Description
This is a documentation is about company analysis of Reliance infra.
Reliance Infra – Company Analysis
The basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function is infrastructure. It’s a set of interconnected structural elements that provide framework supporting an entire structure of development. A region’s development can be judged by this. These are essentially the technical structures that support a society. Roads, water supply, sewers, electrical grids, telecommunications and so on, are the commodities. These are used to enable the living, sustain it and enhance the living conditions of people. Infrastructure facilitates the productions of goods and services, their distribution that is the use of bus, through roads to reach school etc., basic social services such as schools and hospitals; for example, roads enable the transport of raw materials to a factory. , "Hard" infrastructure is the large physical networks necessary for the functioning of a modern industrial nation, whereas "soft" infrastructure refers to all the institutions which are required to maintain the economic, health, and cultural and social standards of a country, such as the financial system, the education system, the health care system, the system of government, and law enforcement, as well as emergency services and operation of military forces.
TYPES OF INFRASTRUCTURE: A. Transportation: a. Roads, highways, bridge, tunnels, culverts, sidewalk, traffic lighting etc. b. Mass transit systems c. Railways d. Canals e. Seaports f. Airports g. Bicycle paths h. Ferries B. Energy Infrastructure: a. Electric power network, generation plants, b. Petroleum pipelines. c. Natural gas pipelines d. Coal mines e. District heating f. Electric vehicle networks.
C. Water management infrastructure: a. Drainage b. Drinking water supply c. Sewage water disposal d. Snow removal e. Irrigation f. Flood control g. Coastal management D. Communications infrastructure: a. Postal service b. Telephone c. Mobile phone d. Television e. Internet f. Satellites g. Undersea cables etc E. Solid waste management: a. Municipal garbage and recyclables collection b. landfills c. plasma gasification d. material recovery facilities e. Hazardous waste disposal facilities F. Earth monitoring and measurement networks a. Meteorological services. b. Tidal monitoring, etc TYPES OF SOFT INFRASTRUCTURE: Governance infrastructure Social infrastructure Economic infrastructure Cultural, sports infrastructure
Indian infrastructure industry: In the past four years, the Indian Economy consistently recorded growth rates more than of 8.5% per annum which lead to rapid increase in the infrastructure spending. Total infrastructure spending is estimated to grow from US$ 24 billion in 2005 to US$ 47 billion in 2009. Total investment requirement in the infrastructure sector over the next five years is US$ 445 billion. It is estimated that the Infrastructure Sector needs to grow at a CAGR of 15% in the next five years so that it can support the growing requirements of almost every other sector of the Indian Economy. The government has announced the following incentives in order to stimulate and mobilize increased private sector investments, either from domestic sources or foreign avenues.
? Liberalization of FDI regulations: a. Except aviation, 100% FDI under the automatic route is now permitted in all infrastructure sectors. b. FDI under the automatic route is permitted up to 49% - 100% for various services in the aviation sector. ? Extended tax holiday periods. a. Under section 80-IA of the Income Tax Act, 1961, a ten year tax holiday is available to enterprises engaged in the business of development, operation and maintenance of infrastructure facilities, subject to compliance with the conditions prescribed therein. ? Introduction of Public Private Partnerships (PPP) a. Based on resounding global success, the government has introduced the concept of public-private partnerships in India, to combine the best practices of public and private sectors to efficiently develop and maintain infrastructure facilities. b. PPPs are aimed at inducing private sector participation in activities which might otherwise prove to be cost prohibitive e.g. development, operation and maintenance of toll roads. ? The Industry has received an aggregate of US$ 6.6 billion in infrastructure investments over the past six years.
? The Government has indicated that the Indian infrastructure sector has the potential to absorb US$ 150 billion (including the power sector) in FDI over the next five years.
PEST ANALYSIS
PEST is the objective study of all the external factors influencing the company. It includes all the social, technical, political and economical factors. The external factors, more than the internal affect the industry a lot. Political Factors The political factors affecting infrastructure industry mostly consists of documentation and permits that have to be obtained during the various stages of construction of a structure and its sale.
?
Building Commencement Certificate: Construction of a building or any such structure cannot take place unless and until the builder or the company secures a commencement certificate from the authority; in case of Mumbai it is the BMC who gives IOD&CCIntimation of Disapproval & Commencement Certificate. Brihan Mumbai Corporation [BMC] Developing Plans: BMC developing plans form the most basic criteria in selecting a site. These developing plans chart out pre-defined areas, which the BMC has already allocated for certain purposes.
?
E.g. In a given area, some land is reserved for plantation/farming, some piece is kept for industrial establishments like the MIDC area and the other one reserved for residential purposes. So, when a builder has to build a residential complex than he has to search for such areas meant for the purpose of residency. Economic Factors When there are fluctuations in input prices of the raw material like cement, steel etc go up, the developers stop the work and wait for the time when their prices would come down. Sometimes the price lost by waiting is more than the increaded input price. Changes in Demand: The change in the income of the buyers, increased housing loan or loans for other like industry establishment , the demand for more infrastructure is rising. With the development of the city, rise in GDP, the rise in demand increases.
-
-
The projects have to be made considering the resale value as the type of infrastructure requirement highly depends on the place. For shops, multiplexes, residencies, usually people prefer place with high resale value. But for factory, the place with low rent is preferred. Stamp Duty & Registration: Payments of Stamp duty followed by the registration of the agreement are two important acts when one enters into an agreement with a developer/seller. With the decrease in the stamp duty by 50% it is considered as a good sign for Construction Sector.
-
Social Factors The developer needs to have a good image in the societyto have good projects. People should have faith in him regaurding the materials used, the quality of work and honesty. A person with bad reputation may not have good financial output. A good image is not built in a day. It needs lot of hard work and consistency to prove the name. The image of the property developed also matters like the location of the school, hospitals, homes etc is very important. As far as the factories are concerned, their suppliers , way of transportation is important. Building Facilities: The builders may offer buildings that have swimming pools, healthclubs, gyms & parks.
-
-
Technical Factors Due to technical nature of the construction process, the technical environment keeps on changing everyday. There are developments in techniques used, materials used and various other such aspects of the construction business. A few of such developments are as follows
?
?
Pre-structured Concrete Blocks: These are blocks of concrete, which are made in the factories according to the dimensions of the building or structure to be built. It is just like a jigsaw puzzle where these blocks are put together using a huge crane and joined together using mortar by workers. This enables quick completion of work and also economies of scale. Mixture of Cement and Sand: nowadays in order to save time the constructor can order the mixture of sand and cement directly from the suppliers as against the traditional way of ordering cement and sand separately and then filtering them and then mixing it. Other Equipments: other modern machines that are used in construction are the use of huge drilling type of machines to dig the ground, which was before done by workers.
Analysis of the competitors of Reliance Infrastructure: Name Last Price Market Cap. Total Assets NTPC 155.90 128,546.79 111,572.36 Power Grid 111.25 51,505.69 62,092.11 NHPC 18.45 22,694.87 39,153.15 Reliance Infra 526.10 13,835.90 21,636.80 Adani Power 45.45 9,908.26 32,971.66 -
Sales Turnover 62,053.58 10,035.33 5,654.69 17,906.67 3,948.90
Net Profit 9,223.73 3,254.95 2,771.77 2,000.26 -293.92
Infrastructure industry is an industry where no one as such has monopoly, as it is a wide scale industry and has many players. The main competitors of Reliance infrastructure areAdani power ltd., BF Utilities Ltd., CESC Ltd., DPSC Ltd., Energy development company Ltd., Entegra Ltd.
SWOT ANALYSIS OF INDUSTRY STENGTHS Strengths are well known and have been proven time and again. Cash flow and stringent processes were the main Weaknesses which are beginning to be quashed by way of private participation, FDI and fast-paced changes in system appraisal and implementation. Opportunities have been tremendous. Employment and training opportunities in the field of construction are plenty. Private sector housing boom and commercial building demands Construction of the multi building projects on the feasible locations in the country. Good structured national network facilitates the boom of construction industry. Low cost well- educated and skilled labor force is now widely available across the country. Sufficient availability of raw material and natural resources in the country is supportive for the industry.
-
-
Real estate development is on high and it is attracting the focus of the industry towards construction.
WEAKNESS: Chances of Natural disadvantage are there. Distance between construction projects reduces business efficiency. Training itself has become a challenge. Changing skills requirements and an ageing workforce may accentuate the skills gap. Improve in long-term career prospects is highly required to encourage staff retention and new entrants. External allocation of large contracts becomes difficult. Lack of clearly define processes and procedures for construction and its management. Huge amount of money need to be invested in this industry.
OPPORTUNITIES Sector Specific Opportunities Roads - India has one of the largest road networks in the world, aggregating to approximately 3.34 million kilometers. - It is estimated that the total investment requirement for development and upgradation of the country’s road network over the next five years is approximately US$ 55 billion. Ports -
India’s coastline of 7,517 kilometers is spread over 13 states and houses 12 major ports and 187 non-major ports. Traffic handling at these ports has been increasing at an average of 10% per annum over the past three completed financial years. It is estimated that the total investment requirement for upgradation and modernization of the country’s ports over the next five years is approximately US$ 12 billion.
Airports - Domestic and international air traffic over the past three financial years has been increasing at over 35% per annum. - It is estimated that the total investment requirement for expansion and modernization of the country’s airports to counter the aforementioned traffic increases is approximately US$ 10 billion
-
The Airport Authority of India has already firmed up plans for modernizing 35 other nonmetro airports across the country.
Railways - Indian Railways is the world’s 2nd largest rail network under single management. - Passenger traffic and freight traffic have been increasing at an average of 7% and 9% respectively over the last three financial years. By 2012, Indian Railways expects to handle double the traffic it already handles. - To scale up manufacturing capabilities sufficiently to meet the increasing flow of traffic, the total investment requirement for modernization and upgradation of the country’s rail networks and rail infrastructure is approximately US$ 75 billion - Development of dedicated freight corridors, at a cost of US$ 7.5 billion, with the objective of easing the flow of freight traffic across the country are already in the process of being executed in accordance with the XIth five year plan. - As part of its modernization plan, the Government has presently identified 22 stations at metro cities and major tourist destinations for substantial upgradation and revamping through the PPP route. Telecommunications India’s telecommunications network is the third largest in the world, with more than 270 million existing connections and is expected to grow to 500 million subscribers by Development of telecommunication infrastructure presents substantial investment opportunities on account of the following reasons: i. Rapidly increasing telecommunication subscriber base, particularly on account of the increased affordability of mobile phones; ii. Technological innovations that have resulted in tariffs in India falling to among the lowest in the world – the government has recently announced subsidy benefits to telecom operators, the benefit of which is expected to be passed on to customers in the form of further reductions in tariffs; and iii. Increasing integration of the telecom sector with the IT sector (through development of telecom-specific software applications), as highlighted by the recent announcement made by the Telecom Regulatory Authority of India (TRAI) permitting mobile virtual network operators (MVNOs) to enter the Indian market.
THREATS:
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Long term market instability and uncertainty may damage the opportunities and prevent the expansion of training and development facilities. Current economic situation may have an adverse impact on construction industry. Political and security conditions in the region and Late legislative enforcement measures are always threats to any industry in India. Infrastructure safety is a challenging task in construction industry. Lack of political willingness and support on promoting new strategies Natural abnormal casualties such as earth quake and floods are uncertain and can prevent the construction boom. Inefficient accessibility in planning and concerning the infrastructure and signs. While, the only is "the environmental effects". Effective implementation of environmental mitigation plans to all have now become quite mandatory and stringent. So, overall, the SWOT analysis of Indian infrastructure is motivational and encouraging enough to boost our confidence.
COMPANY
Reliance Infrastructure Ltd. (BSE: 500390, NSE: RELINFRA) formerly known as Reliance Energy and prior to that as Bombay Suburban Electric Supply (BSES), Its India's largest private sector enterprise in power utility and its a company under the Reliance Anil Dhirubhai Ambani Group banner, one of India's largest conglomerates. The company is headed by Anil Ambani. The company's corporate headquarters is situated in Mumbai. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. It also runs power generation, transmission and distribution businesses in other parts of Maharashtra, Goa and Andhra Pradesh. With the rapid growth of the economy in recent years, the importance and urgency of removing infrastructure constraints have increased. Here, Reliance Infrastructure, one of India’s largest is purposefully surging ahead in a quest to develop world-class infrastructural facilities. Aggressive strategies are being adapted to kick-start projects that otherwise would have never seen the light of the day. Enjoying a premier brand image, Reliance Infrastructure in partnership with the government has funded and launched a number of roads, metro, airports, ports and real estate projects. The
organization dreams of enriching our country by conceptualizing, executing and implementing mammoth projects that are manned by a team of highly motivated professionals. Reliance Infrastructure is playing a pivotal role in undertaking major road projects that encompass hundreds of kilometers all across the country. We understand the growing opportunities that exist and have been relentlessly pursuing them to realize our dream of turning India into a developed nation. Reliance Infrastructure, a part of Reliance Group, is India's largest infrastructure company with turnover of over Rs.15,690 crore and market capitalization of over Rs. 24,450 crore as on March 31, 2010. Reliance Infrastructure Limited is India’s leading utility company having presence in across the value chain of power business i.e. Generation, Transmission, Distribution, EPC and Trading and the largest infrastructure company by developing projects in all high growth areas in infrastructure sector i.e. Roads, Highways, Metro Rails, Airports and Specialty Real Estate. Our presence spans across three verticals: - Engineering, Procurement and Construction - Energy - Infrastructure Engineering Procurement and Construction: EPC offers a single point solution to the execution of power plants including project engineering, procurement, construction & commissioning for its clients. The world of tomorrow will feature abundant energy that will spark a million smiles and dreams. Our EPC division is ushering this energy revolution with power plant projects. Along with full service project advisory capabilities, we manage power plants on a turnkey basis and provide industry specialist services such as fuel management advice and fiscal advice. Our the turnover of the division was Rs 557 crore (US$ 120 million) and order book position of over Rs 18,530 crore (US$ 4 billion) as on June 30, 2010. Energy Our core competency in energy extends to generation, transmission, distribution and trading. This comprehensive sphere of influence extends our vision of a highly developed India within our realms. We distributed more than 36 billion units of electricity to 30 million consumers and generate 941 MW of electricity from our power stations. Our transmission division is developing 5 transmission projects, with total project outlay of Rs 6,640 crore (US$ 1.4 billion).
Infrastructure RInfra has a significant presence in the construction of roads, metros, airports and real estate. Infrastructure is decidedly the most visible and important form of development in a nation. We signify this with our 11 road projects of 970 kms worth about Rs 12,000 crore (US$ 2.6 billion). We are currently implementing 3 metro rail projects in Mumbai and Delhi worth around Rs 16,000 crore (US$ 3.4 billion).In the real estate space, we are in various stages of bidding/negotiation/planning with over 400 million sq. feet of mixed use built up potential. GENERAL INFORMATION ABOUT THE COMPANY Type Public company Traded: BSE:300090. NSE: RELINFRA Industry Utilities (energy) Founded 2002 Headquarters Mumbai, India Key people Anil Ambani (Chairman) Products- electrical power natural gas Services- Electricity generation and distribution natural gas exploration, production, transportation and distribution Revenue 15,475 crore (US$3.09 billion) (2011) Net income 1,551 crore (US$309.42 million) (2011) Total assets 34,018 crore (US$6.79 billion) (2011) Employees 8,988 (2011) Parent Reliance Anil Dhirubhai Ambani Group Financial Performance
The highlights of performance of the Company for the year 2008-09 are:
?
Total Income of Rs 10,959 crore (US$ 2.16 billion), as against Rs 7,501 crore (US$ 1.48 billion), in the previous financial year, an increase of 46%.
? ? ? ?
Cash Profit of Rs 1,384 crore (US$ 273 million) against Rs 1,308 crore (US$ 258 million) in the previous financial year. Net Profit of Rs 1,139 crore (US$ 225 million) against Rs 1,085 crore (US$ 214 million) in the previous financial year, an increase of 5%. Cash Earnings per Share for the year of Rs 60 (US$ 1.18) against Rs 56 (US$ 1.1) in the previous financial year. Earnings per Share (EPS) of Rs 49.5 (US$ 1) against Rs 46.9 (US$ 1) in the previous financial year.
Dividend Payments The Company has been paying uninterrupted dividend even since its inception in 1929. During the year 2008-09, the Company distributed dividend at the rate of 70% on 22, 52, 70,262 equity shares of face value of Rs. 10 each, amounting to Rs. Rs.157.68 crore.
Year
st
Ended
2011 9186 1671 3814 4871 5596 2805
2010 10163 1516 3651 4713 5384 2761
2009 9582 1509 3860 3619 5081 2692
2008 9271 1408 3606 3313 4909 2630
2007 8743 1457 3448 3179 4720 2506
2006 8064 1331 3114 3116 4002 2496
2005 7969 1320 3012 3039 3848 2381
2004 7691 1274 2915 3002 3735 2329
2003 5880^ 1226 2829 2965 3653 2223
2002 5676^ 1201 2789 2923 3547 2142
31 March Units Sold (Million Units) Maximum Demand MVA High Tension Mains KMs Low Tension Mains KMs No. of Substations No. of Consumers (in ‘000) Licensed Area - 384 sq.km No. of Shareholders Assets : Fixed (Net) Assets 6855 12584 2297 4079 10020 5326 3905 12147 3382 3637 7726 5561 3104 2512 9954 2874 1193 8277 2912 696 6731 3093 2875 1410 1813 1030 531 1951 611 850
1454
1509
1591
1596226
1576758
108782
99243
96485
121913
144809
Financial Data (` in crore)
Investments Current Assets (Net)
Total Assets Share Capital Equity Warrants Reserves Surplus Borrowings Deferred Tax Liabilities Total Sources of Funds Gross Revenue Profit Tax Profit Tax Dividends Dividend Tax Retained Earnings (including statutory reserves) Equity Capital Share Before After &
21736 267 541 17400 3969 100 21736 10267 1135 1081 191 31 859
19425 245 14366 4115 158 19425 10908 1297 1152 174 10 968
19434 226 784 10898 7332 194 19434 10959 1193 1139 156 27 956
16924 236 10668 4989 248 16924 7501 1152 1085 148 25 912
15570 229 783 9252 5858 231 15570 6575 872 801 121 21 699
12344 212 7573 4267 204 12344 4608 781 650 104 16 529
10339 186 88 5586 3739 260 10339 4593 570 520 87 12 421
7378 175 4936 2030 237 7378 3583 417 367 70 9 295
3374 138 568 2426 632 178 3374 2777 153 297 * 61 8 54
3412 138 2540 661 73 3412 2783 302 281 61 0.17 244
Sources of Funds :
267 72%
245 71%
226 70%
236 63%
229 53%
212 50%
186 47%
175 45%
138 44%
138 43
Rate of Dividend on Equity Shares
SWOT ANALYSIS OF THE COMPANY
Strengths: 1. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. 2. It also runs power generation, transmission and distribution businesses in other parts of Maharashtra, Goa and Andhra Pradesh. 3. Reliance Infrastructure, one of India’s largest is purposefully surging ahead in a quest to develop world-class infrastructural facilities.
4.
Aggressive strategies are being adapted to kick-start projects that otherwise would have never seen the light of the day. 5. Reliance Infrastructure is playing a pivotal role in undertaking major road projects that encompass hundreds of kilometers all across the country. 6. Reliance Infrastructure, a part of Reliance Group, is India's largest infrastructure company with turnover of over Rs.15,690 crore and market capitalization of over Rs. 24,450 crore as on March 31, 2010. 7. Reliance Infrastructure Limited is India’s leading utility company having presence in across the value chain of power business i.e. Generation, Transmission, Distribution, EPC and Trading and the largest infrastructure company by developing projects in all high growth areas in infrastructure sector i.e. Roads, Highways, Metro Rails, Airports and Specialty Real Estate.
WEAKNESS
1. A lot of competition is there 2. Competitors like Adani Pvt. Ltd, ., BF Utilities Ltd., CESC Ltd., DPSC Ltd., Energy development company Ltd., Entegra Ltd.
OPPORTUNITIES 1. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. 2. It has a wide scope in the areas of ports, airports, roads, railways, and telecommunications.
THREATS: 1. Current economic situation may have an adverse impact on construction industry. 2. Infrastructure safety is a challenging task in construction industry. 3. Lack of political willingness and support on promoting new strategies Natural abnormal casualties such as earth quake and floods are uncertain and can prevent the construction boom.
BUSINESS STRATEGIES: Joint ventures
? KRIBHCO, a premier co-operative society with an unparalleled marketing network in rural India and Reliance Communications Infrastructure Limited, India’s largest telecom service provider, have announced signing of a Joint Venture. KRIBHCO Reliance Kisan Limited, the Joint Venture Company, would synergize the respective strengths of KRIBHCO and Reliance ADA Group to catalyze tele-density growth and provision of state-of-the-art products and services to the rural people in India. ? Reliance Infra - IRB Infra ? Mumbai Metro One Pvt Ltd (MMOPL) is a joint venture company formed by Reliance Infrastructure, Veolia Transport and the Mumbai Metropolitan Region Development Authority (MMRDA) based in Mumbai, India. It is the operator of Mumbai Metro, a rapid transit system under construction in the Indian city of Mumbai Innovation ? Reliance Infrastructure has bagged National Award for Innovative Training Practices for the year 2011.
References: http://www.rinfra.com/ http://rmax09.wordpress.com http://en.wikipedia.org/wiki/Reliance_Anil_Dhirubhai_Ambani_Group http://en.wikipedia.org/wiki/Mumbai_Metr
ne_Pvt_Ltd http://economictimes.indiatimes.com/reliance-infrastructure-ltd/quotecompare/companyid13922.cms http://www.scribd.com/doc/13926953/SWOT-Analysis-on-Construction-Industries
http://news.indiamart.com
doc_773444383.docx
This is a documentation is about company analysis of Reliance infra.
Reliance Infra – Company Analysis
The basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function is infrastructure. It’s a set of interconnected structural elements that provide framework supporting an entire structure of development. A region’s development can be judged by this. These are essentially the technical structures that support a society. Roads, water supply, sewers, electrical grids, telecommunications and so on, are the commodities. These are used to enable the living, sustain it and enhance the living conditions of people. Infrastructure facilitates the productions of goods and services, their distribution that is the use of bus, through roads to reach school etc., basic social services such as schools and hospitals; for example, roads enable the transport of raw materials to a factory. , "Hard" infrastructure is the large physical networks necessary for the functioning of a modern industrial nation, whereas "soft" infrastructure refers to all the institutions which are required to maintain the economic, health, and cultural and social standards of a country, such as the financial system, the education system, the health care system, the system of government, and law enforcement, as well as emergency services and operation of military forces.
TYPES OF INFRASTRUCTURE: A. Transportation: a. Roads, highways, bridge, tunnels, culverts, sidewalk, traffic lighting etc. b. Mass transit systems c. Railways d. Canals e. Seaports f. Airports g. Bicycle paths h. Ferries B. Energy Infrastructure: a. Electric power network, generation plants, b. Petroleum pipelines. c. Natural gas pipelines d. Coal mines e. District heating f. Electric vehicle networks.
C. Water management infrastructure: a. Drainage b. Drinking water supply c. Sewage water disposal d. Snow removal e. Irrigation f. Flood control g. Coastal management D. Communications infrastructure: a. Postal service b. Telephone c. Mobile phone d. Television e. Internet f. Satellites g. Undersea cables etc E. Solid waste management: a. Municipal garbage and recyclables collection b. landfills c. plasma gasification d. material recovery facilities e. Hazardous waste disposal facilities F. Earth monitoring and measurement networks a. Meteorological services. b. Tidal monitoring, etc TYPES OF SOFT INFRASTRUCTURE: Governance infrastructure Social infrastructure Economic infrastructure Cultural, sports infrastructure
Indian infrastructure industry: In the past four years, the Indian Economy consistently recorded growth rates more than of 8.5% per annum which lead to rapid increase in the infrastructure spending. Total infrastructure spending is estimated to grow from US$ 24 billion in 2005 to US$ 47 billion in 2009. Total investment requirement in the infrastructure sector over the next five years is US$ 445 billion. It is estimated that the Infrastructure Sector needs to grow at a CAGR of 15% in the next five years so that it can support the growing requirements of almost every other sector of the Indian Economy. The government has announced the following incentives in order to stimulate and mobilize increased private sector investments, either from domestic sources or foreign avenues.
? Liberalization of FDI regulations: a. Except aviation, 100% FDI under the automatic route is now permitted in all infrastructure sectors. b. FDI under the automatic route is permitted up to 49% - 100% for various services in the aviation sector. ? Extended tax holiday periods. a. Under section 80-IA of the Income Tax Act, 1961, a ten year tax holiday is available to enterprises engaged in the business of development, operation and maintenance of infrastructure facilities, subject to compliance with the conditions prescribed therein. ? Introduction of Public Private Partnerships (PPP) a. Based on resounding global success, the government has introduced the concept of public-private partnerships in India, to combine the best practices of public and private sectors to efficiently develop and maintain infrastructure facilities. b. PPPs are aimed at inducing private sector participation in activities which might otherwise prove to be cost prohibitive e.g. development, operation and maintenance of toll roads. ? The Industry has received an aggregate of US$ 6.6 billion in infrastructure investments over the past six years.
? The Government has indicated that the Indian infrastructure sector has the potential to absorb US$ 150 billion (including the power sector) in FDI over the next five years.
PEST ANALYSIS
PEST is the objective study of all the external factors influencing the company. It includes all the social, technical, political and economical factors. The external factors, more than the internal affect the industry a lot. Political Factors The political factors affecting infrastructure industry mostly consists of documentation and permits that have to be obtained during the various stages of construction of a structure and its sale.
?
Building Commencement Certificate: Construction of a building or any such structure cannot take place unless and until the builder or the company secures a commencement certificate from the authority; in case of Mumbai it is the BMC who gives IOD&CCIntimation of Disapproval & Commencement Certificate. Brihan Mumbai Corporation [BMC] Developing Plans: BMC developing plans form the most basic criteria in selecting a site. These developing plans chart out pre-defined areas, which the BMC has already allocated for certain purposes.
?
E.g. In a given area, some land is reserved for plantation/farming, some piece is kept for industrial establishments like the MIDC area and the other one reserved for residential purposes. So, when a builder has to build a residential complex than he has to search for such areas meant for the purpose of residency. Economic Factors When there are fluctuations in input prices of the raw material like cement, steel etc go up, the developers stop the work and wait for the time when their prices would come down. Sometimes the price lost by waiting is more than the increaded input price. Changes in Demand: The change in the income of the buyers, increased housing loan or loans for other like industry establishment , the demand for more infrastructure is rising. With the development of the city, rise in GDP, the rise in demand increases.
-
-
The projects have to be made considering the resale value as the type of infrastructure requirement highly depends on the place. For shops, multiplexes, residencies, usually people prefer place with high resale value. But for factory, the place with low rent is preferred. Stamp Duty & Registration: Payments of Stamp duty followed by the registration of the agreement are two important acts when one enters into an agreement with a developer/seller. With the decrease in the stamp duty by 50% it is considered as a good sign for Construction Sector.
-
Social Factors The developer needs to have a good image in the societyto have good projects. People should have faith in him regaurding the materials used, the quality of work and honesty. A person with bad reputation may not have good financial output. A good image is not built in a day. It needs lot of hard work and consistency to prove the name. The image of the property developed also matters like the location of the school, hospitals, homes etc is very important. As far as the factories are concerned, their suppliers , way of transportation is important. Building Facilities: The builders may offer buildings that have swimming pools, healthclubs, gyms & parks.
-
-
Technical Factors Due to technical nature of the construction process, the technical environment keeps on changing everyday. There are developments in techniques used, materials used and various other such aspects of the construction business. A few of such developments are as follows
?
?
Pre-structured Concrete Blocks: These are blocks of concrete, which are made in the factories according to the dimensions of the building or structure to be built. It is just like a jigsaw puzzle where these blocks are put together using a huge crane and joined together using mortar by workers. This enables quick completion of work and also economies of scale. Mixture of Cement and Sand: nowadays in order to save time the constructor can order the mixture of sand and cement directly from the suppliers as against the traditional way of ordering cement and sand separately and then filtering them and then mixing it. Other Equipments: other modern machines that are used in construction are the use of huge drilling type of machines to dig the ground, which was before done by workers.
Analysis of the competitors of Reliance Infrastructure: Name Last Price Market Cap. Total Assets NTPC 155.90 128,546.79 111,572.36 Power Grid 111.25 51,505.69 62,092.11 NHPC 18.45 22,694.87 39,153.15 Reliance Infra 526.10 13,835.90 21,636.80 Adani Power 45.45 9,908.26 32,971.66 -
Sales Turnover 62,053.58 10,035.33 5,654.69 17,906.67 3,948.90
Net Profit 9,223.73 3,254.95 2,771.77 2,000.26 -293.92
Infrastructure industry is an industry where no one as such has monopoly, as it is a wide scale industry and has many players. The main competitors of Reliance infrastructure areAdani power ltd., BF Utilities Ltd., CESC Ltd., DPSC Ltd., Energy development company Ltd., Entegra Ltd.
SWOT ANALYSIS OF INDUSTRY STENGTHS Strengths are well known and have been proven time and again. Cash flow and stringent processes were the main Weaknesses which are beginning to be quashed by way of private participation, FDI and fast-paced changes in system appraisal and implementation. Opportunities have been tremendous. Employment and training opportunities in the field of construction are plenty. Private sector housing boom and commercial building demands Construction of the multi building projects on the feasible locations in the country. Good structured national network facilitates the boom of construction industry. Low cost well- educated and skilled labor force is now widely available across the country. Sufficient availability of raw material and natural resources in the country is supportive for the industry.
-
-
Real estate development is on high and it is attracting the focus of the industry towards construction.
WEAKNESS: Chances of Natural disadvantage are there. Distance between construction projects reduces business efficiency. Training itself has become a challenge. Changing skills requirements and an ageing workforce may accentuate the skills gap. Improve in long-term career prospects is highly required to encourage staff retention and new entrants. External allocation of large contracts becomes difficult. Lack of clearly define processes and procedures for construction and its management. Huge amount of money need to be invested in this industry.
OPPORTUNITIES Sector Specific Opportunities Roads - India has one of the largest road networks in the world, aggregating to approximately 3.34 million kilometers. - It is estimated that the total investment requirement for development and upgradation of the country’s road network over the next five years is approximately US$ 55 billion. Ports -
India’s coastline of 7,517 kilometers is spread over 13 states and houses 12 major ports and 187 non-major ports. Traffic handling at these ports has been increasing at an average of 10% per annum over the past three completed financial years. It is estimated that the total investment requirement for upgradation and modernization of the country’s ports over the next five years is approximately US$ 12 billion.
Airports - Domestic and international air traffic over the past three financial years has been increasing at over 35% per annum. - It is estimated that the total investment requirement for expansion and modernization of the country’s airports to counter the aforementioned traffic increases is approximately US$ 10 billion
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The Airport Authority of India has already firmed up plans for modernizing 35 other nonmetro airports across the country.
Railways - Indian Railways is the world’s 2nd largest rail network under single management. - Passenger traffic and freight traffic have been increasing at an average of 7% and 9% respectively over the last three financial years. By 2012, Indian Railways expects to handle double the traffic it already handles. - To scale up manufacturing capabilities sufficiently to meet the increasing flow of traffic, the total investment requirement for modernization and upgradation of the country’s rail networks and rail infrastructure is approximately US$ 75 billion - Development of dedicated freight corridors, at a cost of US$ 7.5 billion, with the objective of easing the flow of freight traffic across the country are already in the process of being executed in accordance with the XIth five year plan. - As part of its modernization plan, the Government has presently identified 22 stations at metro cities and major tourist destinations for substantial upgradation and revamping through the PPP route. Telecommunications India’s telecommunications network is the third largest in the world, with more than 270 million existing connections and is expected to grow to 500 million subscribers by Development of telecommunication infrastructure presents substantial investment opportunities on account of the following reasons: i. Rapidly increasing telecommunication subscriber base, particularly on account of the increased affordability of mobile phones; ii. Technological innovations that have resulted in tariffs in India falling to among the lowest in the world – the government has recently announced subsidy benefits to telecom operators, the benefit of which is expected to be passed on to customers in the form of further reductions in tariffs; and iii. Increasing integration of the telecom sector with the IT sector (through development of telecom-specific software applications), as highlighted by the recent announcement made by the Telecom Regulatory Authority of India (TRAI) permitting mobile virtual network operators (MVNOs) to enter the Indian market.
THREATS:
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Long term market instability and uncertainty may damage the opportunities and prevent the expansion of training and development facilities. Current economic situation may have an adverse impact on construction industry. Political and security conditions in the region and Late legislative enforcement measures are always threats to any industry in India. Infrastructure safety is a challenging task in construction industry. Lack of political willingness and support on promoting new strategies Natural abnormal casualties such as earth quake and floods are uncertain and can prevent the construction boom. Inefficient accessibility in planning and concerning the infrastructure and signs. While, the only is "the environmental effects". Effective implementation of environmental mitigation plans to all have now become quite mandatory and stringent. So, overall, the SWOT analysis of Indian infrastructure is motivational and encouraging enough to boost our confidence.
COMPANY
Reliance Infrastructure Ltd. (BSE: 500390, NSE: RELINFRA) formerly known as Reliance Energy and prior to that as Bombay Suburban Electric Supply (BSES), Its India's largest private sector enterprise in power utility and its a company under the Reliance Anil Dhirubhai Ambani Group banner, one of India's largest conglomerates. The company is headed by Anil Ambani. The company's corporate headquarters is situated in Mumbai. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. It also runs power generation, transmission and distribution businesses in other parts of Maharashtra, Goa and Andhra Pradesh. With the rapid growth of the economy in recent years, the importance and urgency of removing infrastructure constraints have increased. Here, Reliance Infrastructure, one of India’s largest is purposefully surging ahead in a quest to develop world-class infrastructural facilities. Aggressive strategies are being adapted to kick-start projects that otherwise would have never seen the light of the day. Enjoying a premier brand image, Reliance Infrastructure in partnership with the government has funded and launched a number of roads, metro, airports, ports and real estate projects. The
organization dreams of enriching our country by conceptualizing, executing and implementing mammoth projects that are manned by a team of highly motivated professionals. Reliance Infrastructure is playing a pivotal role in undertaking major road projects that encompass hundreds of kilometers all across the country. We understand the growing opportunities that exist and have been relentlessly pursuing them to realize our dream of turning India into a developed nation. Reliance Infrastructure, a part of Reliance Group, is India's largest infrastructure company with turnover of over Rs.15,690 crore and market capitalization of over Rs. 24,450 crore as on March 31, 2010. Reliance Infrastructure Limited is India’s leading utility company having presence in across the value chain of power business i.e. Generation, Transmission, Distribution, EPC and Trading and the largest infrastructure company by developing projects in all high growth areas in infrastructure sector i.e. Roads, Highways, Metro Rails, Airports and Specialty Real Estate. Our presence spans across three verticals: - Engineering, Procurement and Construction - Energy - Infrastructure Engineering Procurement and Construction: EPC offers a single point solution to the execution of power plants including project engineering, procurement, construction & commissioning for its clients. The world of tomorrow will feature abundant energy that will spark a million smiles and dreams. Our EPC division is ushering this energy revolution with power plant projects. Along with full service project advisory capabilities, we manage power plants on a turnkey basis and provide industry specialist services such as fuel management advice and fiscal advice. Our the turnover of the division was Rs 557 crore (US$ 120 million) and order book position of over Rs 18,530 crore (US$ 4 billion) as on June 30, 2010. Energy Our core competency in energy extends to generation, transmission, distribution and trading. This comprehensive sphere of influence extends our vision of a highly developed India within our realms. We distributed more than 36 billion units of electricity to 30 million consumers and generate 941 MW of electricity from our power stations. Our transmission division is developing 5 transmission projects, with total project outlay of Rs 6,640 crore (US$ 1.4 billion).
Infrastructure RInfra has a significant presence in the construction of roads, metros, airports and real estate. Infrastructure is decidedly the most visible and important form of development in a nation. We signify this with our 11 road projects of 970 kms worth about Rs 12,000 crore (US$ 2.6 billion). We are currently implementing 3 metro rail projects in Mumbai and Delhi worth around Rs 16,000 crore (US$ 3.4 billion).In the real estate space, we are in various stages of bidding/negotiation/planning with over 400 million sq. feet of mixed use built up potential. GENERAL INFORMATION ABOUT THE COMPANY Type Public company Traded: BSE:300090. NSE: RELINFRA Industry Utilities (energy) Founded 2002 Headquarters Mumbai, India Key people Anil Ambani (Chairman) Products- electrical power natural gas Services- Electricity generation and distribution natural gas exploration, production, transportation and distribution Revenue 15,475 crore (US$3.09 billion) (2011) Net income 1,551 crore (US$309.42 million) (2011) Total assets 34,018 crore (US$6.79 billion) (2011) Employees 8,988 (2011) Parent Reliance Anil Dhirubhai Ambani Group Financial Performance
The highlights of performance of the Company for the year 2008-09 are:
?
Total Income of Rs 10,959 crore (US$ 2.16 billion), as against Rs 7,501 crore (US$ 1.48 billion), in the previous financial year, an increase of 46%.
? ? ? ?
Cash Profit of Rs 1,384 crore (US$ 273 million) against Rs 1,308 crore (US$ 258 million) in the previous financial year. Net Profit of Rs 1,139 crore (US$ 225 million) against Rs 1,085 crore (US$ 214 million) in the previous financial year, an increase of 5%. Cash Earnings per Share for the year of Rs 60 (US$ 1.18) against Rs 56 (US$ 1.1) in the previous financial year. Earnings per Share (EPS) of Rs 49.5 (US$ 1) against Rs 46.9 (US$ 1) in the previous financial year.
Dividend Payments The Company has been paying uninterrupted dividend even since its inception in 1929. During the year 2008-09, the Company distributed dividend at the rate of 70% on 22, 52, 70,262 equity shares of face value of Rs. 10 each, amounting to Rs. Rs.157.68 crore.
Year
st
Ended
2011 9186 1671 3814 4871 5596 2805
2010 10163 1516 3651 4713 5384 2761
2009 9582 1509 3860 3619 5081 2692
2008 9271 1408 3606 3313 4909 2630
2007 8743 1457 3448 3179 4720 2506
2006 8064 1331 3114 3116 4002 2496
2005 7969 1320 3012 3039 3848 2381
2004 7691 1274 2915 3002 3735 2329
2003 5880^ 1226 2829 2965 3653 2223
2002 5676^ 1201 2789 2923 3547 2142
31 March Units Sold (Million Units) Maximum Demand MVA High Tension Mains KMs Low Tension Mains KMs No. of Substations No. of Consumers (in ‘000) Licensed Area - 384 sq.km No. of Shareholders Assets : Fixed (Net) Assets 6855 12584 2297 4079 10020 5326 3905 12147 3382 3637 7726 5561 3104 2512 9954 2874 1193 8277 2912 696 6731 3093 2875 1410 1813 1030 531 1951 611 850
1454
1509
1591
1596226
1576758
108782
99243
96485
121913
144809
Financial Data (` in crore)
Investments Current Assets (Net)
Total Assets Share Capital Equity Warrants Reserves Surplus Borrowings Deferred Tax Liabilities Total Sources of Funds Gross Revenue Profit Tax Profit Tax Dividends Dividend Tax Retained Earnings (including statutory reserves) Equity Capital Share Before After &
21736 267 541 17400 3969 100 21736 10267 1135 1081 191 31 859
19425 245 14366 4115 158 19425 10908 1297 1152 174 10 968
19434 226 784 10898 7332 194 19434 10959 1193 1139 156 27 956
16924 236 10668 4989 248 16924 7501 1152 1085 148 25 912
15570 229 783 9252 5858 231 15570 6575 872 801 121 21 699
12344 212 7573 4267 204 12344 4608 781 650 104 16 529
10339 186 88 5586 3739 260 10339 4593 570 520 87 12 421
7378 175 4936 2030 237 7378 3583 417 367 70 9 295
3374 138 568 2426 632 178 3374 2777 153 297 * 61 8 54
3412 138 2540 661 73 3412 2783 302 281 61 0.17 244
Sources of Funds :
267 72%
245 71%
226 70%
236 63%
229 53%
212 50%
186 47%
175 45%
138 44%
138 43
Rate of Dividend on Equity Shares
SWOT ANALYSIS OF THE COMPANY
Strengths: 1. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. 2. It also runs power generation, transmission and distribution businesses in other parts of Maharashtra, Goa and Andhra Pradesh. 3. Reliance Infrastructure, one of India’s largest is purposefully surging ahead in a quest to develop world-class infrastructural facilities.
4.
Aggressive strategies are being adapted to kick-start projects that otherwise would have never seen the light of the day. 5. Reliance Infrastructure is playing a pivotal role in undertaking major road projects that encompass hundreds of kilometers all across the country. 6. Reliance Infrastructure, a part of Reliance Group, is India's largest infrastructure company with turnover of over Rs.15,690 crore and market capitalization of over Rs. 24,450 crore as on March 31, 2010. 7. Reliance Infrastructure Limited is India’s leading utility company having presence in across the value chain of power business i.e. Generation, Transmission, Distribution, EPC and Trading and the largest infrastructure company by developing projects in all high growth areas in infrastructure sector i.e. Roads, Highways, Metro Rails, Airports and Specialty Real Estate.
WEAKNESS
1. A lot of competition is there 2. Competitors like Adani Pvt. Ltd, ., BF Utilities Ltd., CESC Ltd., DPSC Ltd., Energy development company Ltd., Entegra Ltd.
OPPORTUNITIES 1. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. 2. It has a wide scope in the areas of ports, airports, roads, railways, and telecommunications.
THREATS: 1. Current economic situation may have an adverse impact on construction industry. 2. Infrastructure safety is a challenging task in construction industry. 3. Lack of political willingness and support on promoting new strategies Natural abnormal casualties such as earth quake and floods are uncertain and can prevent the construction boom.
BUSINESS STRATEGIES: Joint ventures
? KRIBHCO, a premier co-operative society with an unparalleled marketing network in rural India and Reliance Communications Infrastructure Limited, India’s largest telecom service provider, have announced signing of a Joint Venture. KRIBHCO Reliance Kisan Limited, the Joint Venture Company, would synergize the respective strengths of KRIBHCO and Reliance ADA Group to catalyze tele-density growth and provision of state-of-the-art products and services to the rural people in India. ? Reliance Infra - IRB Infra ? Mumbai Metro One Pvt Ltd (MMOPL) is a joint venture company formed by Reliance Infrastructure, Veolia Transport and the Mumbai Metropolitan Region Development Authority (MMRDA) based in Mumbai, India. It is the operator of Mumbai Metro, a rapid transit system under construction in the Indian city of Mumbai Innovation ? Reliance Infrastructure has bagged National Award for Innovative Training Practices for the year 2011.
References: http://www.rinfra.com/ http://rmax09.wordpress.com http://en.wikipedia.org/wiki/Reliance_Anil_Dhirubhai_Ambani_Group http://en.wikipedia.org/wiki/Mumbai_Metr
ne_Pvt_Ltd http://economictimes.indiatimes.com/reliance-infrastructure-ltd/quotecompare/companyid13922.cms http://www.scribd.com/doc/13926953/SWOT-Analysis-on-Construction-Industrieshttp://news.indiamart.com
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