MIRA INFORM REPORT

Report Date :

16.10.2008

IDENTIFICATION DETAILS

Name :	NAGARJUNA CONSTRUCTION COMPANY LIMITED
Registered Office :	41, Nagarjuna Hills, Punjagutta, Hyderabad - 500082, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2008
Date of Incorporation :	22.03.1990
Com. Reg. No.:	04-011146
CIN No.: [Company Identification No.]	L72200AP1990PLC011146
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchange.
Line of Business :	Construction Activity and Cylinders Manufacturing Activity.

RATING & COMMENTS

MIRA’s Rating :

A

RATING		STATUS	PROPOSED CREDIT LINE
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large

Maximum Credit Limit :	USD 79000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established company having fine track. Available information indicates high financial responsibilities of the company. Financial position is good. Payments are correct and as per commitments. The company can be considered good for any normal business dealings. It can be regarded as a promising business partner in a medium to long-run.

LOCATIONS

Registered Office / Factory :	41, Nagarjuna Hills, Punjagutta, Hyderabad - 500082, Andhra Pradesh, India
Tel. No.:	91-40-23351753/ 23353551/ 23350571
Fax No.:	91-40-23350214/ 23356445
E-Mail :	hosecr@ncc-limited.com ncc@ncc-limited.com nccdp@hdl.vsnl.net.in ho.secr@ncclimited.in
Website :	http://www.ncclimited.com

DIRECTORS

Name :	Mr. A V S Raju
Designation :	Chairman
Name :	Mr. A A V Ranga Raju
Designation :	Managing Director
Name :	Mr. A A V Ranga Raju
Designation :	Managing Director
Name :	Mr. P C Laha
Designation :	Director
Name :	Mrs. Bala Deshpande
Designation :	Nominee Director ICICI Venture Funds
Name :	Mr. R V Shastri
Designation :	Director
Name :	Mr. A V N Raju
Designation :	Whole Time Director
Name :	Mr. A G K Raju
Designation :	Executive Director
Name :	Mr. P Abraham
Designation :	IAS (Retd.) Director
Name :	Mr. S Venkatachalam
Designation :	Director
Name :	Mr. Rakesh Jhunjhunwala
Designation :	Director
Name :	Prof. Dr. lng. V. S. Raju
Designation :	Director
Name :	Mr. J V Ranga Raju
Designation :	Whole Time Director
Name :	Mr. R N Raju
Designation :	Whole Time Director
Name :	Mr. N R Alluri
Designation :	Director
Name :	Mr. A S N Raju
Designation :	Whole Time Director
Name :	Mr. Akhil Gupta
Designation :	Nominee Director, M/S. Blackstone
Name :	Mr. Amit Dixit
Designation :	Alternate Director to Mr. Akhil Gupta

KEY EXECUTIVES

Name :	Sri M V Srinivasa Murthy
Designation :	Company Secretary and Vice President (L)

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 30.06.2008)

Category of Shareholders	No. of Shares	Percentage of Holding
Shareholding of Promoter and Promoter Group
Indian
Individuals/ Hindu Undivided Family	37387160	16.60
Bodies Corporate	14019300	6.22
Public shareholding
Institutions
Mutual Funds/ UTI	54659557	24.27
Financial Institutions / Banks	126320	0.06
Central Government/ State Government(s)	107454	0.05
Foreign Institutional Investors	71827130	31.89
Non-institutions
Bodies Corporate	12045509	5.35
Individuals
Individuals -i. Individual shareholders holding nominal share capital up to Rs 0.100 Million	15247140	6.77
ii. Individual shareholders holding nominal share capital in excess of Rs. 0.100 Million	17105535	7.60
Any Other (specify)
NRI / OCB	2692347	1.20
Shares held by Custodians ect.
Shares held by Custodians and against which Depository Receipts have been issued	3621268
Total	228838720	100.00

BUSINESS DETAILS

Line of Business :

Construction Activity and Cylinders Manufacturing Activity.

Products :

Item Code No.	Product Description
Not Allotted	Construction Activity
Not Allotted	Cylinders Manufacturing Activity

PRODUCTION STATUS

(As on 31.03.2008)

Particulars	Unit	Installed Capacity
Cylinders	Qty. Nos.	376000

GENERAL INFORMATION

Bankers :

· State Bank of India

· Canara Bank

· Andhra Bank

· State Bank of Hyderabad

· Syndicate Bank

· Indian Overseas Bank

· Allahabad Bank

· ICICI Bank

· Standard Chartered Bank

Secured Loan	(As on 31.03.2008) Rs. in Millions
From Banks
Term Loan - Rupee Loan	649.710
- Foreign Currency Loan	685.380
Working Capital Demand Loan	4209.640
Cash Credit	1403.490
From Others
Term Loan	188.710
Vehicle Loans	51.340
Total	7188.270
Installments falling due within next 12 months	837.210

Unsecured Loans
Short Term Loans
From Banks	1750.000
Total	1750.000

Banking Relations :

----

Joint Statutory Auditors :

M Bhaskara Rao and Company

Chartered Accountants,

6-3-652 5-D, Fifth Floor, 'KAUTILYA', Amrutha Estates, Somajiguda, Hyderabad - 500 082, India

Deloitte Haskins and Sells

Chartered Accountants

Coromandel House, 1-2-10, Sardar Patel Road, Secunderabad - 500003, India

Subsidiaries :

· NCC Infrastructure Holdings Limited

· NCC Urban Infrastructure Limited

· NCC Vizag Urban Infrastructure Limited

· Nagarjuna Construction Company Limited and Partners LLC

· OB Infrastructure Limited

· NCC Infrastructure Holdings Mauritius Pte. Limited

· Nagarjuna Construction Company International LLC

· Patnitop Ropeway and Resorts Limited

· Liquidity Limited

· Dhatri Developers and Projects Private Limited

· Sushanti Avenues Private Limited

· Sushruta Real Estates Private Limited

· PRG Estates (Private) Limited

· Thrilekya Real Estates (Private) Limited

· Varma Infrastructure (Private) Limited

· Nandyala Real Estates (Private) Limited

· Kedarnath Real Estates (Private) Limited

· AKHS Homes (Private) Limited

· JIG Homes (Private) Limited

· Sushanthi Housing (Private) Limited

· CSVS Property Developers (Private) Limited

· Vera Avenues (Private) Limited

· Sri Raga Nivas Property Developers (Private) Limited

· VSN Property Developers (Private) Limited

· M A Property Developers (Private) Limited

· Vara Infrastructure (Private) Limited

· Sri Raga Nivas Ventures (Private) Limited

· Mallelavanam Property Developers (Private) Limited

· Varaprada Real Estates (Private) Limited

· Sradha Real Estates (Private) Limited

· NCC Urban Lanka (Private) Limited

· Nagarjuna Contracting Company LLC

· Naftogaz Engineering Private Limited

Joint Venture :

· Brindavan Infrastructure Company Limited

· Western UP Tollway Limited

· Bangalore Elevated Tollway Limited

· Premco - NCC

· NCC - MAYTAS

· SDB-NCC-NEC

· NCC - PNC

· NCC-SJRIPL

· Himachal JV

· NCC-KNR

· NCC - NEC - Maytas

Associates :

· Himalayan Green Energy Private Limited

· Jubilee Hills Landmark Projects Limited

· Himachal Sorang Power Private Limited

· Nagarjuna Contracting Company LLC

· NCC Blue Water Products Limited

· Swetha Estates

· R.R.V Constructions Private Limited

· NCC Finance Limited

· Swetha Capital Private Limited

· Sirisha Memorial Charitable Trust

· Nagarjuna Contracting Company LLC

· Brindavan Infrastructure Company (Private) Limited

· Nagarjuna Facilities Management Services LLC

· Varaprada Real Estates Private Limited

· Vajra Seaports Private Limited

· Tellapur Technocity Private Limited

· Tellapur Town Centre Private Limited

· Tellapur Tech Park Private Limited

CAPITAL STRUCTURE

(As on 31.03.2008)

Authorised Capital :

No. of Shares	Type	Value	Amount
300000000	Equity Shares	Rs.2/- each	Rs.600.000 Millions

Issued Capital :

No. of Shares	Type	Value	Amount
229088720	Equity Shares	Rs.2/- each	Rs.458.180 Millions

Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
228838720	Equity Shares	Rs.2/- each	Rs.457.677 Millions

Of the above

1. 1,000,000 Equity Shares of Rs.2/- each were allotted in 1990-91 as fully paid Equity Shares pursuant to a contract without payment being received in cash)

2. 103,368,530 Equity Shares of Rs.2 each are allotted as fully paid up Bonus shares in the ratio of 1:1 by way of capitalisation of Rs. 206.74 millions from General Reserve)

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2008	31.03.2007	31.03.2006
SHAREHOLDERS FUNDS
1] Share Capital		457.680	417.020	206.600
2] Employees Stock Options Outstanding		2.660	4.760	0.000
3] Share Warrants		54.250	54.250	0.000
3] Reserves & Surplus		15209.180	9914.310	9212.300
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		15723.770	10390.340	9418.900
LOAN FUNDS
1] Secured Loans		7188.270	3819.570	1779.300
2] Unsecured Loans		1750.000	2550.000	2849.500
TOTAL BORROWING		8938.270	6369.570	4628.800
DEFERRED TAX LIABILITIES		167.070	115.290	0.000
TOTAL		24829.110	16875.200	14047.700
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		5196.900	4043.170	1849.500
Capital work-in-progress		142.590	185.680	87.500
INVESTMENT		5648.010	4767.630	877.100
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	5492.740	4040.540	3892.600
	Sundry Debtors	8677.410	5816.840	3016.500
	Cash & Bank Balances	2329.840	2434.000	2809.100
	Other Current Assets	60.950	92.980	0.000
	Loans & Advances	14922.980	8579.020	5977.100
Total Current Assets		31483.920	20963.380	15695.300
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	15564.090	11850.410	4026.000
	Provisions	2078.220	1244.150	457.500
Total Current Liabilities		17642.310	13094.560	4483.500
Net Current Assets		13841.610	7868.820	11211.800
MISCELLANEOUS EXPENSES		0.000	9.900	21.800
TOTAL		24829.110	16875.200	14047.700

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
Sales Turnover		34729.380	28710.520	18404.400
Other Income		55.560	291.790	113.400
Total Income		34784.940	29002.310	18517.800
Profit/(Loss) Before Tax		2451.940	2186.450	1262.400
Provision for Taxation		810.860	667.310	223.400
Profit/(Loss) After Tax		1641.080	1519.140	1039.000
Expenditures :
	Construction and Other Expenses	28952.450	24572.270	0.000
	Manufacturing Expenses	0.000	0.000	8707.300
	Administrative Expenses	0.000	0.000	1224.200
	Raw Material Consumed	0.000	0.000	7497.900
	Establishment Expenses	2179.050	1440.700	0.000
	Excise Duty	0.000	0.000	3.300
	Increase/(Decrease) in Finished Goods	0.000	0.000	(1203.800)
	Employee Cost	0.000	0.000	400.700
	Interest	719.440	503.940	310.100
	Miscellaneous Expenses	0.000	0.000	98.600
	Power & Fuel	0.000	0.000	35.500
	Depreciation & Amortization	482.060	298.950	181.600
Total Expenditure		32333.000	26815.860	17255.400

QUARTERLY RESULTS

PARTICULARS	30.06.2008
Type	1st Quarter
Sales Turnover	9709.400
Other Income	8.500
Total Income	9717.900
Total Expenditure	8793.700
Operating Profit	924.200
Interest	238.500
Gross Profit	685.700
Depreciation	141.900
Tax	173.000
Reported PAT	370.800

KEY RATIOS

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Debt-Equity Ratio	0.59	0.56	0.57
Long Term Debt-Equity Ratio	0.12	0.25	0.45
Current Ratio	1.21	1.53	2.51
TURNOVER RATIOS
Fixed Assets	5.97	7.58	8.69
Inventory	7.29	7.24	6.8
Debtors	4.79	6.5	7.46
Interest Cover Ratio	3.18	3.45	5.07
Operating Profit Margin(%)	11.6	8.73	9.53
Profit Before Interest And Tax Margin(%)	10.21	7.69	8.54
Cash Profit Margin(%)	6.05	4.5	6.63
Adjusted Net Profit Margin(%)	4.66	3.46	5.65
Return On Capital Employed(%)	17.17	14.37	15.81
Return On Net Worth(%)	12.46	10.05	16.41

LOCAL AGENCY FURTHER INFORMATION

HISTORY

Subject, a construction and infrastructure enterprise was started its journey in 22nd March of the year 1990. Subject is the only construction company from India hailed as 'Best Under a Billion' in Asia Pacific and evolved from a mere contractor to a full-fledged infrastructure solutions provider. The Company's business divisions are categorized as Building and Housing, Transportation, Electrical, Water and Environment, Irrigation, International, Power, Metals and Oil and Gas Division. The Company has a cluster of regional offices in Delhi, Ahmedabad, Bhubaneshwar, Kolkata, Mumbai, Bhopal, Lucknow, Hyderabad, Chennai and Bangalore. Also subject has presence in international level through offices in Dubai (UAE) and Muscat (Sultanate of Oman). Apart from the conventional construction and other methods, the company adopts the NBS Cellular System, developed in collaboration with Byyging Uddheman AB of Sweden and NCC Pre Fab System, which is developed in house.  

The Property Division of the company was established in the year 1996, it keeping pace with the times, its process features cutting-edge construction technologies on par with international standards, followed by the Transportation Division of the company was started in the year 1998 with the objective to capture opportunities in the country's road network. For undertake the Design, Engineering, Supply, Erection, Testing and Commissioning of EHV Transmission Lines, 33/11 KV Sub-stations and Lines, and Distribution Systems, the company established the Electrical Division in the same year 1998. A year after, in 1999, Subject had started its Water and Environment division, keeping in view of the increasing investments in several projects by various Government agencies in water supply and sewerage, effluent and underground waste water treatment plants across the country. The division meticulously executes projects to the country's urban and rural areas. CRISIL had upgraded the rating of the company from FB+ to FA in the year 2000. During the year 2004, Subject made Joint Venture with M/s Somdatt Builders Limited and also awarded a contract worth Rs 993.80 million for strengthening and paving of shoulders of SH 24, Rajkot-Morvi (Km 1/827 to Km 70/192) from the State Road Project Circle at Gandhinagar, Gujarat and also NCC had kicked off its activity in the Irrigation segment in the year 2004. The Company had teamed up with South Korean firm-Dealim Industrial Company Limited in the same year 2004 to undertake some projects.  

The Company had started its International operations by registering as a local company in the Sultanate of Oman in May of the year 2005. This Company is known as NCC International LLC now. NCC Limited had joined hands with National Highway Authority of India in the year 2006 for different projects. Also in the same year of 2006, the company bagged order from Sultanate of Oman and secured two new Orders worth of Rs 1180 million. The Power Division of the company was started in the year 2007. The Division mainly works for the development of BOOT and BOT projects and participates in tenders for turnkey contracts of power plants as well as the execution of Balance of Plant (BOP) on EPC basis and also in the Civil, Structural and Architectural works of Thermal and Hydro Power plants. Also in the same year 2007, Subject started its Metals Division and the Oil and Gas Division to cater to the infrastructure needs of various Oil and Gas Companies in India. In December of the year 2007, the company had secured a major contract from the Govt. of Oman for the prestigious Wadi Adai Al Amerat Road project.  

Subject had bagged three new orders worth Rs 5.75 billion in June of the year 2008. The first order, valued at Rs 2846.4 million from the Steel Authority of India (SAIL), Burnpur, West Bengal for structural works for basic oxygen furnace (BOF). The second order also from SAIL, Burnpur, West Bengal for structural, works for re-heating furnace (RHF) and rolling mills (RM) valued at Rs 1971.9 million and the third order, valued at Rs 331.8 million from the Nizam Institute of Medical Sciences (NIMS), Hyderabad for construction of University Campus, Heart Institute and Medical University Buildings at Rangapur, dist. Nalgonda, Andhra Pradesh. Subject had also secured four new orders in August of the year 2008 aggregating Rs 4.44 billion. 

The Company in consortia is already involved in two small Greenfield airport projects in Karnataka and a deep-water port in Machilipatnam in Andhra Pradesh. The focus of the company is to tap the potential in regional airports and non-metro (tier II cities). Subject through its Infrastructure Holdings is in consortia with Maytas Infra, Hyderabad and VIE India Projects and Holdings to implement the two airport projects (Gulbarga and Shimoga) under public-private partnership. Nagarjuna Constructions is planning to invest up to Rs 5 billion in the next three years in creating port and airport infrastructure in the country.

OPERATIONAL PERFORMANCE: 

The Company achieved a turnover of Rs. 34784.94 million as against Rs. 29002.31 million achieved in the previous year, registering a growth of 20%. The Company earned a gross profit of Rs. 3653.44 million before interest and depreciation as against Rs. 2989.34 million in the previous year. After deducting interest of Rs. 719.44 million, providing a sum of Rs. 482.06 million towards depreciation, income tax provision of Rs. 810.86 million, the operations resulted in a net profit of Rs. 1641.08 million as against Rs. 1519.14 million in the previous year, recording a growth of 8%.  

During the year, the Company on consolidated basis has bagged new orders valued around Rs. 74856 million. The order book position as on 31st March 2008 stood at Rs. 113791 million. 

The Company along with Paschal-Werk G Maier GmbH, Germany, which is one of the world's leading Formwork (modular shuttering system) producing companies and Maytas Infra Limited, have formed a new company Paschal Form Work (India) Private Limited, which is establishing a factory near Visakhapatnam, Andhra Pradesh for production of Formwork. 

The Company was declared as the second largest construction company in India by Construction World - NICMAR. 

PREFERENTIAL ISSUE OF EQUITY SHARES TO M/S BLACKSTONE GROUP 

As approved by the members at the Extraordinary General Meeting held on 24th September 2007, the Company has issued 19528135 equity shares of Rs. 2 each to M/s. Blackstone GPV Capital Partners Mauritius V-A Limited and 718765 equity shares of Rs. 2 each to M/s. Blackstone FP Capital Partners Mauritius V FII Limited, both at a premium of Rs. 200.50 and raised Rs. 4100.00 million. The aforesaid shares have been listed on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited M/s. Blackstone GPV Capital Partners (Mauritius) V-H Limited, to whom the shareholders have approved issue of 91,11,111 convertible warrants of Rs. 225 each has made an application to Foreign Investment Promotion Board (FIPB), Ministry of Finance, Department of Economic Affairs New Delhi for necessary approval and the same is awaited. 

DISCLOSURES 

Deposits 

During the year the Company has not accepted any public deposits.  

Conservation of energy, technology absorption and foreign exchange earnings and outgo: 

A) Conservation of energy 

The Company's core activity at present 19 Annual Report 2007-08 is civil construction which is not power intensive. The Company is making every effort to reduce the consumption of power. 

B) Foreign exchange earnings and outgo: 

Foreign exchange earnings Rs. Nil. 

 Foreign exchange outgo: 

 a. Towards travel Rs.3.04 million. 

 b. Towards import of capital goods Rs.65.35 million. 

 c. On account of others Rs.2.95 million.  

Particulars of employees: Details in respect of remuneration paid to employees as required under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. However, in pursuance of the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, this Report is being sent to all the members of the Company excluding the aforesaid information and the said details are made available at the registered office of the Company. The members interested in obtaining such details mawrite to the Company Secretary at the registered office of the Company. 

MANAGEMENT DISCUSSION AND ANALYSIS 

INDUSTRY OVERVIEW 

Transportation 

India has the second-largest highway and road network in the world after the United States, which amounts to about 3.3 million kilometres. The main concern remains in the fact that only about six percent of all roads are relatively well-developed national highways (2 percent of the total network) or state highways (4 percent of the total network), whereas in China the percentage of major highways is much extensive. The national highways carry only 40% of the domestic traffic. 

One of the significant developments in road infrastructure in India is the NHDP involving a total investment of US$ 49 billion up to 2012. The recent Cabinet approval for Phase NHDP V and NHDP VI are estimated at US$ 13 billion. Projects are being financed using multiple methods, including tax inflow, foreign aid and private sector participation. Increasing private sector participation and BOT contracts are expected to drive road construction. The transport sector comprises roads, ports, airports and railways. 

Building and housing overview 

Construction spending for urban infrastructure is expected to amount to Rs. 827 bn (US$ 18.8 bn) i.e. 23% of the total construction spending in the Eleventh Five Year Plan. The key drivers include a growing Indian industry and economy, increasing urbanisation and household growth. The mounting demand for building and housing construction is due to the strong growth in the industrial, manufacturing and real estate sectors. Entertainment spending on malls, multiplexes and auditoriums are bound to rise in major cities, strengthening the demand for construction activity. 

The Government of India introduced policies aiding public-private participation (PPPs) to bridge the gap between demand and supply of urban infrastructure. Urbanisation is the inevitable outcome and it is expected that over the next 10 to 15 years, about 40 per cent of India's population is slated to live in urban areas. 

Water and environment 

A massive investment of Rs 2.3 trillion (US$ 55 billion) is proposed for water resource management in the Eleventh Five-Year Plan, which will go a long way to address the uneven distribution of precipitation in the country. An enormous portion of precipitation is mainly witnessed during the monsoon, leading to flooding and water-logging. The growing population and urbanisation driving growth also warrant that such essential utilities are put in proper shape. This job will require an active participation from the private sector players, which is already underway and is expected to continue. 

Irrigation 

Indian agriculture is plagued by poor irrigation infrastructure. The government under the Bharat Nirman programme has set out to address the situation through a targeted irrigated area of 10m hectares by 2012. The Eleventh Plan also lays down similar initiatives through various major and medium irrigation (MMI) projects - envisaging the creation of 9 million hectares of irrigation potential at a total cost of Rs 1,544 billion. A bulk of these investments is likely to be funded from budgetary grants, while the rest will be mobilised through market borrowings. 

Construction investment in the hydropower segment is expected to be around0 US$ 6.9 billion during the Tenth Five-Year Plan; 57% of the total investment is in the power sector. Increasing importance is accorded to hydro-power that is construction intensive in nature. 

The National River Linking Plan has offered a three-fold solution to the country's water problem. One, interlinking will lead to a permanent drought-proofing of the country by raising the irrigation potential to equal the current net sown area of about 150 million hectares. Two, it will mitigate the annual floods in Ganga and Brahmaputra. Three, it will add 34,000 MW of hydropower to the national pool. 

Electrical 

India currently has 135 gigawatts of installed electricity generation capacities. The figure might seem substantial but is only a third of that of China. Indian power supply needs to grow at approximately 12% annually to keep pace with the average GDP growth rate of 8% per annum. The Central government introduced schemes which include Accelerated Power Development and Reform Programme (APDRP) for improving the transmission and distribution network across states. The Government of India's ambitious mission of Power for all by 2012' requires that India's installed generation capacity should be at least 2,00,000 MW by 2012 from the present level of 1,14,000 MW. Currently, the transmission capacity in the country is inadequate to meet the power flow needs. Thus, an expansion of the regional transmission network and inter-regional capacity to transmit power is essential. Private sector participation in transmission projects is likely to lead to higher spending and a faster creation of transmission infrastructure. 

Real estate 

The Indian real estate market is worth around US$ 40-45 billion and can be segregated into residential, commercial and the retail and hospitality segments. The residential sector forms 90-95 percent of the Indian reality space, while commercial segment forms 4-5 percent and organised retail around 1 percent. The reality segment is growing at an exponential pace of CAGR 19.50% and is expected to reach US$ 97.5 billion by 2010. 

OPPORTUNITIES AND STRENGTHS 

The company at present has nine verticals comprising the following: 

 1. Buildings and Housing 

 2. Transportation 

 3. Water and Environment 

 4. Electrical 

 5. Irrigation 

 6. Oil and Gas 

 7. Metals 

 8. Power 

 9. International  

They have one of the most diversified business portfolio which will help them in mitigating the risk of slow down in any one particular segment. With the starting of the three new verticals comprising of oil and gas, metals and power the business mix of the company has under gone a substantial modification. The share of three established verticals i.e. buildings and housing, transportation and water and environment together has come down from 70% to about 45%. They expect this trend to continue. 

During the last 30 years, they executed various construction projects all over the country. The client list of the Company includes reputed organisations in public and private sectors. The Company has developed excellent engineering, planning and project execution skills during this period. It is well recognised for quality consciousness and timely completion of the projects without cost over-run. The track record of the Company and proven skills of its employees at various levels will be useful in further improving the performance of the Company in the years to come.  

The Company has acquired state-of-the- art construction equipment valued at Rs. 6.62 billion as on 31st March 2008. During the year, the Company has bagged new orders valued at Rs. 74.86 billion and executed projects worth Rs. 34.78 billion. The order book of the Company as on 31st March 2008 stood at Rs.113.80 billion. 

Major projects received during the year

(Rs. In million)

Particulars	Value
Government of Karnataka, PWD, Bangalore Division Constn. of Rajeev Gandhi University Health Science's Admn. Block, Medical, Dental, Pharmacy and nursing Colleges, 750 Bedded Hitech and 250 Bedded Super speciality Hospital	3337.70
KRDCL – Bangalore Construction of IV Phase Bridges in Karnataka at different locations Package – II and III	1351.50
Satyam Computers Services Limited (SEZ Unit) Constn.of Shell and Core in SEZ Infocity – Hyderabad	964.30
National Institute of Technology, Warangal , Andhra Pradesh Construction of Hall of Residence for 1000students and Kitchen cum Dining hall at NIT	614.40
Volkswagen (I) Pvt. Limited - Chakan - MIDC – Pune Constn. of Paint shop and HRK Hall at Chakan - MIDC, near Pune – Maharashtra	1115.30
Embassy of India Complex – Kathmandu – Nepal Construction of the Embassy of India Complex at Kathmandu – Nepal	1360.00
The Exe. Engineer, Central Public Works Dept., INA Project Division, Andrews Ganj, New Delhi Constn. of General Pool Office Complex including Development works and internal E.I and DBS at INA New Delhi	886.22
Exe. Engineer, Commonwealth Games Div. No-III CPWD, Jawaharlal Nehru Stadium, - Delhi Constn. of Weight lifting Auditorium with two tiers under Ground parking at J.N Stadium Complex Delhi	654.51
Transportation
National Highways Authority of India, New Delhi Design, Engineering, Construction, Development, Finance, Operation and maintenance of Pondicherry - Tindivanam section in the state of Tamil Nadu under NHDP Phase	2736.20
Chief Engineer(communication), Road Construction Dept., Jharkhand, Ranchi Re-construction of Hatgamharia-Jagannathpur-Noamun-Bara Jamda-Baraiburu Road (Km0.0 to 44.8)	1095.00
Water and Env.
Chief Engineer, Greater Visakhapatnam Municipal Corporation - Visakhapatnam Providing sewerage system to central part of Visakhapatnam City - under JNNURM Pkg.-IV	496.20
The Commissioner, Greater Vishakapatnam Municipal Corporation – Vishakapatnam Infrastructure facilities to Aganampudi, Duvvada and Vambay Colony, Madurawada	848.00
The Engineer in-chief, Public Health AC Guards, Municipal Engineering Dept. - Hyd. Kadiri Water Supply improvement scheme - Investigation Survey design and execution of Kadiri water supply improvement scheme with CBR as source.	531.90
The Project Engineer, Office of the Project Engineer, Public health engineering Dept. – Raipur Providing, Laying, Testing, Commissioning and one year operation and maintenance of following clear water Pumping mains from water treatment plant to different 17 nos. O.H.T with valves and specials and all allied Civil works under Raipur Augmentation water supply scheme.	529.20
The Chief Engineer, Karnataka Urban Water Supply and Drainage Board Bannerughatta - B'Lore Providing and Laying 1118 mm dia to 406 mm dia MS pipe line laying and jointing of 350mm dia to 150mm dia DL Pipe line construction of 15.00 LL and 10.00 LL capacity RCC OHT's on 18M, 15M, and 12M Staging etc. and allied works Under remodelling of water supply Distribution network to Mysore City under JN-NURM.	774.00
The Engineer in-chief, Public Health, AC Guards, Govt. of Andhra Pradesh, Public Health and Municipal Department - Hyderabad Warangal water Supply improvement scheme under UIDSSMT Construction of Jackwell, Providing MS Raw water conduit to the earthen bund of Dharmasagar Reservoir	927.00
Indore Municipal Corporation - JNNURM - NEW PARK – INDORE Constn. of Sewerage System / Allied works in Indore City Under JNNURM East Zone and Central Zone	2668.70
Electrical
The G.M, Planning and Design, Dakshin Haryana Bijli Vitaran Nigam Limited., Vidyut Sadan - Haryana Supply of material and correction of new 11 kv single circuit lines with pole mounting disbtn. for providing HVDS in Hisar, Narmaul and Sirsa Circles and Ghasera Feeder under DHBVN on Turnkey basis	2300.00
Irrigation
Govt. of Andhra Pradesh, I and CAD Department, GNSS Circle - Kadapa GNSS Phase II Investigation, Design and Excavation of Kailasagiri Canal from Km.0.00 to Km 65.500 including Const. of CM and CD works and distributory system including field channel to irrigate an ayacut of 55000 acres in Chittor and Nellore District Pkg. 10/6	975.60
Govt. of Andhra Pradesh - Irrigation and CAD (PW) Dept., Pkg.No.30/6, Investigation, Design, excavation and lining of owk tunnel II for feeding to owk Reservoir and Construction of Adit on EPC Turnkey contract.	2005.60
Metal
Steel Authority of India Limited - IISCO Steel Plant -Burnapur. 2.5 Mtpa New Stream Expansion of ISP-setting up of Blast Furnace Complex. Posco-NCC Consortium	7423.81
Oil and Gas
OGIP Project - ONGC (Offshore Grid Interconnectivity for Power to ESP)	4870.95
Coke Drum System Package – BORL	1722.42
Hydrogen Generation Unit – BORL	3843.84

Major projects completed during the Year 2007-08

(Rs in million)

Project	Value of Work Incl. Escalation
SAAP Games Village Construction of Games Village at Gachibowli	743.79
Delhi Metro Rail Corporation Limited., New Delhi Construction of Metro Bhawan at Fire Brigade Line.	490.79
KHB-Suryanagar, E.P.I. LIMITED., HSG Housing scheme at Suryanagar, Iglur, Banahalli, B'lore	736.00
WIPRO LIMITED,COCHIN Super Structure Work, Civil Works for Software Development Centre, Kochi	480.00
Karnataka Road Development Corpn. Limited., Bangalore Widening and Improvement of AP Boarders. Ramasamudra Road.Gulbarga Dist.	521.14
GWRDCL - SUJALAM SUFLAM – MODHERA EPC Contract for pipeline project from Modhera to Sujalam Suflam and pumping station	1234.40
GWRDCL - SUJALAM SUFLAM – JALUNDRA EPC Contract for Pipeline project from Jalundra to Sujalam Suflam, and Pumping Station.	1491.90
CMWSSB-Pkg. I and II – CHENNAI Supplying, Laying, Jointing, Testing and Commissioning of Mild steel pipes from Water treatment plat Pkg. I, II	884.60
MSEB Nagpur Design, supply, erection, testing, commissioning of 33KV/UG Lines, substations and allied works on Turnkey basis under APDRP.	577.56
Puranchal Vidyut Vitaran Nigam Limited Varnasi Rural Electrification Works - Rajiv Gandhi Gramina Vidyutikiran Yojana on turnkey execution basis	1168.57

RISKS AND CONCERNS

Industry risk 

Risk impact 

Demand is dependent on general economic conditions. A downturn can adversely affect the Company's business and earnings. 

Risk mitigation measures 

Buoyant macroeconomic conditions in India have been sustaining economic reform and investments in infrastructure and construction industries (which has been the second largest contributor to GDP growth). In addition, a targeted double digit growth by the end of the Eleventh Plan period (2008-2012) only suggests an increased spending by the Government on infrastructure, auguring well for the Company. Besides, subject has diversified across several verticals within the construction industry, reducing excessive dependence on any single sector. 

Strategy risk 

Risk impact 

A skewed business strategy may result in lost opportunities. 

Risk mitigation measures 

The long-term business strategy and the annual business plans are approved by the Board of Directors after thorough discussion and analysis. In addition, mid-term reviews of the business strategy and the annual plans ensure that the Company initiates a mid-course correction, should the situation warrant. The long-term business strategy comprises: 

 a. Fortifying the Company's presence in select verticals; 

 b. Focusing on the quality of the Company's products; 

 c. Diversifying presence in different sectors and in different countries to reduce cyclical risk; 

 d. Expansion in international markets that comply with the Company's strategic vision; 

 e. Increasing focus on BOT and BOOT projects in transportation and power; 

 f. Expansion into gas pipeline, metals and power projects.  

All the above measures resulted in a top line growth of 50% y-o-y over the last five years. Besides, subject also provides adequate training to its entire staff on operating procedures and policies, as well as the development of project management skills. 

Competition risk 

Risk impact 

Increasing competition from domestic and international construction companies affect the market share and profitability. 

Risk mitigation measures 

Subject forges alliances with large domestic and international players while bidding for large national and international projects to meet the increasing competition. The company has shifted its business strategy from bidding for small projects with the risk of a larger reduction in price to larger ones, befitting the size and scale of company. 

Operational risk 

Risk impact 

Staff attrition and non-availability of key personnel affect the Company's operations. Volatility in the prices of critical raw materials also impact project profitability.

Risk mitigation measures 

Subject maintains a workforce based upon its current and anticipated workloads. Temporary disturbances at project sites are addressed by relocating the available workforce. Attrition is managed by adopting healthy employee practices that promote and encourage a good work culture. This is coupled with performance-based promotion and rewards, conflict - resolution mechanisms, sound pay and incentive structures benchmarked with industry standards. 

Subject provides adequate training to its entire staff on operating procedures and policies, as well as on honing of project management skills. In addition, employees are encouraged to upgrade their skill sets and adopt multi-tasking through job rotation.  

Subject implemented adequate procurement procedures that include long-term contracts to reduce price volatilities, regular augmentation of storage facilities for stocking of materials and a careful review and monitoring of the carrying cost of raw materials. 

The project contracts comprised a cost escalation clause to ensure that price volatility could be passed on to project owners. Projects are executed using standard quality- certified equipment and materials benchmarked against global standards. 

Crisis management teams have been established at all project sites to manage any eventuality. The project operating procedures institute the most effective accident- prevention measures across all stages of construction activity. 

Price inflation risk 

Risk impact 

Volatility in prices of inputs and /or changes in assumptions may cause cost overruns affecting the profitability Delay in completion of project could result in liquidated damages and / or additional costs affecting profitability 

Risk mitigation measures 

Many of the contracts have inbuilt escalation clauses, which compensate increases in input costs. In case of non escalation contracts, the bid estimate process is carried out in such a way, to insulate the possible increase in the cost of inputs of the contracts. Further, the Company implemented adequate procurement procedures that include long-term contracts to cover price volatilities, regular augmentation of storage facilities for stocking of materials and a careful review and monitoring of the carrying cost of raw materials. In addition, NCC has a system of proper price estimate of contracts, which will minimise the impact of cost overrun. 

Subject undertakes adequate controls on daily management of project process and adequate monitoring controls of project execution for achieving set milestones and alerting the clients for delays. Sophisticated project management tools are extensively used to control schedules.  

Assets and inventory risk 

Risk impact 

Risk of accidents, fire, theft etc., to Company's properties and stocks will affect the company's operations affecting profitability. Similarly the breakdowns to the Company's machinery will affect operations and profitability. 

Risk mitigation measures 

The company undertakes the required steps which provide security to its assets and inventory by taking appropriate insurance policies etc., to avoid or mitigate the above risks. The Company also undertakes preventive maintenance for all its equipments according to a predefined schedule to avoid breakdowns. 

WORK IN PROGRESS

i) Project Division: Work-in-Progress is valued at the contract rates less profit margin / estimates.

ii) Light Engineering Division: Work-in-Progress is valued at lower of cost and net realisable value.

iii) Property Development: Properties under development are valued at cost. Cost comprises all direct development expenditure, administrative expenses and borrowing costs. Land held for resale is valued at lower of cost and net realisable value.

JOINT VENTURE PROJECTS

i) In respect of Joint Venture Contracts in the nature of jointly controlled operations, the assets controlled, liabilities incurred, the share of income and expenses incurred are recognized in the agreed proportions under respective heads in the financial statements.

ii) Assets, Liabilities and Expenditure arising out of contracts executed wholly by the Company pursuant to a joint

venture contract are recognised under respective heads in the financial statements. Income from the contract is

accounted net of joint venturer’s share under turnover in these financial statements.

CONTINGENT LIABILITIES NOT PROVIDED FOR

· Letter of credit - Rs.1781.07 million (31-03-2007: Rs.1208.70 million).

· Counter Guarantees given to the Bankers – Rs. 13051.35 million (31-03-2007: Rs.9860.05 million).

· Performance guarantees, given on behalf of Subsidiaries and Associates Rs.330.89 million (31-03-2007: Rs.90.85 million).

· Corporate Guarantees given to Banks and Financial institutions for financial assistance extended to Subsidiaries,

· Associates and Joint Ventures Rs.4580.66 million (31-03-2007: Rs.2600.53 million).

· Disputed Seigniorage Charges levied by Director (Mines and Geology) Government of Andhra Pradesh, in respect of which the Company has obtained a stay from the Hon’ble Supreme Court of India – Rs.61.59 million (31-03-2007: Rs.61.59 million).

· Disputed sales tax liability for which the Company has gone into appeal Rs.63.75 million (31-03-2007: Rs.71.64 million).

· Disputed central excise duty relating to cement plant, which was sold in earlier year, for which the Company has filed an appeal to CESTAT, Bangalore Rs.28.23 million (31-03-2007: Rs.28.23 million)

LOAN FUNDS

Secured Loans

Term Loans

Term Loans availed from banks and others are secured by hypothecation of specific assets, comprising plant

and machinery, and construction equipment, acquired out of the said loans and personal guarantee of a Director.

Working Capital Facilities

· Cash Credit facilities and Working Capital Demand Loans from consortium of banks are secured by:

· Hypothecation against first charge on stocks, books debts and other current assets of the Project and Light Engineering Division of the Company both present and future ranking parri passu with consortium banks

· Hypothecation against first charge on all unencumbered fixed assets of the Project Division of the Company both present and future ranking parri passu with consortium banks.

· Equitable mortgage of six properties (Land and Buildings).

· Personal guarantee of certain Directors.

Vehicle loans availed are secured by hypothecation of vehicles acquired out of the said loans.

FIXED ASSETS

· Land

· Buildings

· Plant and Machinery

· Construction Accessories

· Tools and Equipment

· Office Equipment

· Furniture and Fixtures

· Construction Vehicles

· Office Vehicles

PRESS RELEASE

Nagarjuna Construction bags National Games contract

Hyderabad , Dec 6

NAGARJUNA Construction Company Limited has announced that it has bagged the `National Games Housing Complex Project' at Ranchi from the Government of Jharkand for the National Games in 2007.

The project is worth around Rs 2760 millions, the company said in a press release here on Monday.

As per the letter of intent, the company has to develop, design, finance and construct 1,800 dwelling units over 27 months. Of these, 1200 have to be completed within 16 months for providing accommodation to the athletes. After the games, the company is free to sell the dwelling units in the open market, the release said.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.48.43
UK Pound	1	Rs.84.54
Euro	1	Rs.65.91

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions