Vous êtes sur la page 1sur 38

Executive Summary

Parvez Akhtar Qazi Rohit Patni


+91 22 4063 5405 +91 22 6623 3392 Edelweiss Securities Limited
parvez.qazi@edelcap.com rohit.patni@edelcap.com
1 Edelweiss Securities Limited
Construction

Executive Summary

We travelled more than 8,500 km by road, air, and railway and visited various road projects
across North, South, East, and West India. We met developers, contractors and sub-
contractors executing projects at a cumulative cost of ~INR 65 bn. Our mission was to find
answers to the following pertinent questions:

• What are the ground level issues in road project execution?

• Do land acquisition issues continue to hamper the pace of project development?

• What are the impediments in the land acquisition process?

• How smooth is the process of getting regulatory approvals in forest / environment /


utility shifting?

• What is the likelihood of reducing cost/time overrun in future projects?

• Are there constraints in manpower/equipment/raw material availability?

„ Our key conclusions are as follows


• Regulatory approvals a big dampener

Land acquisition continues to remain the single biggest road block hampering
developers. Lack of clear land titles, protests over land compensation and
lackadaisical attitude of state government authorities are major causes for delays.
Most developers indicated that execution time of projects could be cut by up to six
months by timely land acquisition. Similarly, getting timely approvals from railway
and forest departments is very difficult due to the cumbersome process involved.

• Developer involvement in regulatory approvals ensures timely execution

Many projects commissioned in the past had been delayed due to the above
mentioned issues. However, developers have learnt from past mistakes and have
started facilitating coordination within various government departments by hiring
retired officials. As a result, many projects that we visited were running ahead of
schedule; also, cost/time overruns, if any, in future projects may not be substantial
and are likely to be less than in past projects.

• Resource availability not an issue

We were positively surprised by the fact that resources (manpower, equipment, raw
materials, financing or sub-contractors) were easily available. Even if there is any
temporary resource crunch, the entrepreneurial spirit of contractors ensures that
these issues are taken care of. Also, with multiple resource providers (in terms of
equipment manufacturers, banks and other financial institutions), timeliness and
cost efficacy of the supply is also reasonably ensured.

• Outlook on execution of road projects: Bright

Over FY09-10, the government has initiated many steps to ensure that the pace of
project award has picked up. This leaves execution issues as the principal irritant in
improving the pace of road project development. While enhanced developer
involvement, good resource availability and increased government efforts have
emerged as a positive, some more action is required to speed up the approvals
process. We believe if the regulatory side of approvals is taken care of, ramping up
execution will not be too challenging.

2 Edelweiss Securities Limited


Construction

Contents

Our modus operandi .................................................................................................... 3

Why focus on execution? .............................................................................................. 4

Land acquisition .......................................................................................................... 6

Utility shifting and other local clearances ...................................................................... 13

Railways, forest & environmental approvals .................................................................. 16

Resource availability issues ........................................................................................ 18

Cash contracts continue to get delayed ........................................................................ 22

Outlook on road projects execution.............................................................................. 23

Major project details .................................................................................................. 24

Dhule-Palasner Project ............................................................................................ 24

Hyderabad outer ring road project ............................................................................ 26

Pimpalgaon-Nashik-Gonde project ............................................................................ 29

Ranchi ring road project .......................................................................................... 31

Edelweiss Securities Limited 3


Construction

Our modus operandi

We travelled more than 8,500 km by road, air and railway and visited various road projects
across North, South, East, and West India. We met developers, contractors and sub-
Visited road projects contractors executing projects with a cumulative cost of ~ INR 65 bn. Apart from interacting
across the country to with project managers and engineers, we also met some bankers financing these road
understand ground level builders.
execution issues
„ What was the scope of projects covered?
We have tried to cover the widest possible array of road projects in terms of geography,
project cost, mandate of project (toll/annuity/EPC) and mode of execution (developer /
sub contractor). This was to ensure that we do not restrict ourself to any one particular
kind of project and interact with a wide spectrum of industry participants. To better
understand execution issues across the industry, we tried to diversify the type of
projects visited.

Fig. 1: Projects visited across India

Source: Google Maps, Edelweiss research

Table 1: Covering entire spectrum of road projects


Scope of projects visited Mode of projects visited
We covered every type
of road project possible 2 lane D BOT toll project D
4 lane D BOT annuity project D
6 lane D State govt EPC project D
8 lane access controlled expressway D District road project D
Regions visited Cost of projects visited
North India D < INR 1 bn D
West India D INR 1 - 5 bn D
South India D INR 5 - 10 bn D
East India D INR 10+ bn D
Source: Edelweiss research

4 Edelweiss Securities Limited


Construction

Why focus on execution?

Between 1951 and 2006, while India’s vehicle population posted a CAGR of close to 11% and
freight and passenger traffic carried by road posted 10% CAGR, the total road length
registered a mere 3.9% CAGR with the National Highway (NH) segment increasing at a
minuscule 2.2% CAGR.

Also, the quality of roads is abysmal. The Global Competitiveness Report 2010-11 ranks
Pace as well as quality of
road length addition in India at a dismal 90th spot as far as quality of roads is concerned, way below
the country has been neighbours China (53rd), Sri Lanka (55th) and Pakistan (72nd).
disappointing
This shows that the pace as well as quality of road length addition in the country has
remained tardy over the years. While things have definitely improved, particularly in the NH
segment, since the start of the National Highway Development Programme (NHDP), we have
still fallen short of targets. This can be attributed to: (i) slowdown in the pace of project
awards in 2006-08 due to regulatory issues and recession; and (ii) execution issues on road
projects as manifested in cost and time overruns.

Table 2: Physical targets and achievements for NHDP


2007-08 2008-09 2009-10
Category Target Achievement Target Achievement Target Achievement
Widening to 4-lanes and strengthening (kms.) 2,885 1,683 3,520 2,203 3,165 2,693
Source: Govt documents, Edelweiss research

Over FY09-10, the government has initiated many steps which have enhanced the
attractiveness of road projects for developers and ensured pick up in the pace of project
awards. With most regulatory issues being sorted out and ~ 26,000 km of projects to be
awarded over the next 4-5 years under NHDP, we believe project award is unlikely to be
a major dampener going forward (even if pace of project award may not be uniform).
This leaves execution issues on road projects as the principal irritant in improving the
pace of road development.

„ How big an issue is execution and what are the costs involved?
As per the government, ~68% of projects undertaken by the National Highway Authority
of India (NHAI) so far have been delayed (includes both completed and under
Most road projects
witness time/cost implementation projects).
overruns
The World Bank had carried out a time and cost overrun analysis on on-going and
completed national highway and state highway contracts a couple of years ago. The
results of the study are given below:

Table 3: Time and cost over-run details


% Overrun [over Completed contracts Completed + ongoing
original estimates of (%) Contracts (%)
time and costs] Time Cost Time Cost
NHAI and
<25% 29.4 55.8 10.4 53.7
state govt
contracts 25-50% 15.0 40.5 9.7 31.6
50-75% 33.0 3.7 38.1 9.7
75-100% 15.0 0.0 29.5 5.0
>100% 7.6 0.0 12.3 0.0
Source: World Bank, Edelweiss research

Edelweiss Securities Limited 5


Construction

The study indicates that 90% of all contracts had a time overrun of more than 25%;
46% had a cost-overrun of more than 25%. The cost overrun figures for completed
contracts do not include a large portion of pending claims and arbitration orders. As per
Execution is a big estimates, ~ INR 100 bn is locked in disputes between the government and contractors.
concern in road
development
Thus, execution remains a major issue in road development; the final costs of road
project implementation are much higher than initially envisaged.

„ What are the major execution issues?


Major issues in road project execution can be broadly categorised into:

1. Regulatory issues
• Land acquisition
• Utility shifting and other local clearances
• Other approvals like forest, railways etc.
2. Resource availability issues
• Manpower availability
• Raw material availability
• Availability of financing
• Equipment availability
• Sub-contractors’ availability

Our trip was aimed at getting to the root of the execution issues listed above.

6 Edelweiss Securities Limited


Construction

Land acquisition
„ How big is this problem?
As per World Bank, on an average, it takes 50% more time than scheduled to hand over
Land acquisition is the encumbrance-free land to contractors for national highway projects. Also, according to a
biggest issue in road
survey of 190 infrastructure projects facing delays, 70% were delayed due to land
development
acquisition problems. This indicates that land acquisition is arguably the biggest hurdle
afflicting road development.

Fig. 2: Delayed due to reluctance of farmers to hand Fig. 3: Problems due to protest over demolition of
over land structure

Source: Edelweiss research
„ What are the relevant regulations?
Land acquisition for development projects in India happens through the Land Acquisition
Act (LAA), 1894. However, land acquisition for national highways is carried out under a
separate law known as the National Highway Act (NHA), 1956.

State governments sometimes constitute a specific law for land acquisition (land
acquisition in India is a Concurrent subject as per the Indian Constitution which gives
state governments the right to legislate on the matter).

Edelweiss Securities Limited 7


Construction

„ What is the process for land acquisition?


The various steps involved in the process of land acquisition for National Highways are
given below:

Fig. 4: Land acquisition process for national highways

Govt expresses its intention to Carrying out of surveys, inspection etc.,


Hearing objections from
acquire the land (3A setting out of boundaries and intended
concerned persons
notification) lines of work

Award finalisation at the Special Decleration of acquisition after


Determination of amount payable as
Land Acquisition Officer (SLAO) disposing off objections (3D
compensation
level notification)

Approval at the NHAI Project


implementation unit / NHAI Disbursement of compensation amount Physical possession
hedaquarter

Source: Govt documents, Edelweiss research

„ What are the reasons behind difficulties in land acquisition?


We learnt from our visit that there are multiple reasons behind difficulties in land
acquisition. Prominent amongst them are:

• Institutional framework and dependence on local authorities: When land is to


be acquired under the NHA, 1956, the NHAI generally relies on the district
administration since the relevant land records are with the revenue department. The
NHAI depends on local
authorities for land district administration appoints an Additional District Magistrate or Sub-Divisional
acquisition Magistrate as the competent authority for this purpose. Sometimes, there is delay in
the appointment of a competent authority by the state government which further
delays the process.

Also, this means that NHAI is dependent on the district administration for the land
acquisition process. Since NHAI has no control on district administration (for
which land acquisition is not a priority issue due to other responsibilities),
the entire process becomes dependent on the proactiveness of district
officials. Sometimes, local officials are transferred, which again hampers the
process.

• Special land acquisition cells enhancing coordination but local authorities


still the key: Over the past year, NHAI has set up local cells to enhance
coordination in land acquisition with local authorities. These units carry out the
following functions:

ƒ Prepare the notification under section 3A (Intention to acquire land).

ƒ Prepare the notification under section 3D (1).

ƒ Disburse the compensation to land owners.

These units coordinate with local officials to ensure that the process of land

8 Edelweiss Securities Limited


Construction

acquisition is smooth. Our interaction with developers reveals that there definitely
has been improvement on the ground level with the setting up of such cells.

However, in case district administration officials are not dynamic and cannot handle
various problems which emerge from time to time with regards to land acquisition,
the entire process is still delayed. Indeed, developers raised serious concerns
regarding the motivation levels of local authorities.

• Fragmented land holdings: The fragmented nature of land holdings in rural areas
means that a large number of landowners need to be compensated for their land.
According to data from the Ministry of Agriculture, 62% of farmers have land
holdings of less than one hectare. This creates problems in land acquisition.

Fig. 5: Land acquisition delayed due to nearby farm Fig. 6: Land acquisition stuck due to dispute over
land compensation amount

Source: Edelweiss research

• Lack of clear land titles: Unclear land titles and absent/incomplete revenue
records in villages are the biggest constraints in timely land acquisition. The process
gets bogged down due to the problem in finding the rightful owner of the land. This
is because land records are generally outdated, inaccurate and/or incomprehensive.
Lack of clear land titles This gives rise to frequent disputes, which result in litigation. This is a problem
and inadequate DPRs which no amount of NHAI/developer involvement can solve. For e.g., news reports
create hurdles
suggest that land acquisition progress in Jharkhand had been hit due to inadequate
land revenue records reflecting ownership; the maps were as old as 1912 and the
state government is now developing land records by way of physical verification.

Similarly, in case there has been an informal division of land amongst family
members, it is not reflected in records of the revenue department. Also, in case the
land belongs to tribals, the acquisition process further suffers since there is
restriction on sale of land from tribals to non-tribals.

• Inadequate land acquisition plans: Many a times, land acquisition plans as


formulated according to the detailed project report (DPR) are inadequate; this is
because the professionals involved in preparing DPRs do not have sufficient
knowledge of land acquisition. The design consultants do not have sufficient
expertise in preparing proper land acquisition plans; also, land acquisition plans are
unrealistic due to deficiencies in on-the-ground verification of the design/alignment.

Edelweiss Securities Limited 9


Construction

• Lack of uniformity in state government regulations: There is lack of uniformity


across state governments in terms of statutes. For e.g., the Uttar Pradesh
government had earlier imposed a condition that NHAI will have to guarantee
development of a 10 m wide strip of plantation along either side of highways if the
project involves felling of existing trees. This affects land acquisition progress.
Institutional framework
for land acquisition is • Lack of adequate compensation and methodology of computation: We
inadequate understand that compensation for land acquired is also a big issue impeding land
acquisition. The bone of contention here is both the eventual quantum of
compensation and the methodology used to arrive at the figure.

The NHA, 1956, provides for compensation based on: (a) market value of the land
on the date of publication of 3A notification; (b) extra payments for trees, crops,
houses, or other immovable properties; and (c) payments for damage due to
severing of land, residence, or place of business.

A lot of discretion is vested with state authorities during the entire process and,
many a times, there is lack of clear cut procedures for the same. This results in
grievances against authorities which delays actual possession of land by the
government.

Various problems related to compensation are detailed below:

ƒ Sometimes, valuation of land, as determined by authorities, is based on sale


deeds recorded with revenue offices; this is way below prevailing market prices
and is a cause of heartburn for the landowner.

ƒ Over the past couple of years, land prices in some parts of rural India have
increased sharply due to expansion of rural roads and improvement in
accessibility. This has resulted in many landowners demanding higher
compensation than the official acquisition rate.

ƒ Also, sometimes, there is a dispute between state and central governments over
the manner of compensating affected land owners. This is also because many
states have their own land acquisition and rehabilitation laws, which differ from
NHA, 1956.

This means that even after publication of 3D notification signifying the acquisition of land
by the government, the valuation of the land, approval of the same, disbursement and
physical possession of the land by the developer takes a long time. In theory, the land
acquisition is complete as soon as the relevant government notification is issued;
however, in practice, developers have to wait for a long time in getting unencumbered
access to the land.

„ What is developers’ viewpoint?


Our interaction with various developers threw some interesting takeaways:

• Developers have become involved in land acquisition process: A large number


of projects which have been commissioned over the past couple of years had been
Developers lending a delayed due to land acquisition problems . However, developers have also learnt
helping hand in land
from past mistakes and have realized that they need to be proactive to facilitate
acquisition process
coordination between various government departments to ensure that land
acquisition is completed on time in order to save time and cost (for BOT projects).

To this extent, developers have become involved in the land acquisition process.
This includes hiring retired officials (earlier involved in land acquisition) to ensure
smooth running of the process. In fact, we came to know of instances where

10 Edelweiss Securities Limited


Construction

developers have themselves acquired certain stretches of land which were proving to
be problematic so as to ensure speedy completion of the land acquisition process.

• Developers indicate more efforts from state government could help: While
most developers indicated that NHAI emphasis on land acquisition has improved,
they also highlighted that developer involvement is not the panacea of all problems;
Developers want more
efforts from state beyond a particular level, land acquisition progress ultimately depends on the level
governments of state government involvement. They highlighted that states where authorities are
proactive (Gujarat, Rajasthan) are the best places to work. On the other hand,
projects in certain states like West Bengal, Kerala, Uttar Pradesh, Orissa etc.,
continue to face problems. Thus, overall while there has been some progress on the
land acquisition front, it is sporadic in nature and still depends on developer
involvement.

• Land acquired is not continuous but piecemeal: Developers indicated that many
a times, land parcels acquired are not continuous , i.e., they are piecemeal and at
quite a distance from each other. This creates problems in execution since it leads to
increase in inefficiencies due to less than optimal utilisation of equipments.

• Unencumbered access to land still a problem: As highlighted above, even after


acquisition of land, various encumbrances mean that developers’ ability to undertake
work in a continuous uninterrupted manner is constrained. Unencumbered access to
land thus still remains a problem.

• Land acquisition process needs to be initiated earlier in project lifecycle:


Currently, the land acquisition process continues well into the execution period,
thereby affecting the construction schedule. Developers suggested the process
needs to be initiated at the design stage itself, well before the beginning of civil work.
To this end, a comprehensive land survey should be completed before land
acquisition schedules are prepared and included in DPRs.

„ Our view
We believe that while the land acquisition process has improved, many issues remain to
be tackled before pace of road development picks up. Our key learning from the visit is
as follows:

• Land acquisition continues to remain the single biggest issue faced by


developers

Our interaction with developers/contractors indicated that land acquisition continues


Project execution could to remain the single biggest issue troubling developers. This was the unanimous
reduce by up to six
months, if land feedback received across all projects that we visited. Most developers indicated that
acquisition is completed execution time of projects could be reduced by up to six months in case land
within schedule acquisition is completed in the scheduled time. However, this is hardly the case with
developers having to contend with numerous delays due to non-availability of land.

• Cost/time overruns in future projects may not be substantial and likely to


be lesser than past projects

With developers lending a helping hand to the government, project execution was
on the right track for most BOT projects we visited. This leads us to believe that
cost/time overruns in future BOT projects may not be substantial and is likely to be
lesser than in past projects.

• Calculation methodology of land acquisition needs closer scrutiny


The revised guidelines for road project awards announced last year state that a LoA
will be issued only when 80% of the land required is under possession. However, the
calculation of this figure needs a closer look. The Right of Way (RoW) or the land

Edelweiss Securities Limited 11


Construction

required for any project includes the portion of the land for existing road as well, i.e.,
for a four laning project, the RoW includes the land of the existing 2 lane project.

As a result, a substantial quantity of land required is available upfront. For e.g., the
RoW of ~40-45 m required for a 4 lane road includes the existing 2 lane road
(usually 10 m wide). Thus, any figure with respect to land acquisition progress
needs to be considered in the proper perspective.

• Recent news flow suggest that government’s efforts bearing fruit

Recent news articles suggest that government’s efforts on the land acquisition front
have resulted in improvement. News articles point that:

ƒ NHAI took possession of 3,022 hectares in Q1FY11. This is almost half the size
of the total land possessed (6,244 hectares) by NHAI in 2009-10 which itself
was a huge improvement over the 3,120 hectares acquired in 2008-09 and
3,684 hectares acquired in 2007-08. The total land acquired by NHAI was at a
relatively higher level at 5,513 hectares in 2006-07.

ƒ Under section 3G of the NHAI Act, which makes the government liable to pay
compensation to the land owner, NHAI has issued notification for 2,204 hectares
in Apr-Jul 2010, compared with 3,605 hectares in the previous fiscal.

ƒ Out of the total 60,500 hectares land required for various stages under the
NHDP, the government has managed to acquire around 25,000 hectares.

• Enhanced support from state government the key

Enhanced support from While NHAI and the roads ministry are doing all they can to improve the land
state governments is key acquisition process, the big kicker can come only if the respective state
to speedier road
governments pull up their socks and improve coordination at the ground level. In
execution
this context, the signing of state support agreements (SSAs) by 24 states and Union
Territories with the roads ministry is a step in the right direction. The agreement
empowers the concessionaire with access to the site and right of way in accordance
with the provisions of the respective concession agreements without hindrance from
any government agency or person claiming it.

• Proposed National Highway Amendment Bill will be a key monitorable

The proposed National Highway Amendment Bill is being keenly watched with
regards to changes in the regulation regarding national highways. News reports
suggest a couple of important recommendations as per the draft bill.

ƒ If a planned road is abandoned, the original owner will reserve the right to buy
back the land by returning the money paid by the government for purchase.
Further, the owner will not have to pay the appreciation price but only that
received when he or she sold the land.

ƒ It has been proposed that a two-step mechanism be introduced for calculating


cost of land at the time of acquisition by NHAI. In the first step, price of the
land will be calculated on the basis of the average land price of top 50% sales
(in terms of value) in the past three years. The land cost will also be estimated
according to the price guidelines for the area maintained by the collector in
charge. After arriving at the two values, the higher of the two will prevail as the
price that the NHAI will pay to the land owner.

Currently, the land price is calculated based on the average price of all land
sales in the area in the past three years. The new mechanism proposed,
however, takes into account the top 50% values of land sale in three years.

12 Edelweiss Securities Limited


Construction

ƒ It is also proposed that the person who sells the land to NHAI should get
solatium for better rehabilitation and resettlement. It is proposed that the land
owner gets 60% of the agreed sale price of the land as compensation for
displacement in addition to the land price.

Land acquisition will be ƒ It is proposed that a time limit of three months be imposed for the aggrieved to
an important parameter approach an arbitrator in the case of land sale. The current form of bill places
in determining the
success of the 20 no such time limit, leaving it open ended. The arbitrator will also be required to
km/day initiative give a decision within six months.

„ Achieving 20 km/day hinges on land acquisition success


Land acquisition will be an important parameter in determining the success of the 20
km/day initiative. As the recent protests by farmers in Uttar Pradesh over land
acquisition for an expressway demonstrated, land acquisition remains a contentious topic
in the Indian infra scene. The sooner the outstanding issues are resolved, the better it
will be for progress of road development.

Edelweiss Securities Limited 13


Construction

Utility shifting and other local clearances

„ How big is this problem?


Utility shifting and other local clearances is another problem facing road projects. Many
times, while land acquisition is complete, unencumbered access to the land and initiation
Utility shifting and other
of execution is not possible due to delays in shifting of utilities and other approvals.
local clearances delay
project execution Sometimes design and layout of the project have to be changed due to problems in
utility shifting.

A World Bank study highlighted had indicated that on an average, shifting of electrical
utilities took about 33 months, telephone utilities about 31 months and water utilities
about 29 months, against the planned target of about 18 months for all these utilities—
more than a year of delay.

Fig. 7: Problems in shifting of power lines Fig. 8: While tree cutting has been completed, power
lines still needs to be shifted

Source: Edelweiss research

14 Edelweiss Securities Limited


Construction

„ Various clearances involved


ƒ Utility shifting: When it comes to utility shifting, major problems are shifting of
transmission towers, electric wires, telephone cables, water pipes, etc.

ƒ Local clearances: Various local clearances required are given below:

Table 4: Various local level clearances required


Sl. No. Description of permits/licenses required
1 Labour license
2 Registration under building and other construction workers' act

3 Blasting permissions
4 Approvals from village panchayat for installation of crusher, batching plant,
asphat plant etc

5 Approval from Pollution Control Board for installation of crusher, batching


plant, asphat plant etc

6 Blasting permission from District Collector


7 License for use of explosive from Chief Controller of explosive

8 Permission for installation and operation of HSD consumer pump

Source: Edelweiss research

„ Agencies involved
For utility shifting, developers need to coordinate with various government departments
like the telecom department, the local municipal board and local bodies for water and
power maintenance.
Lack of proper
coordination between
govt departments delays For other local clearances, entities involved are the village panchayats/municipal board,
utility shifting District Collector, Pollution Control Board and other government bodies.

„ Reasons behind delays in utility shifting/other clearances


We learnt from our visit that there are multiple reasons behind difficulties in utility
shifting/other clearances. Prominent amongst them are:

ƒ Lack of proper coordination between the implementing agency and respective utility
departments

ƒ Inadequate investigations during DPR preparation and lack of proper utility


mapping; sometimes contractors come to know of utilities (underground ones)
during the project implementation stage.

ƒ The road implementing agency has no leverage on utility relocation departments.

„ Developer viewpoint on utility shifting/other local clearances


Our interaction with various developers threw some interesting takeaways:

ƒ Better coordination between different government departments required -


Developers highlighted the need of better coordination between various government
departments. Like land acquisition, utility shifting stretches late into the execution
period, thereby preventing developers from optimal use of resources.

ƒ Presence of a dedicated agency helps - Our interaction with developers indicated


that the presence of a dedicated agency (like Hyderabad Growth Corridor for
Hyderabad outer ring road project) helps in better coordination amongst
government departments.

Edelweiss Securities Limited 15


Construction

ƒ Developers giving a helping hand to government - Like land acquisition,


developers have also become involved in utility shifting/other clearances. They have
themselves approached the concerned authorities to ensure smooth coordination
Better coordination between various entities.
between various
agencies can enhance
road development „ Our view
We believe the challenges in utility shifting are far lower than those in land acquisition as
the factors involved are less complex. Also, with a little improvement in coordination
between various agencies, there can be a marked upturn in the pace of road project
development.

16 Edelweiss Securities Limited


Construction

Railways, forest & environmental approvals

In every NHAI or state highway project that we visited, there was an issue with a railway
Getting approval from over bridge (ROB) or with regards to area under the forest department. Getting approval
railways or MoEF is a
tough task for from railways or the Ministry of Environment and Forests (MoEF) is a tough task for
developers developers. An approval for cutting trees can take up to 30 months. Similarly, approval for a
railway over bridge (ROB) from railways can take 15-18 months.

„ Reasons behind delays in getting railways, forest and environmental approvals


The reason for delays in getting these approvals is primarily the cumbersome process
involved. For e.g., in case of a forest clearance, the developer first receives an ‘in
principle’ approval which stipulates certain specific conditions. Only when all the
conditions are fulfilled is the ‘final clearance’ issued. Project implementation cannot
begin until the final clearance has been achieved.

Road projects which pass through a national park or sanctuary require the approval of
the National Board of Wildlife (NBW) even for the very first step like undertaking a
The process for survey.
environmental clearance
can take up to a year
News reports suggest that there is a lack of a standard procedure for clearance of such
projects and the matter has been raised before an Empowered Group of Ministers
(EGoM), which is expected to meet shortly to prepare the required norms for such
projects.

Apart from the central government represented by the MoEF, developers have to face
additional conditions imposed by the forest department in the state government.

For environmental clearance, the proposal needs to be submitted at the feasibility stage
itself. A complete assessment of the environmental impact is done and the project is
examined by an expert committee. The whole process can easily take up to an year.

In the recent past, many projects have been stuck due to delay in approvals in one of
the above parameters. For e.g., news reports suggest that only recently, the standing
committee of NBW, rejected NHAI’s proposal to divert 85 hectares of forest land for four-
laning in an 85 km stretch on national highway No. 6.

„ Our view
After interacting with project managers, we believe that railways and forest approvals
are emerging as major choke points. Even the proactive efforts of NHAI or developers
usually fail in front of these departments since they follow their own procedures which
usually take time.

Edelweiss Securities Limited 17


Construction

Fig. 9: Project delayed due to construction of an ROB for which permission was
pending for long

Source: Edelweiss research

We had a chance to examine delays due to ROBs firsthand. In a project, which has been
under implementation for the past four years, the entire road widening part of the
project has been complete for some time now. The only portion where work was still
pending were a couple of ROBs.

Fig. 10: Project stalled due to delays in approval for Fig. 11: Project delayed due to delays in approvals
cutting trees from forest department

Source: Edelweiss research

Similarly, the process for environmental clearances involves a number of NGOs; a single
objection from them can cause a major delay. Sometimes, project alignment itself has to
be changed to accommodate demands of the forest department.

18 Edelweiss Securities Limited


Construction

Resource availability issues

After looking at the regulatory approval scenario, we now focus our attention on resource
availability issues i.e., the ease of building asset base in terms of manpower, equipments,
raw materials, financing and execution multipliers (sub-contractor). Our interaction with
project execution personnel pointed out a few positives which we have listed below:
Scarcity of quality
manpower resources at
middle management „ Quality manpower resources at middle management level are scarce
level We observed that there is a scarcity of experienced and good quality manpower
resources at the middle management level (civil engineers with 10-15 years of
experience). Contractors attributed this to the migration of civil engineers to IT
companies (starting from the mid 1990s). As a result, there is a shortage of skilled
professionals at the middle management level. Also, most contractors believed that the
shortage is likely to emerge as a big issue going ahead with the large scale up in
infrastructure spending planned in the coming years. However, unskilled or semi skilled
manpower is not an issue.

We believe contractors have also realized the benefit of developing their own talent base
to cope with the anticipated increase in human resource crunch going ahead. Recent
news flow suggests that Gammon India has started its own training center in Mysore
with a view to create a pool of skilled workforce trained in various skilled disciplines
including masonry, plastering, scaffolding, carpentry, electrical work, painting and
plumbing.

„ Availability of plant/equipment and raw material is not a constraint


Our interaction with project personnel indicated that there were no major issues with the
availability of either plant/machinery or with raw materials. Funding is easily available for
enhancing the fixed asset base. In fact, many contractors opined that it is easier to get
funding for equipment finance than getting their non-fund based banking facilities
enhanced. They attributed this to the presence of NBFCs in the equipment finance space.

Fig. 12: Fixed asset base is easy to expand Fig. 13: Equipment availability is not a concern

Source: Edelweiss research

Edelweiss Securities Limited 19


Construction

Also, raw material constraints are few; in fact, resources mobilisation was in full swing in
practically all locations that we visited even before the work at the site was
started/scheduled to start. Even in areas where there were some issues with raw
material availability, contractors had the foresight of planning for this beforehand.

Fig. 14: Raw material is easily available Fig. 15: No problems in raw material supply

Source: Edelweiss research

For e.g., in Haryana where the state government has imposed a ban on mining of major
minerals in Faridabad, Gurgaon and Mewat districts for 10 years, alternate supply
arrangements from Rajasthan were already in place. This ensured that project
implementation was not affected.

„ No shortage of quality subcontractors


Most developers that we interacted with indicated that there is no dearth of sub-
contractors in the industry. There are enough small contractors willing to work for
developers. We visited a few projects being executed by these sub-contractors and found
that the asset base, both in terms of equipment and manpower, with these sub-
contractors was substantial. These sub-contractors also had easy access to funding
There are enough small
contractors willing to which is crucial to their growth prospects.
work for developers
ƒ Responsibilities clearly outlined: In projects where the execution is being carried
out by a sub-contractor, the role of developers veers more towards project
monitoring and supervising the implementation schedule. Developers have their own
set of technical personnel engaged at the site who oversee the project execution.
There are weekly review meetings with sub-contractors to keep a tab on progress of
the project.

ƒ Sub-contractors have adequate asset base: We also met a few sub-contractors


and visited projects being executed by them. Here again, the fact that these sub-
contractors had their own asset base and qualified manpower came through. Our
interaction with these sub-contractors revealed that they had scaled up their
execution capabilities over the years which was reflected in the average size of
projects being undertaken by them.

20 Edelweiss Securities Limited


Construction

Fig. 16: Sub-contractors have good quality asset base Fig. 17: Sub-contractors have adequate technical
acumen

Source: Edelweiss research

These sub-contractors also had their own laboratories for ensuring the quality of
work being undertaken.

Fig. 18: Quality check at a sub-contractor’s site

Source: Edelweiss research

When it comes to the selection process undertaken by developers for choosing sub-
contractors for any project, the asset base and past work are crucial parameters.

ƒ Traditional developer-sub-contractor relationships changing: Also, some sub-


contractors indicated that developers had started giving them incentives for
upgrading execution capabilities in terms of asset base and manpower resources.
This was being done by developers in the form of assuring the sub-contractor of a
minimum volume of work every year for a fixed period of time. We believe this is a

Edelweiss Securities Limited 21


Construction

win-win situation for both parties involved as sub-contractors get to enhance their
execution capabilities and also learn from project management skills of experienced
developers; for developers, the benefit is in the multiplier effect brought in by sub-
contractors.

Fig. 19: Sub-contractors have built up execution capabilities and asset base
over the years

Source: Edelweiss research

ƒ Funding not an issue: We enquired about the ease of availing financing for
purchasing equipments etc. Here again, sub-contractors indicated that they were
not facing any shortage. They had relationships with multiple banks and fund
availability was not an issue.

ƒ Interaction with financial institutions corroborates findings: We also


interacted with a couple of financial institutions who fund sub-contractors. They
corroborated sub-contractors’ feedback and were optimistic about future growth
prospects of these sub-contractors. These institutions had witnessed growth
trajectories of these sub-contractors for the past many years and sounded confident
in their ability to scale up their business.

„ Our view
We believe there is no shortage of resource availability, be it manpower, equipments,
raw materials, financing or sub-contractors. Even if there is any temporary resource
There is no shortage of crunch, the entrepreneurial spirit of contractors ensures that these are taken care of
resource availability, be adequately. Also, with multiple providers of these resources (in terms of equipment
it manpower, equipment,
manufacturers, banks and other financial institutions etc.), the timeliness and cost
raw materials, financing
or sub-contractors efficacy of supply is also reasonably ensures. One more positive thing is that even the
small sized entities have access to these resources; also, these resources are not
geographically concentrated. What this means is that if the regulatory side of approvals
is taken care of, ramping up execution will not be too challenging.

22 Edelweiss Securities Limited


Construction

Cash contracts continue to get delayed

We visited a number of projects being implemented on cash contract basis. The primary
difference between these projects and BOT projects lies in the mode of funding; while cash
contracts are funded by the government, in BOT projects, the developer has to tie up the
Most cash contracts financing i.e., in BOT projects, developers’ own money is at stake. As is natural, the
continue to get delayed commitment towards avoiding cost/time overrun is higher in BOT projects.

It was not surprising to find that almost every cash contracting project that we visited was
running behind schedule. Since there is no incentive for contractors to get involved in the
process of land acquisition and other regulatory approvals, most contractors adopt a laidback
attitude with regards to cash contracts. They were content with religiously documenting their
machine/labour idle time for the purpose of claims adjustment at a later stage. The entire
responsibility for getting regulatory approvals in this case lies with the client (NHAI/State
PWD etc). The process is rarely completed in time due to bureaucratic hurdles. Thus, cash
contracts continue to get delayed. As is natural, the chances of legal disputes at a later stage
in such projects are also much higher.

Fig. 20: Project stalled due to delays in land acquisition Fig. 21: Project stuck due to delays in utility shifting

Source: Edelweiss research

The delay in cash contracts is also due to the fact that the incentive payment for an early
completion of a cash contract project is minuscule as compared to those for BOT projects
(bonus annuities or early toll collection). Hence, contractors are also not proactive in
completion of cash contracts on time.

Data from NHAI corroborates our hypothesis. Of the 136 projects which were running late
w.r.t. their original implementation schedule at Sep 2010 end, only 28 were on BOT basis
(toll or annuity), balance were all cash contracts.

It needs to be kept in mind that only ~ 9% of projects in the NHDP work plan for future
(approved last year) are proposed to be completed under the EPC mode. This means that
future delays in NHAI projects may be lesser than the past due to smaller share of cash
contracts. However, for state government roads and district roads which continue to be
implemented on EPC basis, there is no such ray of hope.

Edelweiss Securities Limited 23


Construction

Outlook on road projects execution

Over FY09-10, the government has initiated many steps to ensure that there is a pick-up in
the pace of project award. We believe project award is unlikely to be a major
dampener going forward; this leaves execution issues as the principal irritant in
improving the pace of road project development.

Our interaction with developers and other project execution personnel has convinced us that
there are quite a few positives when it comes to road project execution. Enhanced developer
involvement, good resource availability and increased government efforts are likely to ensure
that the execution on road projects is likely to improve going ahead. However, regulatory
constraints continue to stifle efforts to build 20 km/day of roads. We believe if the regulatory
side of approvals is taken care of, ramping up execution will not be too challenging.

24 Edelweiss Securities Limited


Construction

Major project details

We highlight the key learnings from some major projects we visited:

„ Dhule-Palasner project
Key project specific details:

ƒ Developer: Hindustan Construction / Sadbhav Engg / John Laing consortium

ƒ Project scope: Design, engineering, finance, procurement, construction, operation


and maintenance of 4/6 laning of Madhya Pradesh/ Maharashtra border-Dhule
Section of NH-3 from km 168.500 to km 265.000 in Maharashtra under NHDP Phase
III A on BOT (Toll) basis. The concession period is 18 years including construction
period of 30 months.

ƒ Client: NHAI

ƒ Project award date: Jan 2009

ƒ Scheduled completion date: June 2012

ƒ Total project cost: INR 14.2 bn

ƒ Significance of the project: The project involves expansion of an existing 2 lane


stretch on NH-3 into 4 lane. National Highway 3 (NH-3), which is commonly referred
to as the Mumbai-Agra Highway, is a major Indian national highway that runs
through the states of Uttar Pradesh, Rajasthan, Madhya Pradesh and Maharashtra.
The highway originates in Agra in Uttar Pradesh, travels South-West through
Dhaulpur in Rajasthan, Gwalior, Shivpuri, Guna, and Indore in Madhya Pradesh, and
Dhule, Nashik, Thane and terminates at Mumbai in Maharashtra. NH 3 runs for a
distance of 1,161 km.

The project starts from the city of Dhule. At Dhule, NH-3 crosses National Highway 6
(NH-6) which is a busy national highway that runs through Gujarat, Maharashtra,
Chhattisgarh, Orissa, Jharkhand and West Bengal. NH-6 passes through the cities of
Surat, Dhule, Nagpur, Raipur, Sambalpur, Kolkata, running over 1,949 km from
Hazira to Kolkata.

Fig. 22: Location of the project Fig. 23: Project stretch

Source: Maps of India, Google map, Edelweiss research

Edelweiss Securities Limited 25


Construction

Key observations from site visit:

ƒ Land acquisition problems and forest clearance big challenges: We learnt


that the project faced land acquisition problems in the beginning. This was primarily
due to resistance from land owners who were demanding a higher compensation for
their land. There was some opposition amongst people due to compensation rates
being different from village to village. Also, land acquisition was not lateral in nature.

Moreover, since the project passes through a stretch which has forests, clearance
from MoEF was required. This took some time.

ƒ Local resistance led to design changes: Since the project passes through an
urban area, there was a demand from the local population to include certain
underpasses which were earlier not part of the original scope of the project. This
issue has been sorted out now. The changes have been incorporated and the
additional cost to be incurred has also been approved by the client.

ƒ Project designed keeping future needs in mind: The project has been designed
keeping in mind the expected traffic growth in the future. As a result, even though
the project will be a 4 lane road after completion, various structures such as flyovers,
bridges etc., which are being built will have 6 lanes. We believe this is a step in the
right direction to ensure that the project can handle the increase in traffic ahead and
that future capacity expansion will not be difficult.

Fig. 24: Execution underway on a major bridge Fig. 25: Construction in full swing on a bridge across
a river

Source: Edelweiss research

ƒ Despite challenges, project running ahead of schedule: Despite the challenges


mentioned above, the project has been running ahead of schedule. This is primarily due
to the developer’s proactive attitude, aided by the NHAI. The developer mobilised
resources as soon as the project was awarded. Also, a major effort was put in identifying
the challenges in land acquisition, forest clearance etc., in the initial part of the project
itself. Close coordination with various government departments has ensured that all local
clearances have been achieved; design changes have also been incorporated. Significant
progress on the land acquisition front has also been achieved. As a result, currently the
project is ahead of schedule.

26 Edelweiss Securities Limited


Construction

Fig. 26: Execution on track after resolution of land Fig. 27: In spite of heavy traffic, construction is ahead
acquisition issues of schedule

Source: Edelweiss research

ƒ The progress on the project is commendable considering that the stretch lies on a busy
route. There was heavy traffic on the road; despite this, construction was in full swing.
Crushers, wet mix plants, batching and asphalt plants were in operation; similarly,
machines like excavators, pavers, graders etc., were also working.

„ Hyderabad outer ring road project


Key project specific details are:
ƒ Road stretch: Cyberabad Expressway

ƒ Developer: Gayatri Projects consortium

ƒ Project scope: Design, construction, development, finance, operation and


maintenance of an eight lane access controlled expressway from Kollur to
Patancheru (km. 12 to km 23.70). The project is on BOT-annuity basis under Phase
II programme of Hyderabad outer ring road (ORR).

ƒ Client: Hyderabad Growth Corridor (HGCL), an SPV formed for development for the
Hyderabad outer ring road by the state government.

ƒ Date of commencement: Dec 2007

ƒ Total project cost: INR 5.01 bn

ƒ Significance of the project: The Hyderabad ORR is aimed at the development of


well planned and well connected urban settlements around the Hyderabad
Metropolitan area. The 159 km long ring road provides connectivity to various state
and national highways to bypass the city of Hyderabad. The proposed corridor is
expected to relieve congestion in the metropolitan area and inner ring road, provide
orbital linkage to radial arterial roads, provide link to the proposed MRTS and bus
system and provide quick access to the international airport from strategic parts of
the city.

Edelweiss Securities Limited 27


Construction

Fig. 28: Outer ring road project in Hyderabad city Fig. 29: Project stretch (Cyberabad expressway)

Source: HUDA, Edelweiss research

Key observations from site visit:

ƒ Major portion of project completed: Work on majority of the project stretch has
been completed. Construction is still going on a small stretch of the road.

Fig. 30: Completed portion of the expressway Fig. 31: Work going on a small stretch of road

Source: Edelweiss research

ƒ Land acquisition problems delays project: The project has been delayed due to
land acquisition problems. Our interaction with project personnel indicated that
majority of the work has been completed. However, land acquisition problem for a
small stretch of land has meant that the work is incomplete on that portion of the
project.

28 Edelweiss Securities Limited


Construction

Fig. 32: Project stalled due to land acquisition issues Fig. 33: Progress hampered by delays in land
acquisition

Source: Edelweiss research

A look at the website of Hyderabad Metropolitan Development Authority indicates


that this indeed is the case. Of the RoW of 11.7 km required for the project, only
11.2 km has been handed over.

ƒ Utility shifting: Apart from land acquisition, the project progress was also
hampered by delays in utility shifting. This happened due to delay in getting
approval for shifting power transmission lines.

Fig. 34: Shifting of power transmission lines delayed Fig. 35: Utility shifting hampers project completion
project execution schedule

Source: Edelweiss research

The developer has been coordinating with HGCL for getting the approval for this purpose.

ƒ Timely land acquisition could have avoided the delay: The project has been
delayed by more than three months due to delay in land acquisition/utility shifting.
To put things in perspective, an identical project on the same road by the
same developer has been completed six months ahead of schedule i.e.
Hyderabad Expressway is a 13 km stretch of Hyderabad ORR from Bongulur to
Tukkuguda. This project (again an access controlled 8 lane expressway) being
undertaken by a consortium headed by Gayatri Projects has been completed 6

Edelweiss Securities Limited 29


Construction

months ahead of schedule. This was possible due to timely handover of land
required for the project.

ƒ Key learning: Despite being close to an urban area which raises its own set of
execution challenges, the developer has been able to build a good quality road
ahead of schedule when RoW was available; however, when land acquisition/utility
shifting is delayed, the project is delayed too despite the best efforts of the
developer.

„ Pimpalgaon-Nashik-Gonde project
Key project specific details:

ƒ Developer: L&T / Ashoka Buildcon consortium


ƒ Project scope: Design, engineering, finance, procurement, construction, operation
and maintenance of 6 laning of Pimpalgaon-Nashik-Gonde Section of NH3 from 380
kms to 440 kms in Maharashtra under NHDP Phase III A on BOT (toll) basis. The
project involves construction of 452 lane kms of roads. The concession period will
expire in January 2029.
ƒ Client: NHAI
ƒ Project award date: Jan 2009. Construction began in January 2010.
ƒ Scheduled completion date: July 2012
ƒ Total project cost: ~ INR 17 bn
ƒ Significance of the project: The project involves expansion of an existing 2 lane
stretch on NH-3 into 6 lane.
The project runs from Pimpalgaon to Gonde via Nashik with Gonde lying on the busy
Mumbai-Nashik highway. Nashik today is one of the fastest growing cities in India
and has been identified as a tier-2 metro. The city's economy is driven chiefly by the
engineering and manufacturing industry; many auto majors and original equipment
manufacturers have their plants here and have spawned a huge network of auto
component suppliers and engineering ancillary services.

Fig. 36: Location of the project Fig. 37: Project stretch

Source: Maps of India, Google Maps, Edelweiss research

30 Edelweiss Securities Limited


Construction

Key observations from site visit

ƒ Land acquisition and utility shifting a key test: Since the project passes
through the city of Nashik, land acquisition and utility shifting have emerged as a
key test for the developer. We surmise that many small commercial establishments
will have to be shifted to get the land required for road widening.

ƒ Management of existing traffic will be the key: Since the project passes
through a heavy traffic density area, developers have to undertake the construction
work along with managing existing traffic. The project also contains an elevated
corridor for traffic to bypass the underlying city congestion.

ƒ Execution happening on both sides of the road: The existing road is 2 lane. Due
to heavy growth in traffic, it is being directly widened to 6 lanes (instead of the
more usual 2-to-4 laning in the first part and 4-to-6 laning thereafter). As a result,
construction is being carried out on both sides of the road. Despite the challenging
task, we believe the developer was carrying out work admirably. We did not see any
disruption in traffic; work was going on smoothly.

Fig. 38: Land acquired for widening on both sides of road Fig. 39: Construction in full swing

Source: Edelweiss research

ƒ Raw material availability enhances efficiencies: The project benefits from easy
and cost effective raw material availability as the sources of raw material are close
to the project site. This has in turn led to smooth resource mobilization. Ashoka
Buildcon has two captive RMC plants with a capacity of 60 and 120 cubic meters per
hour which are being used in execution of the project (Source: IPO prospectus).

Edelweiss Securities Limited 31


Construction

Fig. 40: Adequate asset base helps in resource Fig. 41: Convenient raw material availability near
mobilisation project site

Source: Edelweiss research

Project progress on track: In spite of the project lying on a busy route which brings
traffic management into the picture, execution was on track. Construction was going
ahead at full speed, aided by easy raw material availability and adequate resource
mobilisation. Land acquisition challenges have been adequately met with good progress
on land parcels located within the city. As a result, construction on the project is
progressing satisfactorily.

„ Ranchi ring road project


Key project specific details:

ƒ Developer: IL & FS Transportation Networks

ƒ Project scope: The project is concerned with improvement of the Ranchi ring road
(Sec III, IV, V and VI). It involves design, engineering, finance, procurement,
construction, operation and maintenance of 6 lane divided carriageway on BOT
(annuity) basis. The length of the project is 36.2 km. The concession period is 17.5
years (including construction period of 30 months).

Ranchi ring road is part of the Jharkhand Accelerated Road Development Programme
(JARDP) which involves development of select road stretches in the state of
Jharkhand. The total length covered under the programme is 1002 lane km; of this,
phase I involves 3 projects (Ranchi ring road, Ranchi to Patratu road and Patratu to
Ramgarh road) spread over 466 lane km while the balance comes under phase II.

The Jharkhand government is a stakeholder in JARDP with it holding 26% equity in


the SPV for the project.

ƒ Client: Road construction department, Govt of Jharkhand

ƒ Date of commencement: March 2010

ƒ EPC cost: INR 4.77 bn

ƒ EPC contractor: Sadbhav Engg

ƒ Significance of the project: The project aims to ease traffic congestion in and
around the city of Ranchi, the capital of the mineral rich state of Jharkhand. Ranchi
boasts of a number of industrial facilities which are located in and around the city.
With rapid growth in trade, commerce, and industry in the city, the traffic has
jumped sharply.

32 Edelweiss Securities Limited


Construction

Fig. 42: Location of the project Fig. 43: Ranchi ring road

Source: Maps of India, Company, Edelweiss research

Key observations from site visit

ƒ Involvement of state govt helped in land acquisition: Since the state


government holds a stake in the project SPV, there was a high degree of
involvement from state officials in the project. This has helped in regulatory
approvals like land acquisition, utility shifting, etc.

ƒ Intensive project monitoring on the part of developers: The developer has


given the EPC contract to a third party contractor. Developer’s involvement is in
terms of design and value engineering, project development, consultancy and
management as well as operations and maintenance management. To this end, the
developer is intensely involved in all the facets of the project including review of the
project construction also. There are regular review meetings to take stock of
progress as well as to assess and to plan for future milestones.

ƒ Well qualified EPC contractor(s): The EPC contractor(s) engaged in the project
are well qualified—both in terms of having a substantial equipment base and
technical/human resources. This has helped in the smooth implementation of the
project. The plant/machinery deployed at the site included batching plants,
excavators, graders, compactors, tippers, pavers, rollers, transit mixers, crushers
etc.

Edelweiss Securities Limited 33


Construction

Fig. 44: Excellent asset base with EPC contractors Fig. 45: Equipment strength not lacking in case of
contractors

Source: Edelweiss research

ƒ Construction in full swing: The project involves construction of various structures


like flyovers, RoBs/RuBs and major/minor bridges. At certain points, it intersects
existing national highways as well. Regulatory approvals for various structures were
in place and execution was in full swing. Overall, the project is progressing as per
schedule.

Fig. 46: Work on structures is going on Fig. 47: Execution is progressing as per schedule

Source: Edelweiss research

Key learning: In case the state government is actively involved, getting regulatory
approvals becomes easy. Also, regular project monitoring and review along with
intensive developer involvement is the key for a project being on the right track.
This, when supported by well qualified contractors, leads to smooth project
execution.

34 Edelweiss Securities Limited


Construction

NOTES:

Edelweiss Securities Limited 35


Construction

NOTES:

36 Edelweiss Securities Limited


Construction

Edelweiss Securities Limited, 14th Floor, Express Towers, Nariman Point, Mumbai – 400 021,
Board: (91-22) 2286 4400, Email: research@edelcap.com

Vikas Khemani Head Institutional Equities vikas.khemani@edelcap.com +91 22 2286 4206

Nischal Maheshwari Head Research nischal.maheshwari@edelcap.com +91 22 6623 3411

Coverage group(s) of stocks by primary analyst(s): Construction


Consolidated Construction Co., C and C Construction, Gammon India, Hindustan Construction Co., IRB Infrastructure, IVRCL Infra,
Jaiprakash Associates, BL Kashyap & Sons Ltd, Man Infraconstruction, Nagarjuna Construction Co, Patel Engineering Ltd, Simplex
Infrastructures Ltd

EW Indices Recent Research

1,400
Date Company Title Price (INR) Recos
1,250
16-Nov-10 IVRCL Weak quarter; strong 133 Buy
Infra order book the only silver
1,100 lining; Result Update

15-Nov-10 Patel Stable performance; 372 Buy


950 Engineering progress on asset
ownership ventures;
800 Result Update

20-Nov-09 20-May-10 20-Nov-10 12-Nov-10 Man Steady revenue growth; 339 Hold
Infraconst. margins decline;
EW Construction Index Nifty Result Update

Distribution of Ratings / Market Cap


Rating Interpretation
Edelweiss Research Coverage Universe
Buy Hold Reduce Total Rating Expected to

Buy appreciate more than 15% over a 12-month period


Rating Distribution* 116 45 12 176
* 3 stocks under review Hold appreciate up to 15% over a 12-month period
> 50bn Between 10bn and 50 bn < 10bn
Reduce depreciate more than 5% over a 12-month period
Market Cap (INR) 110 53 13

Access the entire repository of Edelweiss Research on www.edelresearch.com


This document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and associate companies are a full service, integrated
investment banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our investment banking
activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or
complete and it should not be relied on as such. Edelweiss or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that
may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to
be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this
document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in
this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment
discussed or views expressed may not be suitable for all investors. We and our affiliates, group companies, officers, directors, and employees may: (a) from time to
time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving
such securities and earn brokerage or other compensation or act as advisor or lender/borrower to such company (ies) or have other potential conflict of interest with
respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished to you solely for your
information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in
whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in
any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
Edelweiss and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain
jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions.
The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this
information. This information is subject to change without any prior notice. Edelweiss reserves the right to make modifications and alterations to this statement as
may be required from time to time. However, Edelweiss is under no obligation to update or keep the information current. Nevertheless, Edelweiss is committed to
providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither
Edelweiss nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special
or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Past performance is not necessarily a
guide to future performance. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be
treated as endorsement of the views expressed in the report. Edelweiss Securities Limited generally prohibits its analysts, persons reporting to analysts and their
family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The analyst for this report certifies
that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no
part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved

Edelweiss Research is also available on www.edelresearch.com ,Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. EdelweissEdelweiss
SecuritiesSecurities
Limited Limited
37
Construction

Edelweiss Securities Limited, 14th Floor, Express Towers, Nariman Point, Mumbai 400 021
Tel: +91 22 2286 4400. Email: research@edelcap.com
38 Edelweiss Securities Limited

Vous aimerez peut-être aussi