IVRCL Assets & Holdings Ltd Merged Share Price Management Discussions
IVRCL ASSETS AND HOLDINGS LIMITED
ANNUAL REPORT 2010-2011
MANAGEMENT DISCUSSION AND ANALYSIS
ANNEXURE A TO THE DIRECTORS REPORT
Introduction
IVRCL Assets & Holdings Limited has completed its second year of operation
post amalgamation which was carried out for the purposes of having a focus
on the ever increasing opportunity in the Public Private Partnership (PPP)
sector of our country. The Company has successfully made efforts to
transform its image from being a Real Estate Development Company to a
Comprehensive Infrastructure Asset Development Company. The Company has
devised its growth strategy on the pillars of Vision, Management, People
and Resources. To achieve the vision, Company has put in place business
verticals headed by the experienced professionals to establish the business
strategy and mobilise the people and resources to drive the efficiency of
the project implementation and management thereby improving the savings of
the project and timely completion of the assets under development. The
Company presently has projects under the business verticals of Highways,
Environment & Water, Oil & Gas, Urban Infrastructure and Housing. The
Company has currently under its fold about Rs. 11,000 crore of assets
{Economic Share) under various stages of operation, construction and
development. The Operational asset -portfolio consists of three road
projects, one water project and one environment project. The under
construction asset portfolio consists of four road projects and one oil
tankage project. The projects which are under initial stages of development
consists of two road projects, one urban infra project and one housing
project in Colombo, srilanka. During the year the Company received Letter
of Award (LOA) for two state highway projects, one National highway project
and one pertaining to development of Fully Automated Multi Level Car
Parking Facility in the heart of the Chennai at Broadway Bus stand. During
the year the Company has begun its journey of spreading its wings overseas
with the first building infrastructure project by bagging the award for
construction of 4100 houses for Urban Development Authority (UDA), in the
city of Colombo, Sri Lanka for the total contract value of USD 90 million.
Indian Economy & Infrastructure
During 2010-11, the Indian economy showed a growth of 8.6% compared to 8%
in 2009-10. The period under review has shown a remarkable resilience to
both external and internal shocks. The medium to long-run prospect of the
economy, including the industrial sector, continues to be positive.
However, rising inflation has caused a concern for the growth of economy.
The economic survey projected that the economic growth for the year 2011-
2012 would be between 8.75% - 9%. With the RBI making it clear that it
would maintain its anti-inflationary stance, some amount of growth will
have to be sacrificed if inflation is to be brought under control in a more
sustainable manner. Besides the tight monetary policy stance and risk of
global events, particularly upward movement in prices of commodities like
crude oil remain, posing the downside risk to GDP growth in 2011-12.
Inspite of the above the economy is poised to further improve and
consolidate in terms of key macroeconomic indicators during the medium to
long term.
One of the major requirements for economic growth is an extensive and
efficient infrastructure network. The key to global competitiveness of the
Indian Economy lies in building a high class infrastructure. To accelerate
the pace of infrastructure development and reduce the infrastructure
deficit, the Govt, has initiated a host of projects and schemes to upgrade
physical infrastructure in all crucial sectors. This has not only enabled
access to quality and efficient infrastructure, but also permitted the
Govt, to target inclusive growth through higher spending in social sector.
The XIth Five year plan (2007-2011) has estimated an investment of
Rs.21,000 billion in infrastructure. The XIIth Five Year plan is expected
to focus on governance, infrastructure and inclusive growth. The projected
estimates of infrastructure investment during the XII Five year plan stand
at approximately Rs. 41,000 billion.
The overall contribution of construction industry in India to the GDP
decreased marginally to 8.1% compared to 8.2% last year. With plans to
enhance infrastructure investment the construction sector is all set to
become one of the growth engines of the Indian Economy in the foreseeable
future. In 2010-11, the infrastructure industry had faced challenges in the
form of increased competitive bidding, rise in cost of debt due to
tightening of monetary policy by the RBI to check the inflationary
pressures. These challenges had resulted in reduced operating margins, slow
down in capex activity and further impacted the net earnings of the
infrastructure companies. The Company being the diverse infrastructure
asset developer had to raise money to fund the equity at the downstream
Special Purpose Vehicles (SPV) which implements the assets under various
stages of construction and initial development and its earnings are
subjected to the impact of increased cost of debt. The Company further
believes that increased competition and extremely high interest rates will
take its toll on the relatively inexperienced and new players over a period
of time which in turn will result in market for PPP to be exploited by the
large and stable infrastructure developers. The current scenario can only
be summed up as a difficult period for the infrastructure developers which
can only get better going forward in the medium term.
Sector Review
HIGHWAYS
India has an extensive road network of 4.24 million km, the second largest
in the world. The National Highways have a total length of 70,934 km and
serve as the arterial road network of the country. It is estimated that
more than 70% of freight and 85% of passenger traffic in the country is
handled by roads. National Highways, which comprise only 2% of the total
network, carry 40% of the traffic, and the state roads, which comprise 13%
of the total road network, carry another 40% of the traffic. Only about 23%
of the total Highways in India are 4/6 lane, about 54% of the national
highways, 22% of the state highways are currently two-lane and the sheer
potential for investments in this sector is likely to create opportunities
in the core construction industry. More than 60% of the projected
investment requirement for the National Highway Development Programme
(NHDP) (more than USD 60 billion) is expected to be privately financed,
primarily through the BOT/DBFOT (Toll) route, offering enormous
opportunities. The opportunities for private players in the road sector can
be broadly categorised into Infrastructure Development and Logistics and
Services. By the end of the NHDP in 2015-16, over 40% of the national
highways will be at least four-lane.
The NHDP, involving the development of 50,000 km of national highways, is
the largest road development programme in the country till date. Launched
in 1999, the NHDP is also one of the biggest public-private partnership
initiatives. The implementation of the programmes is entrusted to the
National highways Authority of India (NHAI). The entire project is planned
to be completed by 2015 spanned across seven phases by December 201 5.
Around 34,000 km of national highways will be developed under the programme
over the 3 year period including the current financial year in a phased
manner. Built Operate Transfer (BOT) concession contracts with an estimated
Total Project Cost of approximately USD 25 million (Toll & Annuity) have
been awarded under various packages till May 11, 2011 and these projects
are expected to be fully operational by 2015-16.
The NHAI plans to give out construction contracts for 7,300 kms of roads in
the current financial year. This is likely to turnout an opportunity of
more than Rs.65, 000 crores for the developers. According to NHAI, it will
put 10,000 km out to tender for guaranteeing the award target of 7,300 kms,
which is 44% more than the last years 5,059 km of work.
In the recent times, NHAI has taken various initiatives of fast tracking
the award of projects to achieve the ambitious target of construction
20km/a day as against 6km/day achieved during the previous financial year.
The initiatives include among others,
a. Annual pre-qualification aiming to evaluate the Technical and Financial
Capacity of Applicants and deciding their eligibility of qualification for
a specified threshold of project cost valid till December 2011 or such date
as may be decided by the NHAI.
b. Calling for NHAI tenders from August through e-tendering mechanism in a
phased manner.
c. Apex committee has been constituted to carry forward the process of
Electronic Tolling Collection (ETC) which will facilitate thorough movement
of vehicles, save fuel and time and plug revenue leakages and to improve
better level of service to the commuters.
d. Updating the existing CIS & Road Information System (RIS) based
satellites imagery for planning and monitoring of national highways.
e. 4000 km roads will be covered by March 2012 under Operation, Maintenance
and Tolling (OMT) through PPP Concessions.
The list of initiatives mentioned above will yield encouraging results for
speedy award of the projects and thereby resulting in timely construction
of the projects. This further requires NHAI to be efficient in clearing
regulatory issues like land acquisition, utility shifting and environmental
clearances which still remain a concern for project execution. With the
encouraging participation and active role of the Ministry of Road,
Transport and Highways in bringing changes to improve the efficiency of
project award and completion, it paves the way for profitable partnership
with the private sector to bridge the gap in the Road Infrastructure.
State Level Initiatives
The majority of the states including Andhra Pradesh. Gujarat, Karnataka,
Maharashtra & Madhya Pradesh have recorded increased development of roads
to keep in pace with the need for integrating its state road infrastructure
aligned with that of the record number of road projects awarded under the
NHDP. The pace of activity has also increased in state roads and some state
governments have recorded good performance.
ENVIRONMENT & WATER
India to sustain its robust economic growth, it needs to address its
growing water challenges and the private sector has an important role to
play. The reforms in the water sector includes improving the efficiency of
water usage in agriculture, industrial water and its reuse and urban water
projects and decentralised distribution for rural areas by financing small
water treatment plants. Over the next two to three years more participation
from the private sector is expected to increase. The 11th Plan planned
outlay for the water and sanitation sector was Rs.l.44 lakh crore which is
an increase of 122 percent over the outlay for the 10th Plan of Rs. 0.65
lakh crore. As per the High-powered Expert Committee (HPEC) estimates on
Indian Urban Infrastructure and Services, the share for water supply,
sewerage, and storm water drainage and solid waste management sectors will
be Rs. 8.04 lakh core for the 20 year period from 2012 to 2031. This is
more than the 11th Plan outlay. In addition, the committee has separately
estimated another Rs. 10.92 lakh crore for operation & maintenance during
the period.
RAILWAYS
The Indian Railways (IR) is one of the largest railway systems in the world
under a single management and manages more than 64,000 km of railway
tracks. Railway infrastructure development includes new lines, doubling,
gauge conversion and electrification works, rolling stock, safety works and
information and communication technology (ICT) projects. It also involves
development of stations, terminal, multi functional complexes, logistics
parks and cold storage facilities. The projected investment in railways,
including metro railways in the Eleventh Plan is expected to be about
Rs.200.8 billion.
The railway ministry has identified 50 stations to be promoted as world
class stations. It is expected that the Indian Railways will shortly
initiate projects worth Rs. 10 billion to kick-start one of Indias most
ambitious infrastructure projects to build dedicated freight corridors to
connect North India with Mumbai and West Bengal. The freight corridor is
integral to Highway Development Programme (NHDP) (more than USD 60 billion)
is expected to be privately financed, primarily through the BOT/DBFOT
(Toll) route, offering enormous opportunities. The opportunities for
private players in the road sector can be broadly categorised into
Infrastructure Development and Logistics and Services. By the end of the
NHDP in 2015-16, over 40% of the national highways will be at least four-
lane.
The NHDP, involving the development of 50,000 km of national highways, is
the largest road development programme in the country till date. Launched
in 1999, the NHDP is also one of the biggest public-private partnership
initiatives. The implementation of the programmes is entrusted to the
National highways Authority of India (NHAI). The entire project is planned
to be completed by 2015 spanned across seven phases by December 2015.
Around 34,000 km of national highways will be developed under the programme
over the 3 year period including the current financial year in a phased
manner. Built Operate Transfer (BOT) concession contracts with an estimated
Total Project Cost of approximately USD 25 million (Toll & Annuity) have
been awarded under various packages till May 31, 2011 and these projects
are expected to be fully operational by 2015-16.
The NHAI plans to give out construction contracts for 7,300 kms of roads in
the current financial year. This is likely to turnout an opportunity of
more than Rs.65, 000 crores for the developers. According to NHAI, it will
put 10,000 km out to tender for guaranteeing the award target of 7,300 kms,
which is 44% more than the last years 5,059 km of work.
In the recent times, NHAI has taken various initiatives of fast tracking
the award of projects to achieve the ambitious target of construction
20km/a day as against 6km/day achieved during the previous financial year.
The initiatives include among others,
a. Annual pre-qualification aiming to evaluate the Technical and Financial
Capacity of Applicants and deciding their eligibility of qualification for
a specified threshold of project cost valid till December 2011 or such date
as may be decided by the NHAI.
b. Calling for NHAI tenders from August through e-tendering mechanism in a
phased manner.
c. Apex committee has been constituted to carry forward the process of
Electronic Tolling Collection (ETC) which will facilitate thorough movement
of vehicles, save fuel and time and plug revenue leakages and to improve
better level of service to the commuters.
d. Updating the existing GIS & Road Information System (RIS) based
satellites imagery for planning and monitoring of national highways.
e. 4000 km roads will be covered by March 2012 under Operation. Maintenance
and Tolling (OMT) through PPP Concessions.
The list of initiatives mentioned above will yield encouraging results for
speedy award of the projects and thereby resulting in timely construction
of the projects. This further requires NHAI to be efficient in clearing
regulatory issues like land acquisition, utility shifting and environmental
clearances which still remain a concern for project execution. With the
encouraging participation and active role of the Ministry of Road,
Transport and Highways in bringing changes to improve the efficiency of
project award and completion, it paves the way for profitable partnership
with the private sector to bridge the gap in the Road Infrastructure.
State Level Initiatives
The majority of the states including Andhra Pradesh, Gujarat, Karnataka,
Maharashtra & Madhya Pradesh have recorded increased development of roads
to keep in pace with the need for integrating its state road infrastructure
aligned with that of the record number of road projects awarded under the
NHDP. The pace of activity has also increased in state roads and some state
governments have recorded good performance.
ENVIRONMENT & WATER
India to sustain its robust economic growth, it needs to address its
growing water challenges and the private sector has an important role to
play. The reforms in the water sector includes improving the efficiency of
water usage in agriculture, industrial water and its reuse and urban water
projects and decentralised distribution for rural areas by financing small
water treatment plants. Over the next two to three years more participation
from the private sector is expected to increase. The I1h Plan planned
outlay for the water and sanitation sector was Rs.1.44 lakh crore which is
an increase of 122 percent over the outlay for the 10th Plan of Rs. 0.65
lakh crore. As per the High-powered Expert Committee (HPEC) estimates on
Indian Urban Infrastructure and Services, the share for water supply,
sewerage, and storm water drainage and solid waste management sectors will
be Rs. 8.04 lakh core for the 20 year period from 2012 to 2031. This is
more than the 11th Plan outlay. In addition, the committee has separately
estimated another Rs. 10.92 lakh crore for operation & maintenance during
the period.
RAILWAYS
The Indian Railways (IR) is one of the largest railway systems in the world
under a single management and manages more than 64,000 km of railway
tracks. Railway infrastructure development includes new lines, doubling,
gauge conversion and electrification works, rolling stock, safety works and
information and communication technology (ICT) projects. It also involves
development of stations, terminal, multi functional complexes, logistics
parks and cold storage facilities. The projected investment in railways,
including metro railways in the Eleventh Plan is expected to be about
Rs.200.8 billion.
The railway ministry has identified 50 stations to be promoted as world
class stations. It is expected that the Indian Railways will shortly
initiate projects worth Rs. 10 billion to kick-start one of Indias most
ambitious infrastructure projects to build dedicated freight corridors to
connect North India with Mumbai and West Bengal. The freight corridor is
integral to the Rs. 4000 billion project to build an industrial corridor
between Delhi and Mumbai with a series of industrial parks, airports, power
plants and new townships. The eastern freight corridor would ease movement
of coal and other commodities to the North and the Delhi-Mumbai route would
facilitate container movement. IRs vision 2020 aims to enable growth in
the container business from the current 25 mt to 210 mt by 2020. The urban
rail-based mass rapid transit (MRT) system has witnessed major developments
in the past one year. Metro projects worth over Rs. 460 billion with a
total route length of over 240 km are currently in the planning stage in
Ahmedabad, Ludhiana, Lucknow, Jaipur etc.
URBAN INFRASTRUCTURE
Urban transport projects involve building new facilities for public use
like metro rail system, a new expressway, or a multi-level car parking
facility. The people who directly benefit from such facilities, the
potential users, create the primary demand for these facilities. When Urban
Local bodies structure such projects, they regard the future payments by
users for availing of these facilities as their primary revenue source for
funding the development, operations and maintenance of these facilities.
The direct beneficiaries of the transport system would include the
potential users of a facility, that is, the people who would travel by the
new public transport system, vehicle owners who would use a multilevel car
park, commuters who would use the new expressway etc.
The HPEC which was formed in 2008 by the Ministry of Urban Development
(MoUD) has recently submitted its report on Indian urban infrastructure and
services. The report estimates an investment requirement of Rs.39.2
trillion in the urban infrastructure sector over the next 20 years (2012-
31). Of the total amount, Rs.34.1 trillion will be invested in creating
assets. The eight major civic sectors identified by the committee - Water
supply, sewerage, solid water management, storm water drainage, urban
roads, urban transport, traffic support infrastructure, and street lighting
will corner Rs.31 trillion. Another Rs.4.1 trillion has been allocated for
the renewal and redevelopment of slums and the remaining Rs. 1 trillion for
capacity building.
POWER
The Indian Power generation industry achieved a significant milestone in
fiscal year 2010-11 by recording its highest ever capacity addition. The
power sector added record conventional capacities of 12,160 MW during 2010-
11. This takes the total capacity addition of 34,462 MW during the Eleventh
Plan period so far. The planning commission, which is currently preparing
the approach paper for the Twelfth Plan, is considering increasing the
target to 125,000-130,000 MW.
A key source of peaking power, hydro contributes significantly to the
countrys energy mix. Indias current installed hydro capacity is 37,367 MW
against the total hydro potential of 145,320 MW. The Twelfth Plan target
has been tentatively set at 20,334 MW.
The private sector contribution in the total installed capacity has risen
consistently since the passage of the Electricity Act, 2003 from 8.66% in
March 2003, to 21% in March 2011. This share is expected to rise further,
given that private projects aggregating over 80,000 MW are under various
stages of development. The private sector is expected to contribute over
30% (19796 MW) of total additions during the Eleventh plan. Going forward
the contribution during the Twelfth Plan Period is expected to be about 55-
60% of total capacity addition. Through the Union Government initiative of
Ultra mega power projects (UMPPs), 15880 MW of private power capacity has
been tied up in four projects so far. This is expected to further increase
by another 48000 MW across 12 projects.
In line with the Tariff Policy, 2006, the power ministry notified that all
generation and transmission projects, both public and private, have to be
awarded through a competitive bidding process from January 2011. A robust
transmission system is of crucial importance for evacuating power from
energy-surplus to energy-deficit regions, providing ample justification for
strengthening the system and creating a national grid. Given expected
generation capacity additions of 100 GW in the next seven years, the
transmission system must meet the challenge of dealing with increased load
and network complexity. Private investment in transmission has risen with
tariff-based competitive bidding now mandatory for all future projects.
Over the past four years, the sector has witnessed higher growth in
transmission line length and transformer capacity at the 400 kV level
compared to the 220 kV level. Currently a 765 kV network is being
constructed, and 1,200 kV and 800 kV HVDC lines will be set up over the
next few years.
The Company is closely monitoring the Hydro Power Generation and
Transmission system projects released for private sector participation on
concession basis and has begun to participate into the hydro power
generation and power transmission bids.
PORTS
India has an extensive coastline of around 7,500 km. There are 13 major
ports and 187 non-major ports strategically located on the worlds shipping
routes. India has one of the largest merchant shipping fleet and is ranked
16th among the maritime countries. Ports play a vital role in the overall
economic development of the country. Traditionally, ports all over the
world have been owned and developed by government entities. Similarly, the
Government of India dominated port development in the past but presently
encourages investments from the private sector and foreign entities in port
development activities and operations. About 95% by volume and 70% by Value
of the countrys international trade is carried on through maritime
transport. The traffic handled at major ports is projected at 615.70 MT
during 2011-12 as per National Maritime Development Programme (NMDP).
Development of Indias ports and trade related infrastructure will continue
to be critical to sustain the success of accelerated growth in the Indian
economy.
The Government of India is focussing on port infrastructure development in
the country and is promoting private participation and foreign direct
investment (FDI). Driven by the growth in international trade, the cargo
handled at Indian ports is projected to grow at 7.7 per cent per annum
until 2013-14. The Maritime Agenda 2010-2020 is a perspective plan of the
Ministry of Shipping for the present decade which has set the goals
including to create a port capacity of around 3,200 MT to handle the
expected traffic of about 2,500 MT by 2020, to bring ports at par with the
best international ports in terms of performance and capacity &
Implementation of the Port development projects.
The Union Government identified 23 PPP projects in port sector during the
year 2011 -12 with an estimated investment of Rs. 16,743.92 crore and the
corresponding capacity addition of 231.63 mn mtpa. The National Maritime
Development Programme has envisaged setting up of two international size
shipyards. Maritime states have been requested by the Ministry of Shipping
to identify suitable location for setting up of international size
shipyards, one each on the East Coast and West Coast of India respectively.
OIL & GAS
Efficient and reliable energy supplies are a precondition for accelerated
growth of the Indian economy. While the energy needs of the country,
especially oil and gas, are going to increase at a rapid rate in the coming
decades, the indigenous energy resources are limited.
Oil and gas constitute around 45 per cent of total energy consumption. At
the same time, the dependence on imports of petroleum and petroleum
products continues to be around 80 per cent of total oil consumption in the
country. Over the period 2000-2009, oil and gas consumption grew at a 5 per
cent CAGR to reach 184 million metric tonnes (MMT). This is projected to
reach 368 MMT by 2025. To support the requirement of import & refining
capacities, proper storage facilities and transport infrastructure are a
must to meet the energy needs of our economy.
The proportion of natural gas in the total energy mix has increased to 10
per cent in 2009 from 4 per cent in 1999. The same is expected to increase
to 20 per cent in 2025, playing a vital role in the countrys total energy-
mix. The projected production for natural gas, including coal bed methane
(CBM), for 2010-11 is 53.59 billion cubic metres (BCM). The increase in
natural gas production is primarily from the KG deepwater block. An
adequate pipeline network would play a key role in the transmission of the
Gas.
ASSETS UNDER OPERATION HIGHWAYS
During the year Highways vertical performed well for the Company. It was
awarded three new highways projects and achieved financial closure for two
highway projects. During the year the Company started tolling for two
national highway projects. The Company currently has 2900 Lane km under its
fold with 604 Lane Kms under Operation.
Salem Tollways Limited
Design, Construction, Development, Finance, Operation and Maintenance of
existing 2-lane road into 4-lane road from KM 00.00 (Salem) to KM 53.00
(Kumarapalayam) on NH-47 in the state of Tamil Nadu. The project commenced
operations from 1st July, 2010.
Kumarapalayam Tollways Limited
Design, Construction, Operation and Maintenance of existing 2-lane road
into 4-lane road from KM 53.00 (Kumarapalayam) to KM 100.00 (After
Chengapally) on NH-47 in the state of Tamil Nadu. The project commenced
operations from 26th August, 2009.
Jalandhar Amritsar Tollways Limited
Improvement, Operation and Maintenance including strengthening and widening
of existing 2-lane road into 4-lane dual carriageway from KM 407.100 to KM
456.100 of NH-1 Galandhar - Amritsar section) in the state of Punjab. The
project commenced operations from 30th April, 2010.
ENVIRONMENT & WATER
Chennai Water Desalination Limited
The Company has, through its subsidiary, Chennai Water Desalination Limited
(CWDL), completed the development of 100 MLD sea water desalination and is
currently operating the Chennai Water Desalination Project, which was
awarded by the CMWSSB. The primary function of the project is to draw raw
sea water from the Bay of Bengal and treat and process the water to make it
potable as per the specifications laid down by CMWSSB. The plant had begun
the operations on 25th July, 2010.
First STP Private Limited
12 MLD sewage treatment plant was constructed for Alandur Muncipality in
Tamil Nadu. The plant commenced operations from the year 2002.
ASSETS UNDER CONSTRUCTION
HIGHWAYS
IVRCL Indore Gujarat Tollways Limited
Design, Engineering, Construction, Development, Finance, Operation and
Maintenance of Indore - Gujarat - MP Border section of NH-59 of existing 2
lane road to 4 lane road from KM 9.500 to km 171.100, in the state of
Madhya Pradesh. The total length of the project highway is 155 Km. The
project is awarded by the NHAI and the concession period is for 25 years.
IVRCL Chengapally Tollways Limited
Maintenance and Management of NH-47 including section from KM 102.035 to KM
144.680 from existing 2 Lane road to 6 Lane road & 2 lane road to 4 lane
road from KM 170.880 to KM 183.010, in the state of Tamil Nadu. The total
length of the project highways is 54.76 Kms. The project is awarded by the
NHAI and the concession period is for 27 years.
SPB Developers Private Limited
Government of Maharashtra (PWD) has awarded the project of four laning of
Baramati to Phaltan road SH10 (Km. 42/400 to Km. 64/300) and Phaltan -
Lonad to Shirwal Road SH70 (Km. 136/000 to Km. 80/000) Pune & Satara
District of Maharashtra State. The total length of the project highway is
77.90 Kms and the concession period is for 25 years.
IVRCL Chandrapur Tollways Limited
Government of Maharashtra (PWD) has awarded the project of four laning and
improvement of Karanji-Wani-Ghuggus-Chandrapur (upto Padoli Junction) road
of MSH-6 & 7 in Yavatmal & Chandrapur District of Maharashtra State. The
total length of the project highway is 85.11 Kms and the concession period
is for 30 years.
OIL & GAS
Indian Oil Tankages
IVRCL Assets & Holdings has taken a 37.5 per cent stake in the concession
project for development, operation & maintenance of crude/product tankages
facilities at Paradip Refinery Project, Pradip, Orissa of Indian Oil
Corporation Limited (IOC) on Build, Own, Operate and Transfer (BOOT) basis
and IOT Utkal Energy Services Ltd. Will be the Joint Venture Partner. The
project involves installation, operation and maintenance of approx. 1.4
million kilolitres of tankages for crude oil, petroleum products.
ASSETS UNDER INITIAL DEVELOPMENT HIGHWAYS
Sion Panvel Tollways Private Limited
Government of Maharashtra (PWD) has awarded the project of improving and
maintaining the stretch between Kalamboli Junction and BARC Junction of
Sion Panvel Highway (Project Highway) from 115/800 km to 140/690 km in
the State of Maharashtra to be executed as BOT (Toll) project. The scope of
work includes improving the stretch to a 5+5 lane divided carriageway from
the existing 3+3 lane road. The total length of the project highway is
23.09 Km and the concession period is for 17 years and 5 months.
IVRCL Goa Tollways Limited
Design, Engineering, Construction, Development, Finance, Operation and
Maintenance of 4/6 laning of Maharashtra/ Goa border to Panaji - Goa/
Karnataka Border section of NH 17 from Km 475.040 to Km 611.00 in the state
of Goa under NHDP Phase III on Design, Build, Finance, Operate & Transfer
(DBFOT) Basis . We have received the Letter of Award (LOA) from the NHAI
and Concession Agreement is yet to be signed.
URBAN INFRASTRUCTURE
IVRCL Multi Level Car Parking Private Limited
Corporation of Chennai (CoC) awarded the project to develop a Multi Level
Car Parking Facility (Parking Facility) in Zone III of Chennai City at
Broadway Bus Stand on a Design, Build, Operate and Transfer (DBOT) basis to
cater to the parking demand in the area. The Concessionaire shall have to
develop a Parking Facility with a minimum capacity of 610 Equivalent Car
Spaces (ECS) on the Project Site. In addition to the Parking Facility the
Concessionaire is provided development rights for commercial development on
the Project Site in accordance with the terms and conditions of this
Agreement. The Company has signed the Concession Agreement and is under the
process of achieving Financial Closure.
HOUSING
IVRCL Lanka Housing (Private) Limited
IVRCL Assets & Holdings Limited has recently been awarded a project for
Construction of Housing for relocation of underserved settlements in the
city of Colombo, by the Urban Development Authority (UDA), Government of
Srilanka. The project relates to Design and Construction of total 15,000
housing units in the city of Colombo valued at approximately USD 330
million. The Company has received an order for the 1st Phase of the project
for construction of 4100 housing units valued at USD 90 million. Contract
Agreement has been signed with the UDA and the project is currently in the
process of achieving financial closure.
STRATEGY
We acknowledge the fact that this Company needs large amounts to fund as
equity for various ongoing PPP projects as well as preparing to make
available sufficient funds for new projects that are expected to be awarded
in the near future. Therefore it is imperative that efforts be made to
unlock value which is created at various stages of project development and
operation relating to the existing projects on hand. In addition the
Company intends to focus on certain pre requisites which would result in
prudent assessment of the opportunities, competitive bidding and efficient
implementation of the projects through the following.
Continue to identify and be involved in new business opportunities:
The Company will continually seek to identify and enter into business
activities that we consider to be of high growth potential and that will
complement our existing infrastructure portfolio. The Company intends to
continue to expand its focus and undertake projects among various segments
in the infrastructure sector, including seeking opportunities to develop
ports and undertake power projects. The Company will continue to rely on
its Promoter Company, for its expertise to enable us to ensure quality and
timely completion. The Company believe that the ability to seek out and
identify new business opportunities will result in significant synergies
across its business verticals.
Continue to diversify and expand our portfolio in sectors where we have
existing projects.
The Company intends to continue to diversify the portfolio of projects
undertaken by us in PPP Infrastructure space. The strategy is to position
the Company to capitalize on the ever increasing infrastructure development
opportunity in India. The Company believes that it has achieved sufficient
economies of scale to improve the competitiveness of existing businesses,
and along with the experience of the Promoter Company, it is well
positioned for the diversification of business and the sharing of
resources.
Maintain high standards of quality and project execution capabilities.
The Company intends to develop a reputation for consistently developing
infrastructure development projects known for innovation, quality and
delivery in a timely manner. The Company also intends to continue to focus
on reducing cost and time overruns to maximize client satisfaction. The
Company also intends to continue to further enhance design, construction,
and development capabilities to adapt to the technological changes and
minimize operational costs.
Attract, train and retain qualified personnel
The Company appreciates that maintaining quality, minimizing costs and
ensuring timely completion of construction projects depends largely on the
skill and workmanship of our employees. As competition for qualified
personnel and skilled labourers is increasing among construction companies
in India, and as the Company pursues greater growth opportunities, the
Company seeks to attract, train and retain qualified personnel and skilled
labourers by increasing the focus on training the staff in advanced and
basic engineering and construction technology.
RISK AND CONCERNS
-Essentially a Company like IVRCL Assets & Holdings Limited is exposed to
economic risk, market risks and operational risks. The Company is in the
process of implementing a framework that adopts an integrated approach
managing all the three types of risks across all the entities in IVRCL
Assets & Holdings Limited. In the current scenario, the Company looks at
the following risks and concerns.
i) Economy:
The Economic growth of the country moves in cycles of growth and downturn.
The Company has a framework to address the possible downturn in the economy
with the focus in containing cost through implementation of strict
budgetary controls supported by the efficient Management Information System
(MIS) to check the variances.
ii) Slowdown of Spending
The outlay for the XIIth five year plan is estimated to be increased from
Rs. 21,000 billion to anticipated Rs. 41,000 billion symbolising the
increased commitment of the Government in spending towards Infrastructure.
This is an encouraging budget from the Government and the Company looks
forward to participate in these opportunities available.
iii) Price Inflation Risk
The Company maintains the Project Monitoring Committee for verifying the
project estimates and suggests suitable measures to hedge the input raw
material prices from inflationary pressures thereby eliminating the price
increase impact on the project.
iv) Increased cost of borrowing
Currently countrys apex banking authority in order to check the increasing
inflationary trend is tightening the monetary policy through measure of
increasing cost of debt borrowed from the banks. The Company adopts the
strong risk management framework with a focus on loan portfolio assessment,
assets liability management & loan pricing. The Company is considering the
impact of such increased cost of borrowing in the projects to be bid for
the future.
v) Retention of experienced manpower
The Company is adopting the employee friendly measures in retaining the
skilled manpower resources by providing conducive work environment,
necessary trainings and leadership development. The Company follows a
holistic approach in retaining the talent from possible attrition.
Internal Control systems and their adequacy
The Company installed internal control systems which are considered
adequate for controlling the operations of the Company. The Company is in
the process of further strengthening the internal control systems through
its Finance, legal, contractual and project monitoring functions to ensure
that the operations adhere to the defined and established procedures and
meet statutory or regulatory requirements with the underlying concession
agreements.
Operational Performance
The Operational performance has been dealt within the Directors report
which forms part of the Annual Report.
Human Resources & Industrial Relations
Human Resources continued to be one of the biggest assets of the Company.
The Management has been paying special attention to various aspects like
training, welfare and safety and thereby strengthening the human resources.
Relations with the employees remained cordial throughout the year.
Outlook
While the demand for infrastructure through PPP mode for govt, continues to
remain high, however the pace at which the same is thrown open has proved
fairly volatile due to the fact that the world economy substantially
influences the demand supply situation in our country. In addition a mature
regulatory authority specific to the various sectors of infrastructures
continues to evolve. Nevertheless the Company is well positioned to equip
itself with a continuous stream of infrastructure development projects
especially due to the vast reservoir of opportunities being made available
by the Government in the medium term.
Cautionary Statement
The statements made in the Management Discussion and Analysis Report
relating to the Company Vision, Sector review, projections, outlook may be
defined as forward looking statements within the meaning of applicable
laws and regulations. The actual results may differ from what has been
projected, whether expressed or implied, owing to the influence of the
several factors impacting the Companys operations. These include Economic
conditions, Government regulations, taxation, natural calamities etc.
wherein the Company does not have any direct control.