ketan construction ltd Management discussions

KETAN CONSTRUCTION LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS ECONOMIC SCENARIO:- India, as one of the fastest growing economies has recognized the need for all round development in the important infrastructure sectors. With political consensus in reforms having been established and with a stable democratic environment, clear policies and regulatory frameworks are being put in place. The country having established policies conductive for foreign investments has gradually opened up as a preferred destination for infrastructure financing. Several fiscal incentive were announced by the government for boosting investment in infrastructure projects. INDUSTRY OVERVIEW AND OUTLOOK With the increased expectation of clients with respect to quality, timely completion etc., Construction Industry has seen notable change in its structure. For mega projects, the pre qualification criteria encompassing the technical expertise and other infrastructure requirements has induced various national and international construction companies to enter into joint ventures and strategic tie-ups. The private sector is expected to play a major role in the future growth in India after opening of the economy. Private participation in the roads is through BOT route, the annuity method or SPV route. NHAI has also been permitted to participate in the equity in BOT projects. The estimated investment only in road sector upto 2010 is estimated as $31.20 Billion. The potential is enormous as many sectors are opening up for participation and private investment. However considering the expected the growth, many multinational construction companies have made their foray into India. Consequently the domestic construction and infrastructure companies may face stiff competition. Further the increase in the price of steel may adversely affect the cost of projects. To maintain the vital player position in construction and infrastructure industry, the company has chalked out the strategies. The company has accepted in pursuing with selective approach in taking new orders to mitigate such risks to the extent possible. The group is also diversifying into mining activities and also intend to enter into power sector. A subsidiary company is formed in the name of Ketan Mines and Minerals Ltd having main object of mining activities having its Registered Office at Rajkot. PERFORMANCE:- The year 2005-06 is an another year of growth for the company. The company has posted creditable performance during the year 2005-06. The total income of the company has increased by 23.08% compared to previous year which is a very positive sign of growth. The profit before interest, depreciation and tax shows an upward trend registering an increase by 22.60% over the previous year. The Net Profit rose form 9.02 crores to Rs. 12.71 crores recording 40.90% growth over previous year. This was made possible due to the efforts driven by registering strong volumes of growth and large business exposure that the company has got over the year and efficient cost optimization undertaken by the company. INTERNAL AUDIT SYSTEM:- The Company has maintained adequate internal control systems and procedures to ensure orderly and efficient conduct of business. The system is improved and modified continuously by the management to meet with the changes in business conditions, statutory and accounting requirements. The management of the company has taken every efforts and recently introduced SAP / ERP system in various business operations of the company, site operations, and in various key departments like Finance, Accounts, Human Resource, Purchase etc. Consequently Management Information System which is an integral part of control mechanism has been strengthen. The Audit Committee of the company also actively reviews the adequacy and effectiveness of internal control systems. The internal audit is designed in such a way so as to put check on every financial data & other related records and increase their reliability to the improved level. HUMAN RESOURCE DEVELOPMENT: The Company believes that executive talent is the most important assets of the organization. It ultimately influences the growth, progress, profits and shareholders value. The vision of the company is to create culture and value system to ensure the achievement of corporate goals. CAUTIONARY STATEMENTS:- Statements made in Management and Discussion Analysis have been made in good faith. Many unforeseen factors may come into play and affect the actual results, which could be different from what the Management envisages in terms of performance and outlook. Market. data, industry information etc. contained in this Report have been based on information gathered from various published and unpublished reports and their accuracy, reliability, and completeness cannot be assured. Factors such as economic conditions affecting demand / supply and priced conditions in domestic & international markets in which the Company operates, and changes in Government regulations, tax laws , other statues and other incidental factors, may affect the final results and performance of the Company.