Your Directors are pleased to present the Management Discussion and Analysis Report forthe year ended 31st March 2011.
DISCUSSION ON OPERATIONS OF THE COMPANY:
Revenue from operations increased by 118.49% in the year 2010-11. The Revenue for theyear 2010-11 stands at Rs . 14214.62 Lakhs while for the year 2009-10 revenue fromoperation was Rs. 6505.74 Lakhs.
EBITDA grew by 219.21% in the year 2010-11. The EBIDTA for the year stands at Rs1609.66 lakhs whereas in the year 2009-10 it was Rs. 504.27 Lakhs.
PAT grew by 250.12% in the year 2010-11. The Net Profit for the year stands at Rs.1551.15 Lakhs whereas in the year 2009-10 Net Pro fit was Rs. 443.04 Lakhs.
(Rs in Lakhs)
|FINANCIAL HIGHLIGHTS ||2010-11 ||2009-10 |
|No. of shares (in lakhs) ||430.59 ||430.59 |
|EPS - Rs. ||3.60 ||1.03 |
|EPS Growth (%) ||249.51% ||2475% |
|Book value in Rs. per share ||16.11 ||12.50 |
|P/BV ||0.69 ||1.58 |
|EBIDTA (as a % of revenue) ||11.32% ||7.75% |
|PBT (as a % of revenue) ||10.91% ||7.64% |
|PAT (as a % of revenue) ||10.91% ||6.81% |
|Debt-Equity Ratio || |
|Current Ratio ||3.95 ||2.48 |
|Net Worth (Rs. in Lakhs) ||6935.07 ||5383.92 |
The Net Worth of the company stands at Rs. 6935.07 lakhs in the year 2010-11 ascompared to Rs. 5383.92 lakhs in the year 2009-10.
Debt to Equity Ratio: 0.32 : 1
The Debt to Equity ratio of the company is 0.32 : 1. The Company has raised term loanand working capital loan during the year.
EPS: Rs . 3.60
The Company has shown a remarkable progress which resulted in growth of Earnings PerShare. The
EPS for the year 2010-11 stands at Rs . 3.60.
INDUSTRY STRUCTURE AND DEVELOPMENT: ECONOMIC OVERVIEW:
The Indian economy, during the financial year 2010-11, achieved a robust growth withappreciable contribution mainly from agriculture, industries and services and proactiveinitiatives from the country's policy makers. According to recent estimates, India's GrossDomestic Product (GDP) was expected to rise to 8.5 per cent in 2010-11 as against 8 percent in 2009-10. However, inflation remains primary policy concern and principal threat toeconomic stability. Going forward, the rise in interest rates and continued inflation mayimpact the pace of capital investments and impede the industrial growth.
The India's GDP is expected to consolidate at 8.8 per cent in the financial year2011-12 compared to 8.3 per cent in the financial year 2010-11 on account of continuingtightening by the Reserve Bank of India to manage the inflation. The medium term prospectsremain positive due to healthy expansion in private services, strong consumption in bothrural and urban sectors, acceleration in export demand and strong investment pipeline withemphasis on infrastructure
INDIAN INFRASTRUCTURE SECTOR:
The 11th Plan laid emphasis on development of physical infrastructure includingtransport to support the accelerated growth of the country's economy. The thrust in thesector has been on augmenting capacity through technology upgradation and modernisation.In this regard, improving accessibility to remote and rural areas and enhancing mobilitythrough various programmes with enlarged participation of private sector have been theobjectives of the 11th Plan.
INDIAN ROAD SECTOR: OPPORTUNITIES:
Roads carry about 65 per cent of the freight and 80 per cent of the passenger traffic.While national highways / expressways constitute only about 66,590 kms (2 per cent of allroads), they carry 40 per cent of the road traffic. This signifies the huge potential forhighways development in the country. The number of vehicles have been growing at anaverage pace of 10.16 per cent per annum over the last five years. For the purpose ofmanagement and administration, roads in India are divided into the following categories:
1. National Highways (NH) which are intended to
facilitate medium and long distance intercity/ state passenger and freight trafficacross the country.
2. State Highways (SH) which carry traffic along major centers within the state.
3. Major District Roads (MDR) having the secondary function of linkage between mainroads and rural roads.
4. Other district roads and village roads which provide accessibility to villages tomeet their social needs, as also the means to transport agricultural produce from villagesto nearby markets.
Some of the key initiatives taken by the Government in the private sector are asfollows:
1. The Government of India would carry out initial preparatory work including landacquisition and utility removal. Rights of way to be made available to concessionariesfree from all encumbrances.
2. NHAI / The Government of India may provide capital grant up to 40% (maximum) ofproject cost to enhance viability on a case to case basis.
3. 100% tax exemption for any consecutive 10 out of 20 years from the CommercialOperation Date.
4. Concession period allowed for up to 30 years.
5. Duty free import of specified modern high capacity equipment for highwayconstruction.
6. The Government of India has approved 100% Foreign Direct Investments for road andhighway construction through the automatic route.
7. In BOT projects concession holder s are allowed to collect and retain tolls.
8. Planning Commission, NHAI and Ministry of Road Transport and Highways haveintroduced the model concession agreement to mitigate the traffic risks of toll basedprojects -pursuant to which the concession period will be extended or reduced based onactual traffic.
INDIAN POWER SECTOR:
Power Sector is one of the key enablers for achieving overall economic growth.Government accords the highest priority to capacity addition in the power sector. IndianPower sector has come a long way since the reforms were first introduced in 1991. TheElectricity Act 2003 however, proved to be the landmark step for the sector reforms.Provisions of the Act such as "Delicensing of generation", "Procurement ofpower through competitive bidding"
& "Recognition of power trading", etc. have been key enabler s forattracting huge private interest in the sector. The Mega Power Policy has been modifiedand is now consistent with the National Electricity Policy, 2005 and Tariff Policy, 2006.It will help in lowering the cost of generation and the cost of power purchased bydistribution utilities.
In terms of wind power installed capacity, India is ranked 5th in the World after theUS, Germany, Spain and China with a wind power installed capacity (cumulative) of about10,242 MW in FY09 ( v/s potential of 48,000 m w).
A targeted addition of 10,500 MW out of 14,000 MW for renewable energy for 11th Plan.Top states in India with wind power capacity : Tamil Nadu, Maharashtra, Karnataka, Gujaratand Rajasthan Total potential for wind power in India was estimated by the Centre for Windenergy technology (C-Wet) at 48.5 GW. Government of India has announced generation-basedincentive of Rs 0.50 / unit of electricity from wind power projects, subject to maximum ofRs6.2 million per MW to increase investor base. The study, Wind Energy Outlook 2009, alsoindicates that wind energy can provide up to 24 percent of India' s power needs by 2030,while creating 213,000 green jobs and cutting 5.5 billion tons of CO2 emissions.
Government of India is planning to infuse around Rs600 billion in next few years under11th five year plan in this industry, which will boost the growth of this sector and helpreach this estimated installed capacity.
India ranks 8th in the world in terms of hydro power generation.
Hydropower contributes only 24% of the total power capacity (overall capacity 156,092MW) as on 31st December 2010. India plans to increase it to 40% in next eight years' time.As per the assessment of Central Electricity Agency (CEA), the country has the potentialto harness 148,700 MW of hydro power installed capacity from the identified basins &rivers.
The country faced a peak power deficit o f 13.3% during the year . In the coming years, the deficit is expected to continue despite the significant capacity additions that havebeen planned. The framework for induction of super critical technology in large capacitypower plants o f National Thermal Power Corporation is now in place. According to the CEA,India has an installed generation capacity of 148,265 MW that had increased at acompounded annual growth rate o f 4.6% between 2005 and 2008. A capacity addition of78,700 MW has been targeted for the Eleventh Plan. At the end o f the Tenth Plan, theinstalled capacity stood at 132,329 MW. The additional capacity planned in the EleventhPlan is approximately 60% o f the total installed capacity at the end of the Tenth Plan.Additionally, the Government has set an ambitious target o f providing "Power for All" by 2012. The number of private players in power sector has correspondinglyincreased to a significant level in the past few y ears . It is evident that capacityaddition in the Private sector h as outpaced additions in State & Central Sectors inthe past 3 years .
DISCUSSIONS ON OPERATION OF THE COMPANY:
To exploit the various opportunities in Power sector, Concurrent has taken a long-termstrategic view to focus on execution of projects under development. The company has beenexecuting EPC contracts for Power Project related works.
REAL ESTATE SECTOR:
The Indian real estate sector grew at an accelerated pace of 40%-45% per annum between2004-05 and 2007-08. There was boom in demand for real estate across segments drivenmainly by the sustained high growth trajectory of the Indian economy. Much of this growthwas driven by the following factors in different major segments of the real estate sector:Residential Segment: The economic growth in India contributed to increasing income levels.This, combined with trends of higher urbanization and nuclear families created greaterdemand for housing. Much o f the demand was backed by easier availability of housingfinance that often converted people from living on rent to having their own housing asset.Commercial Segment: India rapidly emerged as a global back office for services. There washug e demand for commercial space from in formation technology (IT) and IT basedbusinesses. Also, the sustained growth in the economy prompted several multinationalcompanies to op en their operations in India increasing demand for office property In thisbackdrop, pr ices of residential, office and commercial properties reached dizzy heights(up
100%-200% from the levels prevailing in 2005). The spurt in demand and rapid assetappreciation made real estate very attractive for investments. While, initially much ofthese investments were from domestic sources, with easing up of government regulations onforeign direct investments (FDI), there were high levels of global capital inflows intothis sector. Most developer s could sustain large developments that have long gestationlags with the help of these large capital flows.
However, by the end of 2006-07, the Reserve Bank of India (RBI) had reacted to concernson rapid appreciation in asset values in India. It had asked banks to set apart 1% (raisedfrom the earlier 0.4%) of personal loans, capital market exposures, residential housingloans beyond Rs.20 lakhs and commercial real estate loans, as a reserve to safeguardagainst the impact of bad loans in the event of an asset bubble burst. There were alsorestrictions introduced on external commercial borrowings (ECBs). This tightened capital flows into the sector and removed speculative investments in the market. And, the realestate market growth subsided to some extent with only end-user demand. The capitalsqueeze became much more apparent with the macro-economic developments in 2008-09. Thefall in housing prices in the US had sparked off the sub-prime lending crisis in themiddle of 2007. Downgrading and increased default risk of various housing backed paper -particularly collateralized debt obligations (CDOs) that were sliced, diced and farremoved from the original assets -rapidly spread throughout the US, and then to theEuropean and Asian financial systems.
Concurrent has impressive land banks and also development rights for both residentialand commercial projects, which will be taken in due course o f time.
INDIAN STEEL SECTOR
An Overview of Steel Sector:
Steel is crucial to the development o f any modern economy and is considered to be thebackbone of the human civilization. The level of per capita consumption of steel istreated as one of the important indicators of socioeconomic development and livingstandard of the people in any country. It is a product of a large and technologicallycomplex industry having strong forward and backward linkages in terms of material flow andincome generation. All major industrial economies are characterized by the existence of astrong steel industry and the growth of many of these economies has been largely shaped bythe strength of their steel industries in their initial stages of development.
World Steel Industry: Steel, the recycled material is one of the top products in themanufacturing sector of the world. The Asian countries have their respective dominance inthe production of the steel all over the world. India being one among the fastest growingeconomies of the world has been considered as one of the potential global steel hubinternationally. Over the years, particularly after the adoption of the liberalizationpolicies all over the world, the World steel industry is growing very fast.
Steel Industry is a booming industry in the whole world. The increasing demand for itwas mainly generated by the development projects that have been going on along the world,especially the infrastructural works and real estate projects that has been on the boomaround the developing countries.
The main demand creators for Steel Industry are
Oil and Gas Industry, and
New innovations are also taking place in Steel Industry for cost minimization and atthe same time production maximization. Some of the cutting edge technologies that arebeing implemented in this industry are thin-slab casting, making o f steel through the useof electric furnace, vacuum degassing, etc. The Steel Industry has enough potential togrow at a much accelerated pace in the coming future due to the continuity of thedevelopmental projects around the world. This industry is at present working n ear itsproductive capacity which needs to be increased with increasing demand.
Indian Steel Industry
The Indian steel industry has entered into a new development stage from 2005-06, ridinghigh on the resurgent economy and rising demand for steel. Rapid rise in production hasresulted in India becoming the 5th largest producer of steel.
It has been estimated by certain major investment houses, such as Credit Suisse that,India's steel consumption will continue to grow at nearly 16% rate annually, till 2012,fuelled by demand for construction projects worth US$ 1 trillion. The scope for raisingthe total consumption of steel is huge, given that per capita steel consumption is only 40kg - compared to 150 kg across the world and 250 kg in China.
The National Steel Policy has envisaged steel production to reach 110 million tonnes by2019-20. However, based on the assessment o f the current ongoing projects, both in Greenfield and brown field, Ministry of Steel has projected that the steel capacity in thecounty is likely to be 124.06 million tonnes by 2011-12. Further, based on the status ofMOUs signed by the private producers with the various State Governments, it is expectedthat India's steel capacity would be nearly 293 million tonnes by 2020. Opportunities:Concurrent as a measure of backward integration to its infra activities, has acquired a140000 tonne per annum TMT wires plant in Pune, India.
Increasing competition :
Competition is expected to intensify in the domestic infrastructure and constructionsectors, post the revival of growth trajectory of the economy. We expect competition tointensify due to possible new entrants (both national and international players) invarious segments including construction (which includes EPC), existing competitors furtherexpanding their operations.
Increasing prices of commodities / raw materials :
Inflationary conditions have erupted in the economy due to supply side constraints.This would have a snowballing effect on the raw materials and input prices , which may impact the profitability of net margins in the near to medium term.
Dependence on Government policies :
The growth of the infrastructure industry in India and our infrastructure developmentbusiness is dependent on the establishment of stable Government policies and prudentregulation. Infrastructure development in India has historically been the preserve of theCentral and St ate Governments, and has been constrained by various factors such asshortages of public funding, political considerations and issues of transparency andaccountability. More recently, policy changes in the transportation, energy, urbaninfrastructure and industrial and commercial infrastructure sectors have begun to attractsignificant private sector interest. Changes in Government policy and support for theinfrastructure sector will affect our growth prospects and operational results.
Decrease in margins on account of bidding for large projects :
Infrastructure project developments on a public private partnership basis in Indiainvolve pre-qualifying interested companies based on their technical and financialstrengths. The nature of the Government of India's process is such that the relevantexperience in the infrastructure sector plays an important role in allowing companies tobid for new projects. Further, the ability to strategically partner with other playerswill also determine our success in being awarded projects for which we bid. Our projectmanagement capability will also affect our financial condition and operations. Maintainingexecution and operating costs at a competitive rate is crucial to the profitability of ourconstruction (which includes EPC), property development and power (comprising powergeneration and power trading) businesses
Investment in our new projects :
We plan to make significant investments in a number of new projects over the nextseveral years, and we intend to bid for new projects. If the development of these projectscosts substantially less than what we have budgeted, or if we are able to complete theseprojects ahead of schedule, our financial condition and earnings could improve.Conversely, if we are unable to complete these projects in accordance with our budgets andwithin the scheduled time or, once completed, these projects do not operate profitably,our financial condition and operational results could be adversely affected.
Delay in execution of Order Book.:
It's an inherent risk factor, where sub-contracting works are procured by the company,as the subcontracted works always need to be synchronized with the main contracting partyand their cash flows.
Delay in execution of overseas projects:
Execution of overseas projects is dependant on all local conditions like physical,economical and environmental.
Management view on risk factors:
Management of the company transparently presented the key risks associated with theindustry and the company in general. All companies in the industry are working within thegiven framework. Your company is also confident to perform well amidst the risk factorsdiscussed in general over h ere.
INTERNAL CONTROL SYSTEMS
The Company has strong Internal Control System which involves various systems andprocedures which are time tested and tried at both the Operational as well as theManagerial Level.
This report contains forward- looking statements, which may be identified by their useof words like 'plans', 'expects', 'will', 'anticipates', 'believes', 'intends','projects', 'estimates' or other words of similar meaning. All statements that addressexpectations or projections about the future, including but not limited to statementsabout the Company's strategy for growth, product development, market position,expenditures and financial results, are forward looking statements. Forward-lookingstatements are based on certain assumptions and expectations of future events. The Companycannot guarantee that these assumptions and expectations are accurate or will be realized.The Company's actual results, performance or achievements could thus differ materiallyfrom those projected in any such forward-looking statements. The Company assumes noresponsibility to publicly amend, modify or revise any forward looking statements, on thebasis of any subsequent developments, information or events.
|REGISTERED OFFICE || |
|OFFICE NO. 218, BIG SPLASH, || |
|PLOT NO. 78 & 79, SECTOR -17, || |
|VASHI, NAVI MUMBAI - 400 703 || |
|MAHARASHTRA, INDIA. || |
|BY ORDER OF THE BOARD OF DIRECTORS || |
|K.Sudhir Babu ||K. P Rao |
|Managing Director ||Director |
|DATED: 7th December, 2011 || |