Shukun Construction Ltd Management Discussions

SHUKUN CONSTRUCTION LIMITED ANNUAL REPORT 2004-2005 MANAGEMENT DISCUSSION AND ANALYSIS There is a pronounced tendency for all construction companies to bid at extremely fine rates. Lower margins, per se, would not have been a cause of concern had there been very significant increase in the volume of projects. Infrastructure growth is on the upswing and lower margins will be partly compensated by higher volumes. Due to sustained thrust on improvement in the operational efficiency coupled with better product mix and management. It is evident from the above that your company is not only committed to achieve customer satisfaction but is also committed to take care of the surrounding and the community. Having said this, it is necessary to high light the fact that the year has seen a growth in margin pressures through out the industry. Well equipment, skilled manpower and expertise in various area is well positioned to take advantage of growth. During the year the Company had propelled to a new growth path. Companys competitive drive to get greater business than merely riding on an overall economic upswing. The Company has increased its revenue growth in a period when the industry witnessed a decrease in growth. Power is the other area where there ought to be considerable scope in the future. Supply outstripped demand and intense competition drove down price of works. There is a distinct change in the type of projects on offer. Construction companies have been adversely affected by the steep increase in steel prices. Recognizing that the external environment will continue to exert pressure oil margins, the company focuses on growth and continuous improvements in productivity and operational efficiencies. There is an increasing need to become more capital intensive and adopt stringent quality control. Since steel is a major raw material in the construction industry this has adversely affected the operations of the Company. The Company intends to maintain its existing capital assets at optimum levels. The company is exploring this opportunity by forming strategic joint ventures. It is necessary to secure new projects across various area to ensure that assets are not underutilized and adequate returns are maintained on these investments. As we approach higher thresholds of growth, explore new avenues and expand operations it has become imperative to sustain and enhance our human resource competencies. The Company has been working towards creating a culture of togetherness and teamwork amongst employees. The company believes in protecting the interest of all its stakeholders. Management Discussion and Analysis under specific heads is as under. (a) Industry Structure and Development The Construction industry in which your company is engaged is going through the crucial stage of sluggish demand. (b) Opportunities and Threats The demand was thin for initial period of the year however it improved in later part of the year. The competition which is already stiff has become caviar due to increased number of competitors in the market. (c ) Segment-wise or product-wise performance An average Indian family so far accustomed for living together has now almost changed to nuclear family concept. Small scale business units are also increasing adding to demand for construction. (d) Risk and Concern The budget presented by P. Chidambaram, Hon. Finance Minister has made steel costly and again service tax net has been widened besides increase in services tax rate with additional education cess. (e) Internal Control Systems and their adequacy In an effort to control costs the company has put checks everywhere possible. Keeping in view the principles of financial management the company has improved on costs cutting. (f) Material Development in Human Resources / Industrial Relations front During the year under review the relations with staff had been very cordial.