10139564-construction-industry-expected-to-witness-effective-investment-over-rs-10000

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PR Log - Global Press Release Distribution

Construction Industry Expected To Witness Effective Investment Over Rs. 10,000

By bharatbook.com

Dated: Nov 11, 2008

Construction industry in India is highly fragmented. There are number of unorganised players in the

industry which work on the subcontracting basis.

Construction industry in India is highly fragmented. [http://

www.bharatbook.com/Indian-Construction-Industry-Report.asp] There are number of unorganised players

in the industry which work on the subcontracting basis. Construction activity being labour intensive,

construction companies have been focusing on mechanisation over past few years. Consequently, growth in

quantum of labourers required has declined from 1.6% in FY 04 to 0.9% in FY 08. Mostly all projects in

Construction industry are working capital intensive.

Construction industry expected to witness effective investment over Rs. 10,000 bn during the 11th fiveyear plan Construction is the second largest economic activity in the country next to agriculture. With its

backward and forward linkages, Construction industry has generated employment for 33 mn people in the

country. In FY 08, Construction sector contributed about 8.5% to the countrys GDP. Over past 3 years,

construction as a percentage of GDP has increased from 8.0% in FY 06 to 8.5% in FY 08. The multiplier

factor between growth rates of construction and GDP has been about 1.5X-1.6X.

Construction project can be materialised through number of small contracts which mainly depend upon

size of the project and diversified nature of activities to be carried out in the project. As a result,

subcontracting is a common phenomenon in the construction industry. Some complex infrastructure and

industrial projects call for specific expertise which a single contractor may be inept to execute. As a result,

industry is witnessing rising joint ventures which help contractors to share professional and technological

expertise.

Cost structure of the construction industry is dominated by raw material cost and subcontracting cost. Raw

material cost which is the major cost accounts for 30-50% of the total cost and subcontracting cost accounts

for about 20-40%. Cost structure of a particular construction company also depends on its order mix. This

is because construction projects from different sectors require varied level of raw materials and

subcontracting work. Major raw materials consumed by construction industry mainly include cement and

steel. Almost all domestic cement consumption is attributed to the construction industry. Steel

requirements of the construction industry prominently includes long products like reinforcement bars/rods,

structurals and galvasnized steel. Consumption of steel by construction industry has grown of 16.1% overpast 5 years whereas cement consumption has registered of 9.6%. Unprecedented rise in prices of these

two raw materials has a direct impact on the cost of the project and in turn margins of construction

companies. Profitability also depends upon the diversity of the projects a company can execute. Companies

having strong presence in segments like power and industrial segment which are complex to execute, tend

to enjoy higher margins.

Table of Contents :-

Executive Summary

1. Overview & Introduction

1.1 Construction component

1.2 Overview of broad sectors

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2. Industry Characteristics

2.1 Linkages with economy

2.2 Fragmentation

2.3 Labour intensive

2.4 Highly customised projects2.5 Varied profitability

2.6 Varied gestation periods of construction projects

2.7 Rising joint ventures (JVs)

2.8 Working-capital intensive

2.9 Rising net worth

3. Introduction to Contracts

3.1 Different entities in a Contract

3.2 Process of a Contract

3.3 Types of contracts

3.4 Private participation

3.5 Risks in construction industry

4. Demand Drivers

4.1 Infrastructure sector

4.2 Industrial sector

5. Cost Structure

5.1 Raw material cost

5.2 Subcontracting cost

5.3 Aggregate income & operating profit margin

6. Outlook & Challenges

6.1 Influence of Infrastructure sector

6.2 Influence of Real Estate sector

6.3 Influence of Industrial sector

6.4 Challenges for Construction industry

7. SWOT Analysis

8. Players

8.1 Hindustan Construction Company Ltd. (HCC)

8.2 Larsen & Toubro Ltd. (L & T)

8.3 Punj Lloyd Ltd. (Punj Lloyd)

8.4 Nagarjuna Construction Company Ltd. (NCC)

8.5 Gammon India Ltd. (Gammon)

8.6 IVRCL Infrastructure & Projects Ltd. (IVRCL)

List of Figures :-

Fig. 1.1 Broad classification of construction sector

Fig. 1.2 Construction ComponentFig. 1.3 Investment in Infrastructure Sector

Fig. 1.4 Trend of Index of Industrial Production (IIP)

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Fig. 2.1 Growth rates - Construction Vs GDP

Fig. 2.2 Trend of labourers employed

Fig. 2.3 Trend of net working capital requirement

Fig. 3.1 Flowchart of Process of Contract

Fig. 3.2 Comparison of different types of contracts

Fig. 4.1 Trend of Investment in Industrial SectorFig. 5.1 Overall Cost structure

Fig. 5.2 Raw material cost of different players in FY 07

Fig. 5.3 Trend of domestic consumption of cement

Fig. 5.4 Average price trend of cement per bag

Fig. 5.5 Trend of steel consumption by construction sector

Fig. 5.6 Price trend of long and galvanized steel products

Fig. 5.7 Subcontracting Cost of different companies

Fig. 5.8 Total income & operating profit margin

Fig. 5.9 Trend of WPI and Raw Materials prices in FY 08

Fig. 6.1 Infrastructure Outlay - 11th Five Year Plan

Fig. 6.2 Operating rates of some major industries

Fig. 6.3 Bifurcation of investments planned in industrial sector

Fig. 6.4 Order book position of Construction companies

Fig. 8.1 HCC - Share Price Trend

Fig. 8.2 HCC -Cost Structure

Fig. 8.3 HCC - Order Book position as on March 31, 2008

Fig. 8.4 L&T - Share Price Trend

Fig. 8.5 L&T - Cost Structure

Fig. 8.6 L&T - Order Book position as on March 31, 2008

Fig. 8.7 Punj Lloyd - Share Price Trend

Fig. 8.8 Punj Lloyd - Cost StructureFig. 8.9 Punj Lloyd - Order Book position as on March 31, 2008

Fig. 8.10 NCC - Share Price Trend

Fig. 8.11 NCC - Cost Structure

Fig. 8.12 NCC - Order Book position as on March 31, 2008

Fig. 8.13 Gammon - Share Price Trend

Fig. 8.14 Gammon - Cost Structure

Fig. 8.15 Gammon - Order Book position as on March, 2007

Fig. 8.16 IVRCL - Share Price Trend

Fig. 8.17 IVRCL - Cost Structure

Fig. 8.18 IVRCL - Order Book position as on March 31, 2008

List of Tables :-

Table 2.1 GDP and construction at factor cost (at current prices)

Table 2.2 Herfindahl Index of Concentration

Table 2.3 Profit margins of construction projects

Table 2.4 Joint Ventures

Table 2.5 Net working capital requirement

Table 2.6 Trend of networth (NW)

Table 2.7 Funds raised by construction companies

Table 3.1 Discription of different entities in a ContractTable 4.1 Different Phases of NHDP

Table 4.2 Countryswise comparison of air passengers density

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Table 4.3 Bifurcation of power generation capacity

Table 5.1 Break-up of different costs

Table 5.2 Overall cement demand-supply position

Table 5.3 Total production of long steel products

Table 5.4 Total consumption of long steel products

Table 5.5 Production and consumption of galvanised steel productsTable 6.1 Effective construction investment from Infrastructure sector

Table 6.2 Opportunities for Construction industry from some infrastructure sub-sectors

Table 6.3 Effective construction investments from Real Estate sector

Table 6.4 Effective construction investments from from Industrial sector

Table 6.5 Order book to sales multiple

Table 6.6 Estimates of resource requirement for the construction industry

For moree information kindly visit: http://www.bharatbook.com/Indian-Construction-Industry-Report.asp

OR Contact us at

Bharat Book Bureau

207, Hermes Atrium, Sector 11, PO Box.54, CBD Belapur, Navi Mumbai - 400 614, India.

Phone : +91 22 2757 8668 / 2757 9438

Fax : +91 22 2757 9131

E-mail : [email protected]

Website : www.bharatbook.com

Category Business, Construction, Reports

Tags Business, construction, reports, Research, industry

Email Click to email authorPhone +912227578668

Fax +912227579131

Address 207 Hermes Atrium, Sector 11

CBD Belapur Navi Mumbai

City/Town Navi Mumbai

State/Province Maharashtra

Zip 400614

Country India

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10139564-construction-industry-expected-to-witness-effective-investment-over-rs-10000