CONSTRUCTION AND ENGINEERING

EXECUTIVE SUMMARY
Market value

The Indian construction & engineering industry grew by 11.5% in 2010 to reach a value of $47.8 billion. Market value forecast In 2015, the Indian construction & engineering industry is forecast to have a value of $71.5 billion, an increase of 49.6% since 2010. Market segmentation I Civil Engineering is the largest segment of the construction & engineering industry in India, accounting for 87.6% of the industry's total value. The non-residential building segment accounts for the remaining 12.4% of the industry. Market segmentation II India accounts for 6% of the Asia-Pacific construction & engineering industry value. Market rivalry The construction and engineering industry in India is characterized by large incumbents operating alongside smaller companies. Rivalry is eased somewhat by companies diversifying operations into other sectors.

GEOGRAPHI PLACES
BUSINESS DISCRIPTION
The construction and engineering sector in India is likely to continue its growth above the average GDP . The construction and engineering industry is composed of civil engineering companies and large-scale contractors, but excludes companies involved in home-building. The market value is calculated as the revenues of those companies whose primary activity is the construction of non-residential buildings and non-buildings construction (civil engineering). Asia-Pacific comprises Australia, China, India, Indonesia, Japan, New Zealand, Singapore, South Korea, Taiwan, and Thailand.

Below is the picture showing that industry gets even worse when you look at the consolidated free cash flows, which have been negative (and falling) over the past few years. So the overall picture doesnt look impressive, despite the fact that negative free cash flow is a chronic problem across the engineering and construction companies

PRODUCT AND SERVICES OFFERED

Staffing Services like industrial construction staffing services, projects construction staffing services and office construction staffing services. Market research and strategic studies Economic evaluations Feasibility studies Process design packages Basic engineering Detailed engineering Procurement Construction management Project management Commissioning and start-up Training Environmental services Fired heaters

The Porters Five Force Model

Bargaining power of suppliers and buyers

High rising competition because of large players. Currently facing declining trend.

New entrants
Moderate threat of new entrants. Retaining a large permanent workforce, reducing barriers further for other players. Foreign companies entering the Indian industry.

Substitutes
Little threat of substitutes in this industry. Rivalry The degree of rivalry within a country is affected strongly by rate of growth witnessed over recent years

Market Analysis
The construction and engineering sector in India is likely to continue its

growth above the average GDP and is expected to retain solid growth rates through to the end of the forecast period in 2015. The performance of the market is forecast to accelerate, with an anticipated CAGR of 8.4% for the five year period 2010-2015, which is expected to drive the market to a value of $71.5 billion by the end of 2015. Comparatively, the Chinese and Japanese markets will grow with CAGRs of 8.4% and 8.8% respectively, over the same period, to reach respective values of $362.2 billion and $448.9 billion in 2015. The sector is labour intensive and, including indirect jobs, provides employment to around 33 million people. It is estimated that about 70 per cent of these are employed in the infrastructure segment and the remaining 30 per cent in the real estate segment. According to industry estimates, the industry is expected to generate additional employment of 47 million, with the total number of persons employed in the sector reaching 83 million persons by 2022. The sector is critical for enhancing the productive capacity of the overall economy .

Market segmentation
Civil Engineering is the largest segment of the construction & engineering industry in India, accounting for 87.6% of the industry's total value. The non-residential building segment accounts for the remaining 12.4% of the industry. The Indian construction & engineering industry grew by 11.5% in 2010 to reach a value of $47.8 billion. The compound annual growth rate of the industry in the period 200610 was 7.7%.

India construction & engineering industry segmentation I:% share, by value, 2010
civil engineering non-residential building

Market segmentation II
India accounts for 6% of the Asia-Pacific construction engineering industry value. Japan accounts for a further 36.9% of the Asia-Pacific industry.

India construction & engineering industry segmentation II: % share, by value, 2010

Rest of Asia-Pacific India South Korea China Japan

Growth Drives
By 2020, India's construction market will be worth almost $650 million

making up 5 per cent of the world's total construction output. The Indian economy has recorded 8 per cent GDP growth 2010 to 2012. With the expected average annual compounded growth rate of 8.5 per cent, GDP is expected to be $1.4 trillion by 2017 and $2.8 trillion by 2027. Construction accounts for nearly 7 per cent of GDP and is the second biggest contributor (to GDP) after agriculture. It is estimated that there are $860 billion worth of construction opportunities in India. According to a Crisil official, the roads sector will be the primary growth driver in the infrastructure sector. Roads, irrigation and urban infrastructure will together constitute 72 per cent of total construction expenditure on infrastructure.

 Increased focus by the central and state governments and urban local

bodies on development of infrastructure in urban areas will support investments. A combination of higher government funding and publicprivate partnerships will also drive new investments into infrastructure projects. The demand for residential construction is expected to continue to grow. Construction of nursing homes, Old Age homes, and other extended care institutions also will increase due to aging population.

Challenges faced by the Industry

The construction industry everywhere faces problems and challenges. However,

in developing countries like India, these difficulties and challenges are present alongside a general situation of socio-economic stress, chronic resource shortages, institutional weaknesses and a general inability to deal with the key issues. There is also evidence that the problems have become greater in extent and severity in recent years. One of the charges levelled at the construction industry, as at the beginning of the 21st century, is that it has a poor record on innovation . Some other areas where challenges are faced by the industry are as follows :Housing Environment Power Natural Hazards Lack of trained manpower and managerial skills with performance much below international level. The industry is starved of finance. Small and medium contractors do not have the wherewithal to upgrade their capability.

Trends & Affect on the Market

Across the world, the construction industry is witnessing a tremendous

boom. And India is no exception! Government policies and expenditure in infrastructure, training and regeneration projects have helped the sector grow at high levels and the same pace is likely to be seen in the coming year too . With construction activities taking place in different Indian cities at phenomenal speed, the sector will escalate to new heights, industry experts predict . ''The construction industry is currently growing at 10 per cent per annum and has a size of 70 billion dollars but with the huge investment in the construction industry, tremendous growth opportunities are expected,'' industry body The Associated Chambers of Commerce and Industry of India said.

 Another interesting trend is that the age group of ownership of a house is

getting younger. Plus according to a recent report by ASSOCHAM, the average age of person buying a property has come down to 30-38 years as compared to an age of 55 to 58 years 20 years ago. The other upcoming trends are:Many new roads to be constructed in 2013 The industry will grow at 10%-12% The housing market will witness very good growth rates of up to 14%. Almost 60% of investments are done in the private sector and the trend is increasing. By 2013, 20 million square meter of office space will be completed. Half of the demand will come from the three cities Delhi NCR, Mumbai and Bangalore. Retail will be a strong driver of the industry that will keep super and hypermarkets companies busy in the coming year.

Major Players
Larsen & Toubro (L&T)
L&T Construction is the largest construction organization in the

country. It figures among the Worlds 58th Top International Contractors and ranks 27th in global ranking as per the survey conducted by the reputed international contractors magazine Engineering News Record, USA (August 2011). Gross Revenue of 18646 crore for the quarter ended March 31, 2012, registering a growth of 21.1 %. Profit after Tax (PAT) for the quarter ended March 31, 2012 stood at 1877 crore recording an increase of 24.8% over the corresponding quarter of the previous year. MARKET CAP (Rs Cr) 102,464.77

Jaiprakash Associates
Jaiprakash Associates Ltd. (JAL), the flagship company of the Jaypee

Group, was incorporated in 1996. In 2003 JAL was formed due to merger of Jaiprakash Industries (JIL) and Jaiprakash Cement (JCL). It is the only group in India, which pre-qualifies on its own for the bidding of various projects that are awarded in the country. The Jaypee Group is a Rs 6,500 crore well diversified infrastructural industrial conglomerate in India. Jaypee group is the 3rd largest cement producer in the country. MARKET CAP (Rs Cr) 21,489.67

Lanco Infratech
Founded in 1986 by the Indian National Congress politician

Lagadapati Rajagopal - currently a member of 15th Lok Sabha representing Vijayawada - the group of companies is among the fastest growing in the world. LANCO's gross revenue before elimination as on 31 March 2012 was Rs 15,398 Crores (USD 3.07 billion). LANCO is a privileged member of the World Economic Forum and has been acknowledged as an elite member of the top 200 "Global Growth Companies. MARKET CAP (Rs Cr) 3,407.04

SWOT Analysis
Strength
Employment and training opportunities in the field of construction. Private sector housing boom and commercial building demands. Construction of the multi building projects on the feasible locations in the country. Good structured national network facilitates the boom of construction industry. Low cost well- educated and skilled labour force is now widely available across the country. Sufficient availability of raw material and natural resources in the country is supportive for the industry. Real estate development is on high and it is attracting the focus of the industry towards construction.

Weakness
Huge amount of money is need to be invested in this industry. Average experience employee age nearing retirement Huge attrition rate Low employee satisfaction Training itself has become a challenge.

Cont.
Opportunities
Continuous private sector housing boom will create more construction opportunities. Renewable energy projects will offer

Threats
Fluctuating Raw material prices. Slowdown in the economy could impact investment and activity in infrastructure and adversely affect

opportunities to develop skills and capacity in new markets. Developing supply chain through involvement in large projects is likely to enhance the chances in construction. Historical cultural heritages like the TAJMAHAL encourage and provide a creative platform for the industry.

business. Increased competition in Engineering and Construction may put pressure on operating margins. Natural abnormal casualties such as earth quake and floods are uncertain and can prevent the construction boom. Government Policies

 The engineering sector is expected to grow in the future and has a

Future Outlook

positive outlook owing to infrastructure development, favourable government policies and new investments in power projects, metals, oil & gas, and petrochemicals industries. It is estimated that by 2020 India can be a US$ 40 bn market for engineering outsourcing services. In addition, Department of Commerce has set a target of US$ 125 bn for engineering exports in 2013-14. 2012-13 will also see expansion of the hotel sector. Investments are likely to increase to 11 billion USD. This can majorly be contributed to the increasing flow of tourists coming to India. Owing largely to this, construction of hotels will rise from budget to five-star. By 2013, 20 million square meter of office space will be completed. Half of the demand will come from the three cities Delhi NCR, Mumbai and Bangalore.

 GDP Growth rate of construction and engineering

GDP GROWTH
3.50% 3.00% 2.50% 2.00% GDP GROWTH 1.50% 1.00% 0.50% 0.00% 2011 A 2012 E 2012 E 2014 E 2015 E

Future Outlook
Market value forecast

In 2015, the Indian construction & engineering industry is forecast to have a value of $71.5 billion, an increase of 49.6% since 2010. The compound annual growth rate of the industry in the period 201015 is predicted to be 8.4%.

THANK YOU !!
Submitted by :Neha Malik 124 Davinder Pal 125 Himani 128 Subin Varghese 129 Neetu Gupta - 155