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A) Construction

Of the total 117 companies profiled in the construction segment, Dun & Bradstreet has considered a sample size of 65 companies.

Key characteristics

• Around 31% of the companies were established between 1990s and 2000, while 65% were relatively older (their operations started prior to 1990).
• Around 76.92% of companies have ISO 9001: 2000 quality certification.
• Maximum representation is from the Western region, followed by the Southern and Northern regions.
• Approximately 77% of companies in the construction sector were found to be public limited companies.

Segment-wise Distribution:

Construction companies undertake construction of real estate and infrastructure projects. Real estate involves construction of buildings, townships, commercial spaces, malls, and retail outlets. Infrastructure projects include construction of turnkey projects of national importance such as roads, bridges, highways, railways, airports, dams, among others. Most of the companies deals in the construction of residential buildings.

Government Projects

The Central government and various state governments have initiated a number of schemes for mass housing, infrastructure development projects, sanitation projects, water supply and irrigation projects, and overall urban development. Some well known initiatives from the government include JNNURM, SEZs, PMGSY, RGGVY, NHDP, SEZs, among others. JNNURM has been initiated by the Indian government for planned urban development in cities; NHDP is the National Highways Development Project that involves development, maintenance and management of national highways. SEZs are geographical regions that have more liberal economic laws and enjoy certain privileges conferred by the government.

According to the study, approximately 37% of the sample companies have undertaken projects under the NHDP scheme initiated by the government and approximately 34% companies have undertaken projects under the SEZ scheme initiated by the government.

Joint Ventures

Construction companies have entered a number of JVs and collaborations for undertaking various projects. Construction companies enter partnerships with domestic and international construction companies for expanding into new regions, new segments, and also enter technological collaborations for completion of projects. Companies come together to form SPVs to execute projects on BOT, BOOT basis.

Approximately 60% of the companies have entered JVs of various forms for execution of projects. Generally, companies carrying out construction of townships prefer the JV route for execution of projects.

Term loans, the most-preferred financing option

Entering new markets-top priority for construction companies

Most companies in the infrastructure sector are presently consciously undertaking projects on a PPP basis, for directing synergies of private companies and government companies. Most companies dealing in building residential buildings are planning to enter new markets. Airport development companies are inclined more towards JVs/ alliances for their future expansion.

Growth Drivers

The construction sector has potential for growth due to the growing need and demand for better infrastructure and real estate properties. In recent times, the government has also realised the importance of robust infrastructure and has undertaken a number of initiatives in that direction. The government has relaxed FDI norms for investment in the sector. Almost all companies in the sample, considered economic and industrial growth in recent times and favorable government policies as the important growth drivers.

Escalating raw material cost troubles construction companies

Some hurdles and challenges faced by the sample construction companies include different clearances from the Central and state governments, competition, availability of land and raw materials, unorganised labour market etc. Majority of companies from the sample cited increasing cost of raw materials and delay in approval from authorities as key hindrances to overall growth of the construction sector.

B) Power

Of the total 71 companies in the power sector, Dun & Bradstreet has taken a sample of 38 companies for this study.

Key Characteristics

• Among the power companies in the sample, 10.53% are centrally governed companies, and 47.37% are state-owned companies.
• 36.84% companies are solely involved in the business of power generation, 42.11% companies handle distribution-related activities and 7.89% companies handle transmission activities. Integrated players constitute the remaining 13.16%, and these players are present in either two or all three activities of generation, distribution, and transmission.
• Out of the 38 companies covered in the sample size, 23.68% companies were incorporated prior to 1990, 39.48% companies were incorporated during 1990-2000 and the remaining 36.84% companies were incorporated after the year 2000.
• Around 58% companies in the sample have a total turnover between Rs 1,000 -Rs 20,000 million, 32% companies have a turnover in the range of Rs 20,000-40,000 million and 10% companies have a turnover of more than Rs 40,000 million.
• Out of the sample of 38 companies, about 29% companies are from the Northern region, 29% from the Southern region, 24% from the Eastern region, & 18% are from the Western region.

Generation

• Electricty Generated
  

  In FY08, the total electricity generated by the sample companies involved in power generation was 339,163.8 MU. Central government controlled companies generated 66.22% of the total electricity, state government undertakings generated 29.06% of the total electricity, and other players including private firms, JVs and public listed companies generated 4.72% of total electricity.

• Installed Capacity
  

  As on March 31, 2008, the total installed capacity of 19 companies that are involved in generation of electricity was 59,426.714 MW. Thermal power plants have almost 75% share in the total installed capacity, hydro power plants have about 22% share and other power plants, including bio-mass, diesel, wind and gas plants, have approximately 3% share in the total installed capacity.

• Capacity Additions
  

  The companies plan to increase the total installed capacity of power plants by 64,037 MW in the next 5 years. This includes expanding thermal power plants by approximately 51%, hydro power plants by approximately 5.26%, nuclear plants by approximately 10.0%, and other plants by approximately 33.6%. The companies will increase their capacities either by installing new power plants or by expanding installed capacity of existing power plants.

• Types of Power Plants
  

  From the analysis, we found that India still depends largely on the conventional methods of generating power such as coal, gas and lignite-based thermal power plants, followed by the hydro power stations.

  Of the total 132 power plants owned and operated by the companies, approximately 48.48% (round off figures) are thermal power plants, 47.73% (round off figures) are hydro-electric power plants and 3.79% (rounded off figures) are other plants, which include combined cycle power plants, gas turbine, diesel-based power plants, and wind-based power plants.

Distribution

• Electricity distributed
  

  In FY08, the total electricity distributed by the sample companies involved in distribution of power was 129.8 BU, of which state government undertakings distributed 46.27% of electricity and the remaining 53.73% of electricity was distributed by non-government organisations.

• T&D losses
  

  In FY08, the average distribution losses of companies were 20.2%. The T&D losses of stateowned undertakings were also 20.0% and that of other players, including private players, municipal undertakings, was 19.87%.

• Consumer mix
  

  In FY08, the consumer mix of T&D companies included residential, industrial and domestic users. Their product mix comprised 84.53% of residential consumers, 9.61% of commercial consumers, 3.11% of industrial consumers, and 2.75% of other consumers (mainly agricultural users).

Transmission

In FY08, the sample companies transmitted approximately 97,610.69 MU of electricity. All electricity was transmitted by state-owned undertakings, among which a maximum of 57.18% was transmitted by a single company. The average T&D loss in FY08 was 2.76%.

Term loan is the most preferred financing option for the future expansion

Most of the companies studied in the sample preferred term-loan financing followed by selffinancing, IPO, bonds/debentures, ADR /GDR etc. About 74% of sample companies preferred term-loan financing for future expansion. About 42.9% of the generation companies and 42.0% of the distribution companies preferred term-loan financing. Self-financing was preferred by 30% of distribution companies and 20% of generation companies.

Capacity expansion - top priority for power companies

Most Central government undertakings prefer capacity expansion for future expansion and for entering newer markets. Most state governments and other companies, including private companies, JVs and municipal undertakings also prefer capacity expansion for the future. A large number of generation companies prefer JVs/alliances as the second preferred option after capacity expansion. Most transmission companies and distribution companies prefer capacity expansion and diversification into new business segments.

Economic and Industrial Growth - reason for growth

The sample companies expect 16.99% growth on an average in the next 2 years. Most generation companies expect approximately 26.0% growth and consider economic and industrial growth to be their growth drivers. Distribution companies expect 15.42% growth in the next financial year mainly through economic and industrial growth. Similarly, transmission companies consider economic and industrial growth along with favourable government policies to be the most important factor for growth.

Regulatory norms is one of the major concern for power companies

One of the challenges faced by most companies in this sector is regulatory norms relating to legal and environmental aspects. Most generation companies faced unavailability of equipment as the XCVI major hurdle in their growth. A large junk of transmission and distribution companies found rise in prices of raw materials due to inflation as the biggest challenge apart from regulatory norms relating to legal and environmental aspects.