry size is pegged at Rs. 800 bn and growing at the rate of 30% pa.
Growth in GDP @ Factor Cost (%)
05-06 Construction GDP @ Cost Factor 12.8 9.5 06-07 10.3 9.6 07-08 10.7 9.3 08-09 5.4 6.8 09-10 7.0 8.0 10-11 8.0 8.6
BUDGET HIGHLIGHTS
Infrastructure ? Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation. ? Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore. ? Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year. India Infrastructure Finance Company Limited (IIFCL) ? Disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011. ? Has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double that amount in 2010-11. ? The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs. 25,000 crore in the next three years
FINANCIALS
Name Market Cap. (Rs. cr.) Sales Turnover Net Profit Total Assets Jaiprakash Asso GMR Infra Unitech
12,918.08 8,174.11 5,834.35
12,966.48 727.40 1,805.85
1,166.11 58.88 510.08
30,930.41 9,545.66 14,850.93
Jaypee Infra
Larsen Gammon Infra
5,361.28
75,016.97 883.01
2,778.70
43,495.93 51.20
1,435.06
3,957.89 35.73
11,095.05
29,007.37 756.5
FINANCIALS contd
JP Major Co’s Gammon GMR Infra Unitech Associates Infra
FY Operating Profit PBDIT Interest PBDT Profit Before Tax Reported Net Profit Earning Per Share (Rs) Mar '11 56.26 58.86 10.94 47.92 45.94 35.73 0.49 Mar '11 3,012.27 3,877.31 1,515.41 2,361.90 1,753.67 1,167.78 5.49 Mar '11 201.17 252.51 182.44 70.07 65.16 58.88 0.15 Mar '11 237.10 1,064.06 329.21 734.85 728.17 510.08 1.95
Jaypee Infra
Mar '11 1,813.63 1,833.56 10.30 1,823.26 1,814.63 1,435.06 10.33
Larsen & Turbo
Mar ‘11 5,878.57 7,659.85 1,199.23 6,460.62 5,861.40 3,957.89 65.01
RISKS AND CONCERNS
? Contracts made insist that the contractor take the risks of
?
?
? ?
?
?
performance Lot of unforeseen circumstances results in unexpected expenses Taken care as 15% contingencies in the contract Best case scenario when this is recognized as margins Worst case when risks are over and above contingencies Fixed price contracts mostly Cost hence to cover all expenses of labor, equipment etc
INVESTMENT ANALYSIS
? Based on number of Projects executed
? Operational costs incurred ? Margins gained from the projects
? Experience in the sector
? Diversification of risks in terms of projects and
shareholding patterns
doc_623599406.pptx