ICRA Rating Feature

INDIAN CONSTRUCTION SECTOR: OPPORTUNITIES EXPAND BUT EXECUTION REMAINS A CONCERN

Contacts
Anjan Ghosh aghosh@icraindia.com +91-22-30470006 Vikas Agarwal vikas@icraindia.com +91-124-4545301 Shubham Jain shubhamj@icraindia.com +91-124-4545306 Mandeep Singh mandeep.singh@icraindia.com +91-124-4545386

Background
The Indian construction sector is an integral part of the economy and a conduit for a substantial part of Indias development investment. The construction industry is primarily driven by Government of India (GOI) investments on core infrastructure projects and creation of urban infrastructure; industrial capital expenditure (capex) by corporate sector and development activities of real estate/housing sector. The sector plays a pivotal role in developing the countrys infrastructure, a pre-requisite for high levels of economic growth and an area of focus for the GoI. Construction sector accounts for nearly 45% of the total investment in infrastructure and is expected to be the prime beneficiary of the surge in infrastructure investment in the near to medium term. The importance that the GoI places on bridging the countrys acute infrastructure deficit is evident from the two fold increase in the planned outlay for the infrastructure sector in the XIIth five year plan. Significant infrastructure investments, along with revivial in industrial capex and improvment in real estate scenario, are likely to catalyse growth for construction companies in India, going forward. The construction sector, however, continues to face challenges from land acquisition issues, adverse political and structural changes, shortage of talent, design and constructability issues, and rising material and labour costs. Further, deficiencies in project planning, use of inappropriate procurement contracts and faulty contract management also contribute to delays in project implementation. The financial impact of delays on construction companies is worsened by the absence of an efficient arbitration mechanism. In addition, the flow of funds to the sector is constrained by sectoral caps/exposure norms, asset-liability mismatches, and the absence of an active corporate bond market. This paper discusses the opportunities and challenges faced by the Indian construction sector against the backdrop of increasing investments, both public and private, in the Indian infrastructure. It also highlights the problems impeding the timely execution of infrastructure projects, issues that have been holding back growth of the construction sector, and the recent policy initiatives taken to address some of these issues. ICRA closely tracks developments in the construction sector and rates many companies in it (refer Annexure II for list of construction companies rated by ICRA).

March 2011

Website www.icra.in

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Significant infrastructure investments envisaged over the near to medium term Development of adequate infrastructure to achieve/sustain high GDP growth is a priority for the GoI. Despite slippages from targets, investments in infrastructure reported a compounded annual growth rate (CAGR) of 18% over the last three years, with the spending increasing to Rs. 4.0 lakh crore in FY 2009-10 from 2.4 lakh crore in 2006-07. According to the Mid-Term Appraisal of the XIth Five-Year Plan (MTA XIth FYP), Rs. 20.5 lakh crore is likely to be invested during the XIth Five Year Plan, with the private sector contribution at 36.2%. The power sector received the highest allocation in the total outlay at Rs. 6.6 lakh crore (32.1% of total allocation), followed by roads and bridges at Rs. 2.8 lakh crore (13.6% of total allocation). Significant investments are also expected to be committed in the Mass Rapid Transport System (MRTS) in the near to medium term as MRTS expands its footprint to include various cities. The strong infrastructure outlay envisaged during the XIIth Five-Year Plan is expected to drive the inflow of orders to construction companies. As Table 1 shows, there is a potential construction opportunity of Rs. 17.7 lakh crore during the XIIth Plan period, with the GoI seeking to raise the countrys infrastructure capability significantly.
Table 1: Estimated Construction Opportunity during XII Plan Period
Investment (Rs. crore) Xth Plan 340,237 127,107 102,091 106,743 60,108 22,997 6,893 766,176 XIth Plan 658,630 278,658 200,802 246,234 111,689 40,647 36,138 1,572,798 XIIth Plan# 1,314,320 556,072 400,708 491,369 222,879 81,113 72,115 3,138,575 Xth Plan 38% 14% 11% 12% 7% 3% 1% 85% Share (%) XIth Plan 32% 14% 10% 12% 5% 2% 2% 77% XIIth Plan 32% 14% 10% 12% 5% 2% 2% 77% Construction Intensity@ (% of Total Cost) Construction Opportunity (Rs. crore) Xth Plan 1,36,095 82,620 76,568 80,057 36,065 16,098 2,068 429,570 XIth Plan 2,63,452 1,81,128 1,50,602 1,84,676 67,013 28,453 10,841 886,164 XIIth Plan 5,25,728 3,61,447 3,00,531 3,68,527 1,33,728 56,779 21,634 1,768,373
th

Electricity Roads & Bridges Railways (incl. MRTS) Irrigation Water Supply Ports Airports Total

40% 65% 75% 75% 60% 70% 30%

# Assuming similar allocation among sectors during the XI th Five-Year Plan @ Based on past estimates Source: Planning Commission, GoI

PPP model to be implemented across sectors The PPP model has gained prominence as the GoIs preferred means to underatake infrastructure development. Facing significant debt and fiscal challenges that limit its ability to fund the required investments, the GoI expects the private sector to partner it in bridging the countrys infrastructure deficit. The GoIs focus on private participation in infrastructure development is expected to lead to a significant increase in the share of PPP projects in the total investment outlay. According to the MTA XIth FYP, 292 projects worth Rs. 2.4 lakh crore are being implemented under the PPP model, while 404 projects worth Rs. 3.8 lakh crore are expected to be awarded in the near to medium term. The roads and ports sectors have garnered the highest shares of 35.4% and 15.9% respectively, of the total PPP investment. This is expected to provide an impetus to the order book going forward, thereby lending visibilty to revenue growth for the construction sector.
Table 2: Details of PPP Projects by Sector
Projects in Pipeline No. of Projects Roads Ports Airports Railways Power Urban Infrastructure Other Total Source: Planning Commission, GoI 167 47 7 53 34 65 31 404 Project Cost (Rs. crore) 115,822 35,902 4,120 90,312 62,032 45,708 22,534 376,430 Project under Implementation No. of Projects 133 50 3 5 15 69 17 292 Project Cost (Rs. crore) 102,775 62,058 19,277 5,217 29,448 18,690 3,575 241,040

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The share of the private sector in infrastructure spending has reported a significant increase over the years. According to the MTP XIth FYP, the share of private investment is expected to increase to 36.2% over the XIth Five Year Plan from the initially envisaged 30.1%, considering the better-than-expected response from the private sector during the first three years of the Plan. Private participation in the infrastructure spending has also received support from favourable policy changes, dismantling of entry barriers, and sharing of risks by the GoI. The GoI has introduced several incentives such as tax exemptions, and duty-free import of road building equipment and machinery to encourage private sector participation in infrastructure projects. Further, several policy reforms, such as early exit for project sponsors and merging of equity and operations & maintenance (O&M) grants for road projects, have been introduced to encourage private investment in the infrastructure sector. Overall, given the substantial capital invested in infrastructure projects, stake sale at the project level and monetisation of exisiting operational assets are expected to rise in the future.
Chart 1: Trend in Infrastructure Investments

Source: Planning Commission, GoI

Increasing size of order book drives revenue visibility The construction sector has witnessed robust growth in order inflows during the last few quarters, benefiting from increased spending on transportation, power, and urban infrastructure, besides from an increase in the award of build-operate-transfer (BOT) contracts. As Charts 3 shows, the ratio of Order Book to Operating Income (OB/OI) for construction companies has exhibited an increase over the past six to eight quarters, which translates into strong revenue visibility, going forward. The companies covered in this note (ICRA Sample)1 reported a CAGR of 27% in their order book over the last three years, with the average OB/OI ratio rising to 3.59 in September 2010. Growth in the size of the order book was muted in the second half (H2) of FY2009 and in H1 FY2010 because of economic slowdown and the general elections, but has picked up since H2 FY2010, driven mainly by infrastructure spending. The two-fold increase in the plan outlay envisaged for infrastructure during the XIIth Five-Year Plan is likely to further augment order inflows for construction companies in the near to medium term.

The construction sector in India is highly fragmented and is characterised by the presence of organised as well as unorganised players. The ICRA Sample includes 15 leading listed construction companies as follows: Ahluwalia Contracts (India) Limited (ACL), Ashoka Buildcon Limited (ABL), B L Kashyap & Sons Limited (BKSL), Consolidated Construction Company Limited (CCCL), Era Infra Engineering Limited (EIEL), Gammon India Limited (GIL), Gayatri Projects Limited (GPL), Hindustan Construction Company Limited (HCC), IVRCL Infrastructure and Projects Limited (IVRCL), Madhucon Projects Limited (MPL), Nagarjuna Construction Company Limited (NCC), Patel Engineering Limited (PEL), Sadbhav Engineering Limited (SEL), Simplex Infrastructure Limited (SIL), Unity Infraprojects Limited (UIL) Please refer Annexure I for the brief profile of the companies under coverage

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Chart 3: Cumulative Order Book and OB/OI for Companies in ICRA Sample

Source: Annual Reports of Companies, Quarterly Results, ICRA Research

Trends in the financial performance of construction companies in ICRA Sample During the last six to eight quarters, the slowdown in the economy, land acquisition and client specific issues, and a muted execution rate for projects in Andhra Pradesh led to the ICRA Sample reporting subdued growth in operating income. However, the recent increase in orders, along with an improvement in the execution rate and the better availability of funds, is expected to push up the operating income, going forward. The sector reported stable profitability margins during the last few years on the strength of a decline in raw material prices and a favourable order mix. The working capital requirement for construction companies had increased in the recent past because of the economic slowdown, slower payments from clients, and an increase in loans and advances/investments in subsidiaries (executing BOT/real estate projects). Consequently, the debt levels and financial charges had increased significantly during this period. However, although the debt level for the sector has been rising, the gearing remains stable because of dilution of equity through Qualified Institutional Placements (QIPs).
Table 3: Consolidated Key Financials of Companies in ICRA Sample
FY2009 Net Sales Change in Net Sales PBDIT Change in PBDIT Interest Change in Interest PAT Change In PAT 34,397 34% 3,786 24% 1,101 65% 1,617 15% FY2010 39,636 15% 4,708 24% 1,425 29% 1,710 6% H1 FY2011 19,208 12% 2,291 9% 780 17% 728 -4%

PBDIT/Net Sales PAT/Net Sales

11% 5%

12% 4%

12% 4%

Net Worth Change In Net Worth Total Debt Change in Debt

12,118 21% 12,191 42%

14,848 23% 15,790 30%

15,938 17% 20,311 43%

Gearing (Total Debt/Net Worth) Interest Coverage (PBDIT/Interest)

1.01 3.44

1.06 3.30

1.27 2.94

PBDIT: Profit before Depreciation Interest and Taxes; PAT: Profit after Tax; Gearing: Total Debt/Net Worth; Interest Coverage: PBDIT/Interest Source: Annual Reports of Companies

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Overruns and disputes during construction make for significant execution risks Indian construction companies are increasingly bidding for large-size projects to enhance their credentials and their profitability. However, the strategy also exposes them to execution risks, including risks related to land acquisition, resource adequacy, and securing of environmental/regulatory clearances, which can impact their profitability and liquidity profile adversely. Construction projects have invariably faced delays in the past on account of problems over land acquisition, legal issues and regulatory bottlenecks. In several projects, these issues have led to significant delays in project execution, rendering them unviable.
Table 4: Progress in Infrastructure Projects -Target vis--vis Achievement
Target FY2010 Power Capacity Addition (MW) Transmission Lines Commissioned (circuit km) 14,507 17,563 9,585 13,721 66% 78% Achievement FY2010

Roads & Highways Construction Completed (km) Contracts/Concession Awarded (km) 3,166 9,806 2,674 3,359 84% 34%

Railways New Lines (km) Doubling of Lines (km) * Data till December 2009 Source: Planning Commission, GoI 250 500 85* 196* 34% 39%

Problems over land acquisition persist The problems associated with land acquisition and liaising with multiple authorities for the requisite approvals often causes delays in the commencement of construction activity, thereby affecting project viability. Lack of clear land titles, the fragmented nature of landholding, protests over land compensation, and inconsistencies in regulatory framework continue to impede the development of various infrastructure projects. Along with this, the absence of an efficient arbitration mechanism to compensate for such delays also increases the risks for construction companies. While disputes during project execution require quick and effective settlement, in most cases, they end up in courts and usually remain unresolved for long periods. Although the GoI has taken steps to facilitate land acquisition2, more needs to be done on this front to attract private capital towards infrastructure projects like ports and airports.
Table 5: Cost and Time Overruns in Road Projects in India
NHAI & State Govt Projects % Overrun (over original estimates of time and costs) <25% 25-50% 50-75% 75-100% >100% Source: World Bank Completed Projects Time 29.4% 15.0% 33.0% 15.0% 7.6% Cost 55.8% 40.5% 3.7% 0.0% 0.0% Completed + Ongoing Projects Time 10.4% 9.7% 38.1% 29.5% 12.3% Cost 53.7% 31.6% 9.7% 5.0% 0.0%

Resource base remains limited While the order books of construction companies have reported robust growth in the recent past, not all players have been able to scale up their resources to the extent required. Growth in the supply of skilled and semi-skilled manpower in India has not kept pace with the growth of the infrastructure sector. Attracting and retaining skilled manpower is one of the key challenges for contractors. According to the industry, the construction sector employs nearly 340 lakh persons and creates an average demand of 32 lakh people who need to be trained, tested and certified. The industry needs to add around 10% of the manpower every year to sustain the growth momentum, which at present appears to be an overwhelming task. Training of human resources has also gained importance in view of the increasing complexity of projects. Along with skilled manpower, relationships with labour contractors and adherence to local labour laws are necessary
2

For instance, the National Highways Authority of India (NHAI) requires 80% of the land to be acquired before the contract can be awarded. It has also set up 150 Special Land Units (SLUs) in various States to facilitate land acquisition.

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for uninterrupted operations. Besides adequate manpower, appropriate mechanisation of operations is required to optimise construction time and achieve the desired quality levels.

Lengthy approval process affects project execution Regulatory approvals have to be obtained at every stage of an infrastructure project, right from project initiation till completion. Infrastructure projects require multiple clearances at the Centre, State and local levels, which affects project execution. Bureaucratic complexities and a protracted process for securing the necessary regulatory approvals are often serious disincentives for project sponsors. Although many states have introduced the facility of single-window clearance, it is still a fact that project sponsors need to secure multiple approvals through various nodal agencies. Government/nodal authorities need to come up with a clear policy framework and reduce uncertainties arising out of policy implementation and frequent changes in contractual commitments. Risks inherent in BOT projects With PPP projects in the infrastructure sector gaining momentum, many contractors are increasingly turning into project developers/concessionaires, in the process exposing themselves to the commercial risks inherent in such projects. The PPP projects are generally executed on a BOT basis which are typically characterised by long concession periods and back-loaded debt structures, and rely on project revenues to generate the expected returns. In addition to project execution risk, these projects are exposed to several other risks, including time and cost overrun risks, market risks, and funding risks. To assess the viability of any BOT project, developers forecast revenues over the concession period. For instance, in the case of road projects, the developer use estimates of base traffic volumes, traffic growth rates, and toll rates to forecast revenues. However, all such parameters are prone to estimation errors, and are closely linked with business cycles and various macro-economic factors. Significant negative deviations in any of the parameters can adversely affect the projects viability and profitability.
BOT projects are implemented by project-specific special purpose vehicles (SPVs) and generally the developer (who is also a contractor) also enters into a fixed-price engineering, procurement and construction (EPC) contract with the SPV. While on the one hand, the operating profits earned from the EPC contract partly fund the equity contribution made by the contractor in the SPV, on the other, the fixed nature of the contract limits the contractors ability to recover costs in case there are overruns because of price escalation.
Table 6: Details of BOT Projects being implemented by Select Companies in ICRA Sample
Company ABL EIEL HCC GIL GPL IVRCL MPL NCC SEL SIL No. of Projects@ 6 6 4 10 2 7 1 6 5 1 Project Cost (Rs. crore) 4,985 5,040 4,651 8,170 2,802 10,872 820 11,062 5,942 1,047 Committed Investments* (Rs. crore) 570 800 790 1,550 446 2,030 205 1,550 796 286

@ includes projects undertaken by associate/group companies *Approximate amount Source: Annual Reports of Companies, ICRA Research

Diversification into real estate development entails additional risks Many construction companies in the past have turned into real estate developers to enhance their profitability during periods of economic upturn. Construction companies like IVRCL, HCC and NCC, in order to take advantage of the buoyancy in the real estate sector during 2005-08, accumulated significant land banks and diversified into real estate development. However, diversification into real estate development also brings in such risks as market risks, funding risks, and regulatory risks, in addition to those that characterise the regular contracting business. Significant capital investments for real estate projects are required to be committed upfront for land acquisition and asset creation, even as the returns on the same are realised over a longer time frame. Moreover, profitability and liquidity could be adversely impacted during cyclical downturns, which affect bookings and collection efficiencies, as has been witnessed in the recent past.

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Table 7: Land Bank Details of Select Companies in ICRA Sample

Company CCCL EIEL HCC IVRCL NCC PEL UIL @ includes projects undertaken by associate/group companies Source: Annual Reports of Companies, ICRA Research (Approx. Acres)@ 600 500 15,000 3,400 250 1,100 40

Funding constraints remain an impediment for capital intensive infrastructure projects Construction companies require regular funding to meet their working capital and capital expenditure requirements. They also require funding to meet their equity commitments in BOT and real estate projects. The working capital intensity for the sector has increased in the recent past due to longer execution cycles on account of issues in land acquisition and lengthy approval process; delay in payments from clients; blockage of funds in the form of retention money and margin money required for availing the non-fund based limits (bank/performance guarantees). Consequently, the debt levels for the construction companies have increased over the years. Moreover, the increasing proportion of BOT and real estate projects in the portfolios of construction companies has also added to the uncertainty for sponsors/lenders. These projects are complex, capital intensive, and long-gestation undertakings that pose multiple and often unique risks to project sponsors/lenders. The funding problems are aggravated by the lack of alternatives to bank financing because of limited exit options, complexities in the terms of contracts, ambiguous legal structures, and weak corporate governance systems. As a result, many infrastructure projects in the recent past have witnessed overruns because of delays in achieving financial closure. As many as 36 out of 42 projects awarded by NHAI last year were marred by delays because of their inability to achieve financial closure against the backdrop of the tight liquidity conditions and challenging credit environment.
Debt funding for the sector is largely confined to banks (45-50%), which are constrained by sectoral caps and exposure norms, beside asset-liability mismatches. In addition, an underdeveloped corporate bond market and restrictive investment norms for pension/infrastructure funds serve to curtail financing for infrastructure projects in India. Construction companies/project developers intends to raise long-tenure loans extending to 10-15 years, given the relatively long tenures of Infrastructure/BOT projects (15-30 years). However, the appetite of Indian lenders for long-tenure loans is low because such loans create asset-liability mismatches in their books, given that the average maturity of their funding sources is three to four years. Moreover, limited participation of insurance companies and pension funds, which have to comply with restrictive investment guidelines even as they remain risk averse, have also curtailed the flow of funds into the infrastructure sector. Considering the large number of projects that are set to be awarded over the XIIth Plan period, the amount of debt financing would have to increase substantially, as Table 8 brings out.
Table 8: Bank Funding required for Infrastructure Sector during XII Plan
(Rs. crore) Total Investments in XII Five-Year Plan* Private Investments in XII Five-Year Plan
th th # @ th

th

4,099,240 1,475,726 1,033,008 365,617 16%

Expected Debt Funding for XII Five-Year Plan (FY2013-FY2017) Gross Bank Lending to Infrastructure Sector
$

Annual Growth required for Credit to Infrastructure Sector * Includes Telecommunications and Oil & Gas # Assuming the same proportion (36%) as in the XIth Five-Year Plan @ Assuming 70% debt funding for the project $ As on February 26, 2010 Source: RBI, Planning Commission

Gross bank credit to the infrastructure sectors reported a CAGR of 45% from Rs. 0.6 lakh crore in 2004-05 to Rs. 3.6 lakh crore in 2009-10. Given the past trends, the annual growth rate of 16% required for the sector (refer Table 8) appears achievable.

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Conclusion In ICRAs view, the extent to which infrastructure investments is stepped up along with revival of industrial capex and real estate development activity would be the key growth drivers for the construction sector. Amidst the potential opportunities, execution risks for the sector are increasing given the land acquisition problems, lenghty approval processes and shortage of manpower and resources. Further, the sector continues to face challenges from adverse political and structural changes, cost overruns and difficulties in securing the necessary funding. Moreover, diversification into BOT projects/real estate development is expected to involve additional risks for the construction companies. On the whole, as the Indian construction sector embarks on expanding opportunities, there is a pressing need to review and enhance project execution capabilities to realize the envisaged benefits and growth.

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Annexure I Brief profile of companies included in the ICRA Sample Ahluwalia Contracts (India) Limited Ahluwalia Contracts (India) Limited (ACIL) was incorporated in1979 as Ahluwalia Contracts (India) Private Limited and subsequently converted into a Public Limited Company in 1990. ACIL is a medium-sized construction company engaged in civil construction and turnkey projects. It is actively engaged in construction of institutional buildings, corporate office complexes, industrial buildings, multi-storeyed housing complexes, township development projects, hospitals, hotels & sport complexes etc. ACILs clientele includes central and state government departments along with various private clients. Ashoka Buildcon Limited Established in 1993, Ashoka Buildcon Limited (ABL) was initially engaged in civil construction activities, mainly for the construction of industrial and institutional buildings. Presently, ABLs business comprises the BOT road projects and EPC divisions, besides the ready-mix concrete and bitumen division. In the BOT division, the company has 12 projects in the tolling phase, 5 in the construction phase, and 6 foot over bridges from which it generates advertising revenues. In the EPC division, ABL constructs roads and bridges for its own BOT projects as well as for third parties. BL Kashyap & Sons Limited BL Kashyap & Sons Ltd. (BKSL) was incorporated in 1989 by Mr. Vinod Kashyap, Mr. Vineet Kashyap and Mr. Vikram Kashyap as a private limited company. The Company undertakes industrial, commercial, residential, hospitality and infrastructure construction projects for public and private customers. Its service portfolio extends across the construction of manufacturing facilities, information technology campuses, commercial and residential complexes, retail malls and hotels. BKSL had three subsidiary companies viz., Soul Space Projects Limited, B L K Lifestyle Limited and Security Information Systems India Limited. Consolidated Construction Consortium Limited Consolidated Construction Consortium Limited (CCCL) was incorporated in 1997 as a public limited company by four former employees of Larsen & Toubro: Mr. R. Sarabeswar, Mr. S. Sivaramakrishnan, Mr. V. G. Janarthanam, and Mr. T.R. Seetharaman. Since inception, the company has concentrated on construction and related activities in the commercial, infrastructure, industrial and residential sectors. To provide turnkey construction solution to clients, CCCL has set up three subsidiaries: Consolidated Interiors Limited (for interior contracting and fit-out services); CCCL Infrastructure Limited (for development of Special Economic Zones); and Noble Consolidated Glazings Limited (for glazing services). Era Infra Engineering Limited Era Infra Engineering Limited (EIEL), the flagship company of the Era Group was incorporated in September 1990. It was promoted by Mr. H.S Bharana, a civil engineer by profession, having more than two decades of experience in the construction industry. EIEL is a growing construction company, involved in the construction of industrial and institutional complexes, infrastructure projects, housing complexes, hospitals and related civil & structural works. EIELs clients are diversified across Public Sector Units (PSUs), private sector and Central Public Works Department (CPWD). They include NTPC Limited, Power Grid Corporation of India, Airport Authority of India, Public Work Department, Rail Vikas Nigam etc. Gammon India Limited Gammon India Limited (GIL) was initially established in 1922 as J.C. Gammon (Bombay) Limited and subsequently in 1962 was renamed as Gammon India Limited. GIL is a civil engineering and construction company specialised in the areas of transportation engineering projects; power projects; industrial and commercial structures; marine projects and pipeline projects. Apart from India, the company also executes power transmission and distribution projects in countries such as Oman, Ethiopia, Nigeria, Algeria, Kenya and Afghanistan. The company also undertakes infrastructure projects such as roads, bridges, ports, hydroelectric power and biomass power projects on PPP basis through its subsidiary namely Gammon Infrastructure Projects Limited. Gayatri Projects Limited Gayatri projects Limited (GPL), promoted by Dr. T. Subbirami Reddy, was initially formed as Gayatri Engineering Company in 1975 and subsequently converted into a public company in 1994. GPL is engaged in execution of civil works including construction of concrete/masonry dams, earthen dams, roads and highways, bridges, canals, airports and ports etc. The company also has presence in the PPP space of infrastructure development through its subsidiaries Gayatri Infraventures Limited and Thermal Powertech Corporation Limited.
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Hindustan Construction Company Limited Hindustan Construction Company Limited (HCC) is one of the leading construction companies in India, engaged in the construction of roads, bridges, ports, power stations, water supply & irrigation projects etc. It is actively engaged in major segments of the construction sector, including heavy engineering, power projects, and roads & highways. HCC has completed a number of projects in various sectors like irrigation and water supply, tunnels & underground works, bridges and dams, power and piling & embankments. IVRCL Infrastructures & Projects Limited IVRCL Infrastructures & Projects Limited (IVRCL) is engaged primarily in providing engineering, procurement, construction and commissioning services in major infrastructure segments including urban/rural water supply, irrigation & environment related projects, pipelines, power projects (substations and transmission & distribution lines), buildings & industrial structures, roads & bridges. During the year 2009-10, IVRCL restructured its business operations in order to undertake all its real estate and infrastructure development projects through its subsidiary, IVRCL Assets and Holdings Limited. Another important group company of IVRCL Group is Hindustan Dorr-Oliver Limited in which IVRCL holds about 55.28% and is engaged in turnkey projects across industries. Madhucon Projects Limited Madhucon Projects Limited (MPL) was initially incorporated in 1990 as Madhu Continental Constructions Private Limited and subsequently converted into a public limited company in March 1995. MPL was promoted by Mr. N Seethaiah and Mr. N Krishnaiah. It is engaged in a diverse range of business construction and turnkey activities like building construction, deep excavation, heavy rock cuttings, high railway embankments, major canals and earthen dams, dykes and tunnels. MPLs clientele includes central and state government departments, banks and financial institutions along with various private clients. Nagarjuna Construction Company Limited Nagarjuna Construction Company Limited (NCC), set up by Mr. A V S Raju in 1978, provides construction services in diversified sectors, including industrial structures, transportation, water and environment, electrical installations, irrigation, hydropower, real estate, and property development. The company has formed several JVs with Indian and overseas construction companies for BOT and civil construction projects. With operations in construction, real estate and infrastructure development, the company undertakes diverse activities in India and abroad. Patel Engineering Limited Founded in 1949, Patel Engineering Limited (PEL) is an established construction company in India. Its services portfolio includes heavy constructions; massive earth and rock excavations; housing complexes; and building projects, dams, tunnels, bridges, refineries, factories, steel projects, thermal, hydro power houses, and pre stressed and pre cast concrete facilities, as well as marine works and public health works. The company offers its services to power, irrigation and water supply, urban infrastructure development, and transportation sectors. Sadbhav Engineering Limited Sadbhav Engineering, Limited (SEL) was incorporated in 1988 as a private company in Gujarat, by Mr. Vishnubhai M. Patel. SEL is one of the prominent players in the construction sector in India. SEL operates in four distinct business areas in the infrastructure sector viz. BOT road projects, cash contract based road projects, canal and mining. The company's key clients include NHAI, Gujarat Industries Power Corporation Limited, state governments of Gujarat, Andhra Pradesh, Karnataka, among others. In its line of business, company has executed projects in joint venture with various organizations such as HCC, GIL, PBA Infrastructure Limited etc. . Simplex Infrastructure Limited Simplex Infrastructure Limited (SIL) incorporated in 1924, is one of the leading construction companies in the country. The company is mainly engaged in foundation work, turnkey services and general civil construction. SIL provides various services including civil and structural construction activities, turnkey projects comprising layout plan, detailed civil & engineering design, architecture, structural construction, and commissioning. The company has strong expertise in concrete pilling, road & railways, bridges, power, urban infrastructure, building & housing, marine and industrial structures.

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Unity Infraprojects Limited Unity Infraprojects Limited (UIL) was incorporated as Unity Builders Limited on August 9, 1997. It provides engineering, procurement, and construction services for real estate and infrastructure projects, such as dams, tunnels, bridges, flyovers, subways, roads, and buildings to public and private sector. The company has executed various projects in the state of Maharashtra, Delhi and other north eastern states. UIL has also ventured into real estate development and BOT projects through its wholly owned subsidiaries Unity Realty and Developers Limited and Unity Infrastructure Assets Limited.

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Annexure II List of Construction Companies with ICRA-Assigned Ratings Outstanding

Company Name Ratings (As on 7th March 2011) Long Term Afcons Infrastructure Limited B G Shirke Construction Technology Private Limited Brahmaputra Infrastructure Limited Brahmaputra Infraproject Limited BSCPL Infrastructure Limited Consolidated Construction Consortium Limited D.S. Contractors Private Limited Dilip Buildcon Private Limited Durha Constructions Private Limited East Coast Constructions & Industries Limited ETA Constructions (India) Limited Hariharan Foundations Private Limited Indu Projects Limited ITD Cementation India Limited IVRCL Infrastructures & Projects Limited Larsen & Toubro Limited M S Khurana Engineering Limited Mackintosh Burn Limited Madhucon Projects Limited Mahalakshmi Infraprojects Limited Navayuga Engineering Company Limited NKG Infrastructure Limited Progressive Civil Construction Company Private Limited R G Buildwell Engineers Limited Raj Buildcon Buildcon Construction Limited Roman Tarmat Limited SRK Construction and Projects Private Limited Shapoorji Pallonji & Company Limited Soma Enterprises Limited Subhash Projects & Marketing Limited Sun Nirman Infrastructure Private Limited Tirupati Buildcon Private Limited Vijai Infrastructure Limited Vijay Nirman Company Private Limited Vijeta Projects & Infrastructure Limited LAA (Stable) LBBB (Stable) LBBB (Stable) LBBB- (Stable) LA (Stable) LA+ (Stable) LBB (Stable) LBBB LBBB LBBBLBB+ (Stable) LBBB- (Stable) LBBB (Stable) LBBB+ (Negative) LA+ LAAA LBBB+ (Stable) LBBB+ (Stable) LA+ (Stable) LBBB+ (Stable) LA (Stable) LBBB+ (Stable) LBB+ (Stable) LBBB- (Stable) LBB+ (Stable) LBB+ LBBB- (Stable) LAA+ (Stable) LBBBLBBB- (Stable) LBB+ (Stable) LBBBLBBB+ (Stable) LBBB+ (Stable) LBB+ (Stable) Short Term A1+ A3+ A3 A1 A1 A4 A3 A3 A3+ A2+ A1 A2+ A2+ A1 A2 A1 A2 A4+ A3 A4+ A4+ A3 A1+ A3 A3 A4+ A2+ A2+ A4+

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