MIRA
INFORM REPORT
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Report Date : |
26.09.2008 |
IDENTIFICATION
DETAILS
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Name : |
HINDUSTAN CONSTRUCTION COMPANY LIMITED |
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Registered Office : |
Hincon House, Lal Bahadur Shastri Marg, Vikhroli (West), Mumbai 400 083, Maharashtra |
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Country : |
India |
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Financials (as on) : |
31.03.2008 |
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Date of Incorporation : |
28.01.1926 |
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Com. Reg. No.: |
1228 |
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CIN No.: [Company Identification No.] |
L45200MH1926PLC001228 |
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TAN No.: [Tax Deduction & Collection Account No.] |
MUMH00179E |
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Legal Form : |
Public limited liability company. The company’s shares are listed on the Stock Exchanges. |
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Line of Business : |
Undertakes projects for the construction of roads and bridges, dams, barrages, power projects, tunnels and underground works, industrial structures and buildings, marine works, railway bridges and environmental business. |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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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 |
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Maximum Credit Limit : |
USD 50000000 |
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Status : |
Excellent |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well-established company of Walchand Hirachand Group. Directors are reported as experienced, respectable and resourceful industrialist. Their trade relations are reported as fair. Financial position is satisfactory. Payments are reported as slow but correct.
The company can be considered normal for business dealing at usual trade terms and conditions |
LOCATIONS
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Registered Office : |
Hincon House, Lal Bahadur Shastri Marg, Vikhroli (West), Mumbai – 400 083, Maharashtra, India |
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Tel. No.: |
91-22-25775959 |
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Fax No.: |
91-22-25777568/ 25781850 / 25775950 |
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E-Mail : |
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Website : |
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Factory : |
Located at:- · Rajasthan · Himachal Pradesh · Delhi · Madhya Pradesh |
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Branches : |
Located at:-
· Jammu and Kashmir · Punjab · Haryana · Rajasthan · Gujarat · Maharashtra · Mumbai · Goa · Karnataka · Kerala · Tamilnadu · Andhra Pradesh · Orissa · West Bengal · Uttaranchal · Assam · Bihar (Jharkand) · Madhya Pradesh (Chattisgarh) · Uttar Pradesh · New Delhi · Himachal Pradesh · Bhutan · Bihar |
DIRECTORS
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Name : |
Mr. Ajit Gulabchand |
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Designation : |
Chairman and Managing Director |
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Name : |
Mr. Y. H. Malegam |
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Designation : |
Director |
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Name : |
Mr. Rajas R. Doshi |
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Designation : |
Director |
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Name : |
Mr. Bhalchandra R. Sule |
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Designation : |
Director |
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Name : |
Mr. D. M. Popat |
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Designation : |
Director |
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Name : |
Mr. Ram P Gandhi |
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Designation : |
Director |
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Name : |
Dr. N. A. Kalyani |
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Designation : |
Director |
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Name : |
Mr. Fred Moavenzadeh |
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Designation : |
Director |
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Name : |
Mr. Sharad M. Kulkarni |
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Designation : |
Director |
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Name : |
Mr. Nirmal P. Bhogilal |
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Designation : |
Director |
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Name : |
Mr. K. G. Tendulkar |
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Designation : |
Dy. Managing Director |
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Name : |
Mr. M. D. Khattar (upto 01.08.2005) |
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Designation : |
Executive Director, Technical and Business Development |
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Name : |
Mr. R. G. Vartak |
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Designation : |
Director |
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Date of Appointment : |
27.07.2007 |
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Name : |
Mr. S K Fotedar |
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Designation : |
Executive Director (Technical) |
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Date of Appointment : |
29.09.2005 |
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Name : |
Mr. Anil Singhvi |
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Designation : |
Director |
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Date of Appointment : |
27.07.2007 |
KEY EXECUTIVES
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Name : |
Mr. Vithal P Kulkarni |
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Designation : |
Company Secretary |
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Name : |
Mr. Pradeep Sood |
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Designation : |
Group Chief Financial Officer |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
(As on 31.03.2008)
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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Promoters, directors, relatives and associates |
120748457 |
47.12 |
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Foreign institutional investors/mutual funds |
30495506 |
11.90 |
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Public financial institutions/State Financial Corporation |
6352629 |
2.48 |
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Mutual funds (Indian ) and UTI |
37706177 |
14.71 |
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Nationalised and other banks |
473410 |
0.18 |
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NRIs/ OCBs |
2487399 |
0.97 |
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GDSs |
890010 |
0.35 |
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Public |
57096012 |
22.29 |
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Total |
256249600 |
100.00 |
BUSINESS DETAILS
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Line of Business : |
Undertakes projects for the construction of roads and bridges, dams, barrages, power projects, tunnels and underground works, industrial structures and buildings, marine works, railway bridges and environmental business. |
GENERAL
INFORMATION
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No. of Employees : |
14869 |
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Bankers : |
·
ICICI Bank
Limited ·
Canara Bank ·
Punjab
National Bank ·
Oriental
Bank of Commerce ·
Indian Bank ·
State Bank
of India ·
IDBI Bank
Limited ·
Federal Bank
Limited ·
State Bank
of Patiala ·
Union Bank
of India ·
ING Vysya Bank
Limited ·
Exim Bank ·
Bank of
India ·
Bank of
Bahrain and Kuwait B.S.C. ·
HDFC Bank
Limited ·
Citibank
N.A. ·
J.P. Morgan
Chase Bank N.A. ·
Axis Bank
Limited ·
IDFC Limited ·
State Bank
of Travancore ·
Standard
Chartered Bank ·
Hongkong
Shanghai Banking Corporation Limited |
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Facilities : |
Notes: Privately Placed Non Convertible
Debentures i) 10% Non Convertible Debentures
"E" Series : Secured by first charge by way of hypothecation of
specific movable properties as specified in second schedule of the trust deed
executed on 20th January, 2003 in favour of Axis Bank Limited, the trustees
to the debenture holders. These debentures having a face value of Rs.100/-
each aggregating Rs. 150.000 millions are to be redeemed in seven half yearly
installments at the end of 48th, 54th, 60th, 66th, 72nd, 78th and 84th month
from the date of allotment i.e. 25th October, 2002. The first, second and
third installment of Rs.20.000 millions each were paid on due dates i.e. 25th
October, 2006, 25th April, 2007 and 25th October, 2007.
ii) 9% Non Convertible Debentures
"F" Series :
Secured by first charge by way of hypothecation of specific movable
properties as specified in second schedule of the trust deed executed on 20th
January, 2003 in favour of Axis Bank Limited, the trustees to the debenture
holders. These debentures having a face value of Rs.100/- each aggregating
Rs.200.000 millions are to be redeemed in three annual installments at the
end of 36th, 48th, and 60th month from the date of allotment i.e.17th
January, 2003. First and Second installment of Rs. 66.700 millions each were
paid on due dates i.e. 16th January, 2006 and 16th January,
2007. These debentures have been redeemed by paying the third and final
installment of Rs.66.700 millions on 16th January, 2008. iii) 7.5% Non Convertible Debentures : Secured by first charge by way of hypothecation
of specific movable properties as specified in second schedule of the trust
deed executed on 17th December, 2004 in favour of Axis Bank Limited, the
trustees to the debenture holders. These debentures having a face value of
Rs.10,00,000/- each aggregating Rs.600.000 millions are to be redeemed in
five half yearly equal installments commencing from the end of the 8th year
from the date of allotment i.e.28th September, 2004. iv) 9% Non-convertible debentures : Secured by first charge on Company’s
specific movable properties as specified in second schedule of the trust deed
executed on 17th January, 2007 in favour of Axis Bank Limited, the
trustees to the debenture holders. These debentures having a face value of
Rs.1000000/- each aggregating Rs.500 millions are to be redeemed in three
annual equal installments commencing from the end of 3rd, 4th
and 5th year from the date of first disbursement i.e. 07th
September, 2006. v) 9% Non-convertible debentures : Secured by the first charge on Company’s
specific movable properties as specified in second schedule of the trust deed
executed on 17th January, 2007 in favour of Axis Bank Limited, the
trustees to the debenture holders. These debentures having a face value of
Rs.1000000 each aggregating Rs.500.000 millions are to be redeemed by bullet
payment at the end of 5th year from the date of allotment i.e. 20th
November, 2007. The above
debentures (i) to (v) are also secured by way of mortgage of a flat situated
at Lok gaurav Complex, Vikhroli. Banks: Cash credit
limits are secured against hypothecation of work in progress, stores, book
debts, dues and advances and residual charge/mortgage on plant and machinery and land and
buildings at Village Tara, District Raigad. ICICI Bank Car Loan Secured by first
charge by way of hypothecation of Cars purchased under the scheme in favour
of ICICI Bank. EXIM Bank Term Loan [Item No. (iii) and
(iv)] Secured by a
first charge on movable fixed assets acquired / to be acquired by the Company
as specified in schedule III-A of the loan agreement executed on 22nd
March, 2007. State Bank of Travancore Term Loan [Item
No. (v) and (vi)] Secured by a
first charge way of hypothecation of a pool of specific plant, machinery,
tools and accessories acquired / to be acquired by the Company as specified
in schedule II of the deed of hypothecation executed in favour of the Bank on
15th February, 2007. State Bank of Mauritius Secured by first
charge by way of hypothecation of specific assets in favour of the Bank as
described in schedule II of the deed of hypothecation executed on 8th
May, 2007. Bank of Maharashtra Secured by first
charge by way of hypothecation of specific assets in favour of the Bank as
described in the fourth schedule of the deed of hypothecation executed on 26th
December, 2007. State Bank of India Secured by first
charge by way of hypothecation of specific fixed assets in favour of the Bank
as described in the annexure II to the agreement of loan executed on 30th
November, 2007. From HDFC Corporate Loan Secured by way of
oral charge on 6th June, 2003 on non residential premises being all the piece
and parcel of land admeasuring 202505 sq. meters at Village Tara, district Raigad
together with buildings and other structures thereon, land appurtenant
thereto both present and future. This loan has been repaid during the year.
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Banking Relations
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Good |
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Auditors : |
K. S. Aiyar and Company Chartered Accountants |
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Joint Ventures : |
· Nathpa Jhakri Joint Venture · HCC Pati Joint Venture · Kumagal Skanska – HCC- Itochu Group · HCC-L and T Purulia Joint Venture · Alpine – Samsung – HCC Joint Venture · Alpine - HCC Joint Venture |
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Associates: |
· Hincon Holding Limited · Gulabchand Investments Limited · The Premier Automobiles Limited · Acron (India) Limited · Walchandnagar Industries Limited · Levasa Corporation Limited |
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Subsidiaries |
· Hincon Technoconsult Limited (Formerly known as Ganga Construction Limited) · Ucchar Investment Limited · Western Securities Limited · Hincon International Limited · HCC Infotech Limited · HCC Infotech Inc. · Pune – Paud Toll Road Company Limited · Hincon Realty Limited · Nirmal BOT Limited · HCC Real Estate Limited · HCC Singapore Enterprises Pte Limited · HCC Mauritius Enterprises Limited · HRL Township Developers Limited · HRL (Thane) Real Estate Limited · Panchkutir Developers Limited · Hinjewadi Township Limited · Nashik Township Limited · Charosa Wineries Limited · Lavasa Corporation Limited · Lavasa Hotel Limited · Lavasa Star Hotel Limited · Apollo Lavasa Health Corporation Limited · Vikhroli Corporate Park |
CAPITAL STRUCTURE
(As on 31.03.2008)
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
50000 |
9.5% Redeemable Cumulative Second Preference Shares |
Rs.100/- each |
Rs.5.000 millions |
|
495000000 |
Equity Shares |
Rs.1/- each |
Rs.495.000 millions |
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Total |
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Rs.500.000 millions |
Issued, Subscribed & Paid-up Capital :
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No. of Shares |
Type |
Value |
Amount |
|
256249600 |
Equity Shares |
Rs.1/- each |
Rs.256.200 millions |
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Add : Forfeited Shares |
|
Rs.0.100 millions |
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Total |
|
Rs.256.300 millions |
Notes :
1. Out of 256249600 Equity Shares of Rs.1/- each
·
126866250 Equity Shares were issued as fully paid
Bonus Shares by capitalization of Reserves and Surplus.
·
29055400 Equity Shares were issued to two SEBI
Registered institutional Investors and a Domestic Mutual Fund on a preferential
basis on 31st March, 2005.
·
26954200 Shares representing 26954200 Global
Depository Shares were issued on 29.03.2006 pursuant to Global Depository
Offering by the Company. Out of above 26064190 Global Depository Shares Have
been converted into Indian Equity Shares.
2. Each Equity Share of Rs.10 has been subdivided into 10 Equity Shares of
Re.1 each, as approved by the Shareholders in the Extraordinary General Meeting
held on 28th October, 2005.
3. Share Warrants
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES
OF FUNDS |
31.03.2008 |
31.03.2007 |
31.03.2006 |
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SHAREHOLDERS
FUNDS |
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1] Share Capital |
256.300 |
256.300 |
256.316 |
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2] Share Warrants |
151.900 |
0.000 |
0.000 |
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3] Reserves &
Surplus |
9632.400 |
8784.500 |
8641.893 |
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NETWORTH
|
10040.600 |
9040.800 |
8898.209 |
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LOAN FUNDS |
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1] Secured Loans |
5207.500 |
4824.800 |
1973.235 |
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2] Unsecured
Loans |
13241.100 |
10685.800 |
11005.151 |
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TOTAL BORROWING
|
18448.600 |
15510.600 |
12978.386 |
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DEFERRED TAX
LIABILITIES |
1132.900 |
855.400 |
677.327 |
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TOTAL
|
29622.100 |
25406.800 |
22553.922 |
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APPLICATION OF FUNDS
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FIXED ASSETS [Net Block]
|
9531.000 |
7461.600 |
4920.648 |
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Capital work-in-progress
|
0.000 |
0.000 |
1074.263 |
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Items Awaiting Completion for Commissioning
|
675.000 |
1512.700 |
0.000 |
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INVESTMENT
|
2955.400 |
2286.400 |
1264.723 |
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DEFERREX TAX ASSETS
|
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS &
ADVANCES
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Inventories
|
21438.700
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17386.100
|
10987.231
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Sundry Debtors
|
44.500
|
5.400
|
28.045
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Cash & Bank Balances
|
2643.500
|
2083.700
|
10060.068
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Other Current Assets
|
19.800
|
110.900
|
0.830
|
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Loans & Advances
|
2954.000
|
3476.100
|
1991.108
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Total Current Assets
|
27100.500
|
23062.200
|
23067.282 |
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Less :
CURRENT LIABILITIES & PROVISIONS
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Current Liabilities
|
10174.200
|
8439.000
|
7400.550
|
|
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Provisions
|
465.600
|
477.100
|
372.444
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Total Current Liabilities
|
10639.800
|
8916.100
|
7772.994
|
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Net Current Assets
|
16460.700
|
14146.100
|
15294.288
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MISCELLANEOUS EXPENSES
|
0.000 |
0.000 |
0.000 |
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TOTAL
|
29622.100 |
25406.800 |
22553.922 |
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PROFIT & LOSS
ACCOUNT
|
PARTICULARS |
31.03.2008 |
31.03.2007 |
31.03.2006 |
|
|
Sales Turnover |
30827.600 |
23576.200 |
19869.852 |
|
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Other Income |
387.100 |
198.800 |
61.425 |
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Total Income |
31214.700 |
23775.000 |
19931.277 |
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Profit/(Loss) Before Tax |
1560.000 |
1178.900 |
1382.613 |
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Provision for Taxation |
472.300 |
811.300 |
134.632 |
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Profit/(Loss) After Tax |
1087.700 |
367.600 |
1247.981 |
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Expenditures : |
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|
Construction Expenses |
23049.300 |
18370.300 |
0.000 |
|
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Employees Remuneration and Benefits |
2972.300 |
2086.800 |
0.000 |
|
|
Office and Site Establishment Expenses |
1139.900 |
966.500 |
0.000 |
|
|
Administrative Expenses |
0.000 |
0.000 |
715.862 |
|
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Salaries, Wages, Bonus, etc. |
0.000 |
0.000 |
1314.210 |
|
|
Increase/(Decrease) in Finished Goods |
7.200 |
(243.800) |
0.000 |
|
|
Interest |
1524.100 |
619.700 |
413.888 |
|
|
Depreciation & Amortization |
961.900 |
796.600 |
524.455 |
|
|
Other Expenditure |
0.000 |
0.000 |
16011.094 |
|
Total Expenditure |
29654.700 |
22596.100 |
18979.509 |
|
QUARTERLY RESULTS
|
PARTICULARS |
30.06.2008 |
|
Type |
1st
Quarter |
|
Sales
Turnover |
8658.900 |
|
Other
Income |
630.200 |
|
Total
Income |
9289.100 |
|
Total
Expenditure |
8253.800 |
|
Operating
Profit |
1035.300 |
|
Interest |
390.600 |
|
Gross
Profit |
644.700 |
|
Depreciation |
252.600 |
|
Tax |
83.700 |
|
Reported
PAT |
308.400 |
KEY RATIOS
|
PARTICULARS |
31.03.2008 |
31.03.2007 |
31.03.2006 |
|
Debt-Equity Ratio |
1.79 |
1.53 |
1.3 |
|
Long Term Debt-Equity Ratio |
1.08 |
0.95 |
0.85 |
|
Current Ratio |
1.36 |
1.49 |
1.4 |
|
TURNOVER RATIOS |
|
|
|
|
Fixed Assets |
2.46 |
2.52 |
2.85 |
|
Inventory |
1.42 |
1.51 |
2.12 |
|
Debtors |
1235.58 |
1411.75 |
673.55 |
|
Interest Cover Ratio |
1.92 |
2.26 |
2.62 |
|
Operating Profit Margin(%) |
13.68 |
12.36 |
10.18 |
|
Profit Before Interest And Tax Margin(%) |
10.56 |
8.98 |
7.54 |
|
Cash Profit Margin(%) |
6.65 |
4.94 |
6.83 |
|
Adjusted Net Profit Margin(%) |
3.53 |
1.56 |
4.19 |
|
Return On Capital Employed(%) |
12.31 |
9.33 |
10.46 |
|
Return On Net Worth(%) |
11.49 |
4.1 |
13.4 |
LOCAL AGENCY
FURTHER INFORMATION
HISTORY
Subject is a spearheading force in engineering construction,
both in India and the rest of the world. Seth Walchand Hirachand founded the
company and it was incorporated in January 27th of the year 1926. Subject has
been entrusted with the construction of high value projects across segments
like transportation, power, marine projects, oil and gas pipeline
constructions, irrigation and water supply, utilities and urban infrastructure.
In Power Generation, HCC have constructed Hydroelectric, Nuclear, Thermal Gas
and Diesel based Power Projects. In the field of Water Supply and Irrigation,
also constructed major dams, barrages, aqueducts and tunnels. In
Transportation, the company concentrates road and rail bridges, expressways and
roads and marine construction. The company is ISO 9001, ISO 14001 and OHSAS
18001 certified for its quality, environmental and occupational health and
safety management systems.
Walchand Tandur Cement Company Limited, Hyderabad became a subsidiary of the
Company with effect from 11th October of the year 1967. The Ganga Bridge
Construction Company Limited became subsidiary of the company in 30th March of
the year 1976. During the year 1986, Subject entered into foreign consultancy
agreements with Pullman Power Products International Corporation, U.S.A and
Interform, Sweden for its Trombay chimney works. The Company renewed the
technical collaboration agreement with Taisei Corporation of Japan in the year
1987 for execution of the underground tunnel work for Metro railway project in
Calcutta. It entered into a foreign consultancy agreement with Geoconsult of
Austria for the Company's tender for construction of tunnel between Sewri and
Futka Tank in Mumbai for BMC and with Bureau BBR International Limited, Zurich
in Switzerland, for the company's tender for superstructure design and
construction of Godavari Bridge III in AP. The Company entered into a joint
venture with M/s. Impregilo-Italy in the year 1991 and submitted tender bid for
Nathpa Thakri hydel project in Himachal Pradesh. At the same time, the contract
for road construction works in the State of Malavi was terminated. The Company
signed a joint venture with Alfred McAlpine International Limited, U.K. in the
year 1994.
During the year 1997, The Company signed a Memorandum of Understanding with
M/s. Bechtel Water Technology U.K., M/s. Hyundai Engineering and Construction
group, Korea, Sam Sung Corporation, Seoul, Korea and M/s. PATI SDN BHD,
Malaysia for participating in Water Supply Projects, Bridge Highway and
Hydro-Electric Projects respectively. During the year 1999, the company made
numerous joint ventures for its differentiated works. In the year 2000, Subject
floated an information technology subsidiary, under the name of NCC Infotech
Limited. The Company bagged a contract from Delhi Metro Rail Corporation
Limited, New Delhi in the year 2001 for the construction of Delhi Metro Rail
Corridor, Package MC-1A. After a year, in 2003, Subject secured Rs.912.3
million contract from Maharashtra State Road Development Corporation Limited
for construction of 4 laning of Satara-Kolhapur Maharashtra. During the year
2004, Subject got Rs 8430 millions order for lifting water from Godavari River
using a single pipeline to fill the tanks at Bhimghanpur, Ramappa, Salivagu,
Nagaram, Dharmasagar and Ghanpur railway station in Andhra Pradesh, bagged an
order from the National Highways Authority of India to execute a project
involving four-laning of a 77 km stretch of highway in the Chandikhole-Paradip
section in Orissa and also awarded an order of Rs 1210 millions for the supply
of spiral welded pipes to PSL Limited to carry out the Godavari Lift Irrigation
Scheme project for Government of Andhra Pradesh.
The Company secured its first BOT Project in the year 2005; it was worth of Rs
302 million from the office of an Executive Engineer, Integrated Unit of PWD.
In 2005, HCC awarded 2 contracts of the Lucknow-Muzaffarpur National Highway
project. The contracts are jointly valued at Rs. 4104.000 millions and awarded
by the National Highway Authority of India. As at September 2006, Subject
bagged two prestigious Hydel project contracts from NHPC worth Rs.7940
millions. It has bagged the Chutak Hydroelectric Project for Rs. 4105.400
millions and Nimo Bazgo Hydel project for Rs.3839.000 millions both in Jammu
and Kashmir. The Company received Golden Peacock National Quality Award for the
Year 2006 in the category for Private Large Service by IOD (Institute of
Directors) in association with World Environment Foundation (WEF) and also
Golden Peacock Award for Occupational Health and Safety - 2007 from IOD in association
with WEF. During December of the year 2007, HCC received a prestigious contract
worth Rs. 2975.100 millions in a joint venture with Alpine Mayreder, Austria
from Delhi Metro Rail Corporation (DMRC).
Subject incorporated a Special Purpose Vehicle (SPV) company in January of the
year 2008 that is HCC Singapore Enterprises Pte, as a wholly owned subsidiary
of the company for promoting its business and also the business of group
companies. Further its wholly owned Subsidiary; HCC Real Estate has also
incorporated a Special Purpose Vehicle (SPV) company that is Charosa Wineries
for undertaking wine business. In May of the year 2008, Subject joined 18 other
companies in an unprecedented statement to the 'Group of Eight' countries,
urging heads of state and government to take action on the emerging global
crisis in water and sanitation. During July of the year 2008, Subject bagged
the prestigious order from National Highway Authority of India (NHAI) to
construct the 4.4 km elevated highway at Badarpur on National Highway 2
(Mathura Road) near Delhi on BOT basis.
OPERATIONS
The turnover of the Company at Rs. 31043.400 millions has shown an increase of
29.6% as compared to Rs. 23945.000 millions for the previous year. The profit
before and after tax is Rs. 1560.000 millions and Rs. 1087.700 millions as
compared to Rs. 1178.900 millions and Rs.792.800 millions for the previous
year.
The Directors are pleased to inform that during the year under report, the
Company has secured the following contracts.
- Rajiv Dummugudem Lift Irrigation Scheme, Andhra Pradesh.
Contract Value: Rs.3284.800
millions
- Pula Subbaiah Veligonda Tunnel,Andhra Pradesh.
Contract Value: Rs.7352.100
millions
- IV Mumbai (Middle Vaitarana)Water Supply Project, Mumbai.Section-II
Contract Value: Rs.3119.600
millions
- Water Supply Tunnel fromMaroshi to Ruparel College,Mumbai.
Contract Value: Rs.4151.000
millions
- DMRC-Airport Metro Express Line,New Delhi. Contract AMEL-C1
Contract Value: Rs.7746.400
millions
- DMRC-Airport Metro Express Line,New Delhi. Contract AMEL-C6
Contract Value: Rs.2975.100
millions
- Cavern for Crude Oil Storage,Visakhapatnam.
Contract Value: Rs.3753.700
millions
The total balance value of works on hand as on March 31,
2008 is Rs 101580 millions including Company's share in integrated joint
venture projects and Sawalkote project.
Decisions are awaited from various clients for tenders submitted by the Company
for seven packages amounting to about Rs. 74110 millions (Subject share Rs.64980
millions). Tenders for various packages for 16 projects worth over Rs.262120
millions (Subject share Rs. 133020 millions) are expected to be submitted in
the near future. The Company has also submitted prequalification bids for 24
projects worth over Rs. 265640 millions which are under evaluation. The company
is confident of securing a sizable share in these new projects.
REAL
ESTATE BUSINESS
Indian Real Estate Sector continues to play a key role in driving India's
economic growth. The size of the Real Estate market is estimated at US$ 12
billion and has been showing a robust growth of about 30% per annum. While
significant increase in property prices, coupled with increase in the interest
rates has had a sobering impact on the demand in the residential segment, the
commercial segment is showing signs of a slow down due to supply side build up.
However, as economic fundamentals continue to be strong and the demand
continues to increase at a steady pace, the impact of supply side build up may
not last for too long.
Recognizing the fact that Real Estate is a specialized field, your Company
formed a separate wholly owned subsidiary company i.e. HCC Real Estate Limited
(HREL) in the financial year 2005-06. During the year, the Company and HREL
have formed a Partnership Firm 'Vikhroli Corporate Park', in the profit sharing
ratio of 20% for the Company and 80% for HREL. The firm is developing '247
Park', an IT park, at Vikhroli (West) in Mumbai which is progressing as per
schedule. The total construction consists of 1.8 million sq.ft. with commercial
space spread over three towers in addition to retail space, parking and utility
building. M/s. Jones Lang LaSalle Meghraj, the international property
consulting firm has been given the exclusive mandate to lease the
property.
Lavasa Corporation Limited, a subsidiary of HREL is developing independent
India's largest hill station 'Lavasa' spread across a picturesque landscape of
12,500 acres and located 45 minutes from Pune. HREL, has invested about Rs.1520
millions in Lavasa Corporation representing 63.5% of the paid up capital of the
said Company.
During the year, on an auspicious occasion of Dassehra, Lavasa launched a sale
of Villas and Apartments which was completed by November 2007. This was
followed by a further offering and sale of Villas in March, 2008.
A landmark MOU with the Business School of Oxford University, U.K. for setting
up of a research and training centre at Lavasa has been executed. An agreement
has also been reached with Apollo Hospitals for the development of a Health
City. MOUs with Christ University and NSHM, for educational campuses within
Lavasa have also been executed during the year. Agreements have also been
signed with Ecole Hotelier Lausanne for setting up a hospitality school at
Lavasa, and the Girls Day School Trust GDST, for a residential International
School.
The other projects undertaken by HREL and Lavasa have been dealt with in
details in the Management Discussion and Analysis (MDA) Report.
RESTRUCTURING OF BUSINESS
The Company, for the past few years, has been witnessing growth in its turnover
and also the number of projects being executed. However, most of the growth
came from the construction sector while the opportunities in EPC, Real Estate
segment, BOT etc. are yet to be explored to their fullest potential. Keeping in
view of the above, the Company has restructured its existing Construction
Business into distinct Business Sectors i.e. Subject, HCC Infrastructure, HCC
Real Estate, Lavasa and HCC Capital. Each of the Business Sectors will nurture,
develop and leverage unique skill sets which will be supported by Group Level
shared services. These being Finance and Accounts, Human Resources,
Procurement, Outsourcing and External Logistics, Legal and Secretarial,
Information System, Corporate Communication, Internal Audit, Corporate Affairs,
Corporate Office Services, Corporate Social Responsibility, Industrial
Association Cell, Risk Management and Corporate Planning and Strategy.
Considering the growth of Subject and the expanded skills of operations,
business verticals are created within subject with a view to bring about
greater focus and accountability in each of the businesses. These verticals are
Hydro, Water, Transport, Nuclear and Thermal, Integrated and Special Projects
and Buildings. Initially till business grows, Nuclear and Thermal and
Integrated and Special Projects will operate as a single vertical. All these
verticals have started functioning. In addition, an EPC business vertical has
been created and is responsible for the acquisition, planning and execution of
all EPC projects. The core functions of subject i.e. Monitoring, Marketing,
Tendering, Engineering and Design, Equipments, R and D, IMS and Project
Management shall provide services to all the business verticals at matrix
structure basis.
SUBSIDIARY
COMPANIES
During the year:
(a) The Company has promoted following wholly owned
Companies for undertaking infrastructure development projects and generally
promoting the Company's other businesses at opportune times.
|
Name
of the Company |
Date
of Incorporation |
|
HCC Singapore Private Limited |
18.12.07 |
|
HCC Mauritius Enterprises Limited |
17.01.08 |
|
HCC Infrastructure Limited |
14.02.08 |
b) HCC Real Estate Limited (the wholly owned subsidiary) has
promoted following wholly owned subsidiary company for the purpose of
undertaking proposed winery business, making it a subsidiary of your Company
from the date of its incorporation.
|
Name
of the Company |
Date
of Incorporation |
|
Charosa Wineries Limited |
11.12.07 |
c) Lavasa Corporation Limited has promoted following wholly owned subsidiary
Companies for the purpose of undertaking specific business of healthcare and hospitality
making them subsidiaries of the Company from the day of their
incorporation.
|
Name
of the Company |
Date
of Incorporation |
|
Lavasa Hotel Limited |
01.09.07 |
|
Lavasa Star Hotel Limited |
01.09.07 |
|
Apollo Lavasa HealthCorporation Limited |
13.12.07 |
A statement pursuant to Section 212 of the Companies Act, 1956 containing the
details of subsidiaries of the Company, forms part of the Annual Report.
HCC Singapore Private Limited, HCC Mauritius Enterprises Limited and HCC
Infrastructure Limited shall close their first financial year on March 31, 2009
and therefore no accounts have been prepared by these Companies for the period
ended March 31, 2008.
In terms of the approval granted by the Central Government under Section 212(8)
of the Companies Act, 1956, vide its letter bearing number 47/65/208-CL-III
dated February 20, 2008, the copies of the balance sheet, profit and loss
account, reports of the Board of Directors and the Auditors' Reports of the
subsidiary companies for the year ended March 31, 2008 are not attached to the
balance sheet of the Company. The Company will make available the annual
accounts and other related detailed information of the following
subsidiaries:
1. Hincon Technoconsult Limited
2. Western Securities Limited
3. Pune Paud Toll Road Company Limited
4. Nirmal BOT Limited
5. HCC Real Estate Ltd and its below-mentioned
Subsidiaries:
i) HRL Township Developers Limited
ii) HRL (Thane) Real Estate Limited
iii) Panchkutir Developers Limited
iv) Nashik Township Developers Limited
v) Hinjewadi Township Developers Limited
vi) Charosa Wineries Limited
vii) Lavasa Corporation Limited and its following
subsidiaries:
a. Lavasa Hotel Limited
b. Lavasa Star Hotel Limited
c. Apollo Lavasa Health Corporation Limited
Upon request by any member/investor of the Company/ subsidiary companies.
Further, the annual accounts of the subsidiary companies will also be kept for inspection
by any member/investor at the Company's Registered Office. The Company has
presented the audited consolidated financial statements and the same have been
prepared in compliance with the Accounting Standard AS-21 issued by the
Institute of Chartered Accountants of India.
AWARDS
Golden peacock Award 2007 for Excellence
in Corporate Governance
The Company has won the Golden Peacock Award 2007 for Excellence in Corporate
Governance'. The award is conferred by the Institute of Directors (IOD), New
Delhi, in association with World Council for Corporate Governance (WCFCG). The
Company was selected as a winner in the National Category by an eminent jury
chaired by Justice Shri P N Bhagwati, former Chief Justice of India and a
member of the UN Human Rights Committee.
Golden Peacock Award for Occupational
Health and Safety for BWSL Project
The Company has also been awarded the coveted Golden Peacock Award for
Occupational Health and Safety - 2007' for its Bandra Worli Sea Link (BWSL)
project which is under construction in Mumbai.
ISSUE OF WARRANTS TO THE PROMOTERS
During the year, the Company, on December 20, 2007 has allotted to the
promoters of the Company, 75,00,000 warrants, each of Rs. 202.50 on a
preferential basis, pursuant to the shareholders' approval obtained by a
special resolution through postal ballot on December 10, 2007. The warrants
will entitle the promoters to apply for and be allotted one equity share of
Re.1/- at a price of Rs. 202.50 (including a premium of Rs. 201.50) against
each warrant, any time after the date of allotment but before the expiry of 18
months from the date of allotment (i.e. latest by June 19, 2009). The warrants
and the shares allotted on exercise of option attached to the warrants issued
as above to the promoters, shall be locked-in for a period of three years from
the date of allotment of warrants.
MANAGEMENT
DISCUSSION AND ANALYSIS
Looking back at 2007-08, it is safe to say that the US-led
global real sector slowdown has not significantly affected the Indian economy.
Advance estimates of the Central Statistical Organisation (CSO) suggest that
real GDP in India grew by 8.7% during the year. While this will be less than
the 9% plus growth achieved in 2005-06 and 2006-07, it is by any yardstick, a very
impressive growth rate for an economy as large as India’s. Indeed, it beings
the compounded annual growth rate (CAGR) over the last five years to over 8.7%.
Indeed, in an environmental of global economic slowdown in 2008, the world is
looking to India, China and some other emerging markets to be the beacons of
growth.
The positive aspect of India’s growth story is the extent to
which it has been driven by widespread domestic consumer demand, which accounts
for over 65% of GDP. This is very difficult from China’s growth where the
impetus is from exports and huge annual increases in both public and private
investments. Economists believe that the anchor of domestic demand in India
creates greater stability for the growth process and tends to immunize the
country from global cycles relative to an export – and investment – intensive
China.
This is true. However, it is also the case that while China
needs to focus on boosting domestic incomes and demand, India needs to do more
on pushing up investments, especially in infrastructure, the sinews that
connect and power growth. India is already on an accelerated growth path, a
focused approach towards intensive infrastructure development will propel it to
the next level. And, Company which is a construction company in India, is well
positioned to participate and partner such development initiatives and grow
exponentially.
This is where India has not yet managed to break out into a
higher trajectory. While the need for infrastructure development in India is
well established in theory and in the political rhetoric of the land, the speed
of reforms us sluggish and investments are not happening at the requisite rate.
While the infrastructure growth agenda is well established, the speed of
implementation is not satisfactory. Take for example the two major
infrastructure – roads and power.
In roads, the East West-North South corridor, which forms a
part of the National Highways Development Programme “(NHDP 1 and 2) was
scheduled to be completed by December 2008. As of 31 March 2008, inly 2010 km
of the planned 7300 km have been completed; 146 contracts covering 4220 km of
roads are under implementation, while over 115 of project length has not yet
been contracted.
The situation for NHDP Phase 3 and Phase 5 is also not heartening.
Of the 12109 km to be built under NHDP 3, only 441 km have been completed; 31
contracts covering 1664 km are under implementation, while for 83% of the
projects, contracts still need to be awarded. None of the roads under NHDP 5
has been completed; 7 contracts for 1030 km are under implementation, while for
84% of the projects; contracts still to be awarded.
In power, too, although there has been some development,
this has not matched up to the set annual targets. According to the latest
reviews conducted by the government in January 2008, while a total of 16335 MW
of additional capacity was targeted to be developed through government and
private participation across thermal, hydel and nuclear sectors, only 10783 MW
was added which is 34% below target.
In thermal, the target was 12704 MW, of which, only 8015 MW
will get added in 2007-08. In nuclear, of the 880 MW planned, exactly a quarter
was added. Thankfully, there has been some better news from the hydel sector, which
is subject’s traditional strength. Hydro added 2548 MW against a target of 2751
MW, less than the target, but way better than the other two sectors.
While much has happened, infrastructure development has
certainly not been in line with the opportunities that the Indian economy
presents. Likewise, while the 9.6% growth in construction activities is healthy
on a stand-alone basis, relatively speaking it is the lowest growth in the last
four years. Clearly, with the right impetus, India can do much better.
There are two important aspects that have caused this
slowdown. First, there is the issue of infrastructure finance. The World Bank
estimates that to meet the requirements of the Indian economy for roads, power,
telecommunications, railways, airport and ports up tom 2010-11, at least
Rs.19000 billion is required to fund infrastructure projects. Of this, Rs.5500
billion has to be raised from sources outside the budgetary estimates as per
the Eleventh Five-Year Plan. Given that investments in infrastructure involve
large outlays with long gestation periods, the projects need to be well
conceived, developed and planned so that risk-return profiles are well
understood, and investors get attracted to putting their money in such assets.
Today, there is considerable uncertainty and shortage of expertise in creating
appropriate financial models that can make of these projects profitable. Thus,
there is a supply side constraint in terms of financial resources.
Second, given financial resource limitations especially
within government, many of the projects are being implemented in the
Build-Operate-Transfer (BOT) mode, However, is a considerable time lag between
securing a BOT contract and starring work on the construction phase of such a
project. With many developers not having adequate financial capabilities, there
are several instances of significant delays between award of contract and full
financial closure without which the projects cannot start.
In this environment, Subject believes that private sector
entities have to play a much larger role in the entire infrastructure
development space. Companies have to rise above merely hoping for reforms and
become torch bearers of growth. Subject is determined to establish itself as
one such company. Consequently, it realizes the imperative of occupying a much
larger space across the entire life cycle of infrastructure projects. It
recognises the need to offer a suite of services that can be provided to an
infrastructure project right from the stage of conceptualization to actual
construction and finally to maintenance of the underlying asset including
collection of charges from the public.
In serving these needs, the company needed to integrate its
in-house strengths with external skills and expertise, and develop
function-specific teams that specialize on different elements of an
infrastructure project. This led to subject taking some strategic decisions at
the corporate and operational levels.
·
At the
corporate level, the Company has created three distinct business units:
Construction services, infrastructure and real estate. While
subject has been a player in the country in the project execution space, it did
not have allied expertise in comprehensively developing the BOT business. To
aggressively grow its business as an integrated infrastructure developer,
subject has launched its own subsidiary, HCC Infrastructure Limited. This
company will play a key role in envisaging projects, creating their financial
models, developing partners, executing construction works and managing a
financial asset across its entire life-cycle. With this, the company hopes to
tap significantly greater opportunities for itself across the entire
infrastructure development space.
·
Recognising
that real estate is a specialized field, Subject has created a separate real
estate organization. The company had floated a real estate
subsidiary, HCC Real Estate Limited (HREL), in 2005-06. During 2007-08, HREL
has developed its organization and has started executing its first project.
HREL intends to be recognized as a credible, professional player in the Indian
real estate business.
·
Subject
has also restructured its existing construction business into distinct vertical
organizations, based on the sectors that they serve. Each
vertical will develop and leverage its skill sets and, where required, will be
supported by shared services. As of now, there are five such verticals: Hydro,
Water, Transport, Nuclear and Thermal, Integrated Special Projects and
Buildings.
While considerable development work has happened at the
organization level, Subject has continued to focus on delivering value to its
shareholders. The highlights of its financial performance in 2007-08 are:
·
Revenue from operations increased by 29.6% from Rs.23945
millions in 2006-07 to Rs.31043.400 millions in 2007-08
·
Operating profit (PBDIT including profits from JVs, but
excluding other income) increased by 52.7% from Rs.2396 millions in 2006-07 to
Rs.3659 millions in 2007-08
·
Profit before tax (PBT including profits from JVs and other
income) increased by 32.3% from Rs.1179 millions in 2006-07 to Rs.1560 millions
in 2007-08
·
Pursuant to the withdrawal OF THE Section 80-IA benefit with
retrospective effect, in 2006-07 subject has paid an additional previous period
(from 2002-03 to 2005-06) tax liability of Rs.425 millions. It they do not
account for this anomaly in tax payments last year, Profit after Tax (PAT)
increased by 37.2% form Rs.793 millions in 2006-07 to Rs.1088 millions in
2007-08 even by not accounting for the tax anomaly in 2006-07, Return on Net
Worth (RONW) improved from 2006-07 levels of 8.8% to 10.8% in 2007-08. This is
despite an increase in net worth, primarily due to Rs.150 millions worth of
share warrant issues
·
Diluted Earning Per Share (EPS), without the tax effect in
2006-07 improved marginally from Rs.2.68 in 2006-07 to Rs.2.82 in 2007-08.
Towards the end of 2007-08, Subject faced strong pressure on margins due
to price inflation of one its key items: steel. This needs some explanation.
Subject broadly has three types of contracts.
·
The first is the one without price escalation. For these contracts
subject had severe margin pressures as steel prices were on a high, especially
for the second half of 2007-08.
·
The second is with price escalation, but the escalation that the client
provides is based on the overall Wholesale Price Index (WPI).
·
The third are contracts with starred items, where the complete price
hike is passed on. Here, subject was neutral to the steel price hike.
In the next sections, they will analyse the performance of the Company
across the three broad businesses: Projects, real estate and infrastructure.
Projects
In line with the lack of expansion growth in the construction sector,
there was not much accretion to the order book. Even so, subject has a strong
order book position that has to be executed. The order book, which stood at
Rs.93000 millions in 2006-07, grew marginally to Rs.101580 millions in 2007-08.
The Company secured seven new orders worth Rs.22730 millions in the year
2007-08.
Among the new projects, the Company has secured the order to construct
Rock Caverns for crude oil storage at Visakhapatnam, the first of its kind in
the country. These Rock Caverns will be used for strategic storage of 1 million
metric tons of crude oil. This project is for the Indian Strategic Petroleum
Reserves Private Limited, a special purpose vehicle of the Oil Industry
Development Board.
Power
Subject continues to focus its attention on developing hydel, nuclear
and thermal power projects in the country. The thrust however remains on
development of hydel power projects. As of today, Subject is working on various
power projects which include:
·
Chutak
Hydroelectric Power Project, Kargil, Jammu and Kashmir: Subject is
executing the Chutak Hydroelectric Power Project at Kargil in Jammu and Kashmir
worth Rs.4110 millions with a capacity of 4*11 MW. The project is progressing
extremely smoothly with river diversion completed two months ahead of schedule.
At present, excavation work for a dam and underground power house is in
progress.
·
Nimoo Bazgo
Hydroelectric Power Project, Leh, Ladakh: The 3*15 MW, Rs.3840 millions Nimoo Bazgo
Hydroelectric Power Project is another project under execution by subject in
the Leh-Ladakh area of Jammu and Kashmir. River diversion works have been
completed and excavation for the dam and surface power house is underway.
Both the Chutak and Nimoo Bazgo projects continue to be challenging due
to their lack of accessibility by road for five months in the year. Extreme
temperatures in summer and winter have been countered with detailed planning
and advance stocking of materials and supplies at both project sites.
·
Uri-II
Hydroelectric Project, Jammu and Kashmir: Subject is presently constructing the 4*60
MW Uri Hydroelectric Power Plant in Jammu and Kashmir. River diversion works
for the project were completed in FY 2006-07. Dam concrete up to the river bed
level and excavation (heading) in head race tunnel has been completed this
year. Presently dam complete, power house complex excavation, tail race tunnel
and surge shaft excavation are in progress.
·
Chamera
Hydroelectric Power Project, Stage III, Himachal Pradesh: The project involves
civil works of 3*77 MW Chamera Hydroelectric Power Project Stage III.
Excavation of the power house is complete. 71% excavation of the head race
tunnel is complete. Underground excavation is continuing in the transformer
hall, desilting chambers and allied tunnels in the power house complex.
·
Kudankulam Nuclear
Power Project, Tamil Nadu: Subject is executing two packages forming part of
the 2*1000 MW power project owned by Nuclear Power Corporation of India
(NPCIL). The first package civil works of reactor buildings along with reactor
auxiliary and main control buildings. The second package comprises of a 2 km
breakwater and intake works. For the first package, the inner containment dome
of reactor building Unit 1 is complete and the outer containment dome is in
progress. Both inner and outer containment domes are in progress in the reactor
building of Unit 2. Pump house works for the second package are complete and
have been handed over to the client.
·
Rajasthan Atomic
Power Project, Rajasthan : The Rs.2380 millions contract for civil works of
two reactors (Unit 5 and 6) and other ancillary works for NPCIL are nearing
completion. All the main plant structures are complete.
Transportation
The road sector is extremely competitive with low margins. Subject with
its detailed planning and analysis has always been keen to identify projects
that offer value propositions and higher levels of profitability. Subject
continues to be a key player in the transportation sector. Subject bagged two
contracts to be executed through Integrated Joint Ventures. Both the contracts
are for Delhi Metro Rail Corporation Limited for the Airport Metro Express
Line. Package C1 involves construction of two stations and a tunnel between New
Delhi and Talkatora Gardens. Package C6 includes construction of a tunnel
between Talkatora Gardens and Budha Jayanti Park using the New Austrain
Tunnelling Method (NATM). The combined value of the contracts is worth Rs.10760
millions, out of which subject’s share is Rs.4030 millions. Subject is also
executing 15 other contracts in this sector including roads of about 502 km
(approximately 900 single lane km) of road construction. Of these 341 km are
national highways, 77 km are for port connectivity and about 84 km for state
highways.
Some of Subject’s projects include:
·
North South
Corridor Project (NHDP Phase II) Package NS2/BOT/AP-8, Andhra Pradesh : This project was
awarded to subject on a Build-Operate-Transfer (BOT) basis involving design,
procurement, construction, operation and maintenance of 31 km of four-lane
national highways for a concession period of 20 years on annuity basis. Subject
is executing the project through a wholly owned Special Purpose Vehicle, Nirmal
BOT Limited. Both road and bridge works are currently in progress.
·
East West Corridor
Project, Package EW-II (RJ-7), Rajasthan: Of the total 60 kms of the four-lane road
stretch, concrete pavement has been completed for 47 kms. Out of the 14 bridges
on the stretch, 5 bridges are complete and 9 are under execution.
·
Mughal Road, Jammu
and Kashmir: This project involves construction of 84 km of two lane asphalt road
from Bafliaz (Poonch) to Shopian near Srinagar through the Pir Panjal pass.
This road will pass through Pir-ki-Gali at an elevation of 3494 metres above
sea level. The road will improve connectivity in the region. About 24 km of
excavation for two lanes is completed from both the Bafliaz and Shopian ends.
·
Lucknow
Muzaffarpur National Highway, Package LMNHP-EW II (WB) – 1 to 4, Uttar Pradesh:
Subject
is executing four packages on the Lucknow-Gorakhpur section of the Lucknow –
Muzaffarpur National Highway Project. The project involves strengthening of 156
km of existing two-lanes of bituminous pavement and construction of two new
lanes of concrete pavement. Recently, recors two lane concrete paving of 5319
cubic metres 2 km (4.03 lane km) was achieved at Package (WB) in 33.5 hours
using slipform paver.
·
Bandra-Worli Sea
Link, Mumbai, Maharashtra: The Bandra-Worli sea link project under execution
by subject will provide a fast passage way from the island city of Mumbai to
the western suburbs, reducing travel time and the operating costs of vehicles.
Tower for the southbound carriageway of Bandra cable-stay is complete and cable
installation is underway. The bridge is complete upto to the Bandra cable-stay.
Bridge erection towards Worli is progressing well.
·
Udhampur –
Srinagar - Baramulla Railway Line Project, Jammu and Kashmir: Subject is
executing three packages of the Laole – Qazigund section of Udhampur – Srinagar
– Baramulla Railway Line Project. Work for two of the packages involves
construction of about an 11 km long railway tunnel. Excavation of 2.2 km of the
tunnel is complete.
Water Supply and
Irrigation
Subject’s key focus in the irrigation sphere continues to be in the
state of Andhra Pradesh. It is also evaluating the viability and profitability
of irrigation projects in other areas of the country. Subject has taken up for contracts,
two each in Andhra Pradesh and Maharashtra in this year. The EPC contract for
Rajiv Dummungudem Lift Irrigation Scheme in Andhra Pradesh is for a 74.4 km
long water supply pipeline. The other contract in Andhra Pradesh is for the
construction of an 18.8 km long Pula Subbaiah Veligonda tunnel on EPC basis.
Subject’s projects include:
Godavari Lift
Irrigation Project, Andhra Pradesh: Subject is executing the first two phases of
this project on an EPC basis with joint venture partners. The scheme aims at
providing irrigation and drinking water to 6.47 lakh acres of land. In terms of
total lift, this project is the second largest scheme in the world. The first
phase of the project is in the commissioning stage. In the first section, water
has successfully reached the Bhimghanpur tank located 38 km from intake with a
lift of 130 m. Pipe manufacturing has been completed in the second phase. Civil
works for tanks and pump houses are in full swing.
IV Mumbai (Middle
Vaitarana) Water Supply Project, Section - II, Maharashtra: This project
involves the construction of a 15.7 km long pipeline, 3 metre in diameter. This
project forms part of the Mumbai Middle Vaitarana Water Supply Project
undertaken by the Municipal Corporation of Greater Mumbai to bring an
additional 455 mld of water to Mumbai. The order is valued at Rs.3120 millions.
Maroshi Ruparel
Tunnel Contract ARFC 2, Maharashtra: Subject has been awarded the task of
constructing a water supply tunnel between Maroshi and Ruparel College in
Mumbai. The order is valued at Rs.4150 millions. The finished diameter of the
tunnel will be 3.0 m and it will be positioned at a depth of about 65 m from
the ground level.
HCC Real Estate
Subject is developing its real estate business through its wholly owned
subsidiary HCC Real Estate Limited (HREL), HREL’s aim is to establish itself as
a professional, high quality, credible real estate developer in the next 5
years.
Some of the other projects being developed by HREL include:
·
247 Park at
Vikhroli (West): Subject’s IT Park has been named as ‘247 Park’ and was officially
introduced to the Broker community on 24 March, 2008 by the Company’s marketing
and leasing agency M/s. Jones Lang LaSalle Meghraj.
·
Construction is in progress and structural work of all towers is planned
to be completed by October / November 2008. Offices will also be ready for
occupation by 2009.
·
Despite Stiff increases in steel and cement prices and additional cost
an account of gold rating under LEED Certification for Green Buildings, the
original budget will be met.
·
Development of
Vikhroli (East) land parcel: Subject owns a land parcel at Hariyali Village,
Vikhroli (E) declared a slum under the Slum Rehabilitation Act of 1973. HREL
proposes to develop the project through its wholly owned subsidiary, Panchkutir
Developers Limited. With the consent of slum dwellers, the SRA scheme is being
filed for approval.
·
Integrated
Township Development at a Mumbai suburb: Subject plans to acquire land in a Mumbai
suburb for Integrated Township Development.
·
Land at Village
Wadiwarhe, Taluka Igatpuri, Dist. Nashik, (along Mumbai – Nashik Highway) for
Special Township / Single Industry SEZ: HREL is in the process of acquiring land at
Village Wadiwarhe, Nashik for Township and / or SEZ development.
·
Charosa Wineries
Limited: Extending the group’s focus on managing real estate and catering to the
growing aspirational needs of the Indian population, an independent company
called Charosa Wineries Limited has been created, which has started work on developing
a vineyard and winery in Maharashtra
Given the magnitude of development at the Lavasa Township, a separate
company has been created to manage this work, while HREL holds a substantial stake
in this company – Lavasa Corporation Limited. This company has its own
organization and operations and the developments at Lavasa are reported
separately in the next sub-section.
Lavasa
Lavasa Corporation is developing independent India’s largest hill
station, ‘Lavasa’, spread across a pictures que landscape of 12500 acres
located 45 minutes from Pune.
On the marketing and sales front, a soft launch was done on Dassehra
2007. Subsequently, sales followed in October-November 2007 and February 2008.
Select outdoor advertising was undertaken through hoardings all along the
expressway and a print campaign was also initiated across various magazines. A
new coffee table brochure and other collaterals were developed. Designs and
renderings of new villas and apartments were developed as well.
Residential Sales were launched in October 2007 and sales of the initial
of 427 units comprising of villas and apartments were completed by November
2007. This was followed by further sales of 105 villas in March 2008.
Report on
Corporate Governance
Subject remains unfettered in its business endeavor to continuously
create value for all its stakeholders, be it customers, employees, shareholders
or the society at large. The company’s focus on adopting the highest standards
of Corporate Governance and Ethical Business Practices is fundamental to this
pursuit. Consequently, timely disclosures, transparent business practices and
an effective and independent Board from the cornerstone of the Company’s
business ethos. It is this belief that has made subject adopt good Corporate
Governance Practices well before they were stipulated under a mandatory
frame-work in India.
In recognition of its good Corporate Governance Practices, the Company was
awarded the prestigious ‘Golden Peacock Award 2007 for excellence in Corporate
Governance’. This prestigious award is given every year by the Institute of
Directors (IOD), New Delhi, in association with World Council for Corporate
Governance (WCFCG), The Company was selected as a winner in the National
Category by an eminent jury chaired by Justice P N Bhagwati, former Chief
Justice of India and a member of the UN Human Rights Committee.
This chapter, along with the chapters on Management Discussion and
Analysis and Additional Shareholders Information, reports subject’s compliance
with the Clause 49 of the Listing Agreement with Stock Exchanges
Corporate
Guarantees :
The Company has provided an undertaking to pay in the event of default
on loan given by a bank to following subsidiaries.
As on 31.03.2008
(Rs. In Millions)
|
Pune Paud Toll Road Company Limited |
234.000 |
|
Lavasa Corporation Limited |
1733.100 |
|
HCC Real Estate Limited |
4100.000 |
|
Nirmal BOT Limited |
267.800 |
The Company issued at par 1000 Zero Coupon Convertible Bonds due 2011 of
US$ 100000 each. These bonds are considered as monetary liability. The bonds
are redeemable only if there is no conversion of the bonds earlier. The payment
of premium on redemption therefore, is contingent in nature, the outcome of
which is dependent on uncertain future events. Hence no provision is considered
necessary nor has been made in the accounts in respect of such premium which
may amount to maximum of Rs.545.500 millions.
The Company has a single segment namely “Engineering and Construction”.
Therefore, the Company’s business does not fall under different business
segments as defined by AS 17 – “Segmental Reporting” issued by ICAI.
FIXED ASSETS
·
Freehold Land
·
Buildings and Sheds
·
Plant and Machinery
·
Heavy Vehicles
·
Light Vehicles
·
Helicopter / Aircraft
·
Speed Boat
·
Furniture and Office Equipments
·
Computers
·
Intangible Assets – ERP Software
WEB DETAILS
Profile
Subject has been building large and complex structures for
the last 80 years. Known for taking giant strides in technology and innovation,
they are now recognized as a spearheading force in engineering construction,
both in India and the rest of the world.
They are one of the largest private sector construction companies in India and
specialize in pioneering large-scale civil constructions and developing new age
construction technologies.
Subject has been entrusted with
the construction of high value projects across segments like transportation,
power, marine projects, oil and gas pipeline constructions, irrigation and
water supply, utilities and urban infrastructure.
They are the first construction company in India to be certified for ISO 9001,
ISO 14001 and OHSAS 18001 for its Quality, Environmental and Occupational
Health and Safety Management System.
Founder
Seth Walchand Hirachand Doshi
(23 November 1882 – 8 April 1953)
A man of rare talent and conviction, Seth Walchand Hirachand believed that
India could be a world power one day. He dedicated his life to make India self-
reliant and utilized his unrelented enthusiasm to empower people and establish
new realities to show India’s prowess to the world.
Seth Walchand Hirachand’s life is a living example of ‘management thoughts’ in
practice. It was a life guided by a powerful vision, through which he generated
some out-of-the-box strategies, chartering a road ahead with impeccable
planning, unparalleled human resource empowerment and rigorous project
management.
Hailing from a trading community that migrated to Sholapur from Saurashtra in
the middle of the 19th century, Seth Walchand Hirachand was born at Sholapur,
Maharashtra in a Digambar Jain family engaged in trading and money lending. He
matriculated in 1899 but was not interested in the family business, and thus
started his entrepreneurial journey. Shri Walchand Hirachand was amongst the
better of the second generation of indigenous industrial enterprises in the
Indian sub-continent. He took a burning task in his hands of facing the
criticisms leveled against Indian businessmen who entered manufacturing
business as essentially merchants and moneylenders, who wandered into
manufacturing, and that they were more profiteers and rent seekers, than risk
takers. Braving the odds, he became a classical Schumpeterian risk taker.
The
Acumen
Seth Walchand was noted for his
ambition and vision. Some termed him a dreamer, while others dismissed him as a
person who wanted to run even before learning to walk. Despites the odds, he
moved on. The projects undertaken by Walchand were grand in design, to say the
least. He had persuasive abilities that were helpful in generating good
publicity and goodwill towards his projects. As a contractor engaged in
construction, his biggest customer was the British government; he worked with
British officials closely in several projects. However, he supported the Indian
Independence Movement and most of his projects were inaugurated by famous
freedom fighters.
The
beginning
He
began his entrepreneurial foray with construction business, first as a railway
contractor, and then, as a contractor to other departments of Government. Some
of the major projects executed by the company include the commissioning of the
tunnels through the Bhor Ghats for a railway route from Mumbai to Pune and
laying of water pipes from Tansa lake to Mumbai. Other major projects executed
by the firm include the Kalabag Bridge over Indus and a bridge across the
Irrawaddy River in Burma. All these projects were directed by Seth Walchand.
This company was merged into Tata Construction Company in 1920. In 1929, he
became the Managing Director of the company, and in 1935 Tatas sold their stake
in the firm to Walchand, making Premier Construction.
Shipping
In 1919, after the end of World War I, Seth Walchand bought a
steamer, the SS Loyalty, from the Scindias of Gwalior. His underlying
assumption was that the post-war years would also spell massive growth for the
shipping industry just as the war years had done. He named his company -
Scindia Steam Navigation Company Limited and competed with formidable foreign
players. It was recognized as the first Swadeshi shipping company in the true
sense. It barely managed to survive after entering into agreements on routes
and fare wars with its foreign competitors. However, Walchand still supported
new indigenous shipping ventures, as he believed that a strong domestic
shipping industry was the need of the hour. In 1929, he became the Chairman of
Scindia Steam and continued in the same position till 1950. By 1953, the
company had captured 21% of Indian coastal traffic. He also believed that there
was a strong need for a shipyard in the country and started work on it in 1940
at Visakhapatnam. It was named Hindustan Shipyard Limited and its first
product, the ship ‘Jalusha’ was launched soon after independence by Jawaharlal
Nehru in 1948. However, the shipyard came under government control a few months
later and was fully nationalized in 1961.
Aircraft
factory
In 1939, a chance acquaintance with an American aircraft company
manager inspired him to start an aircraft factory in India. Hindustan Aircraft
was started in Bangalore in December 1940. By April 1941, the Indian government
acquired one-third of ownership and by April 1942, it nationalized the company.
The reasons that prompted the government for nationalizing were – it was a
sensitive and strategic sector. Hindustan Aircraft was renamed as Hindustan
Aeronautics Limited.
Car
factory
As early as 1939, Walchand was interested in establishing a
car factory in India. Birla family was also working in the same direction. In
1940, he signed an MOU with Chrysler but could not get clearances and
concessions from the Mysore government unlike in the case of the aircraft
company. In 1945, he established Premier Automobiles near Mumbai. By 1948, the
company started indigenisation in a small way with an in-house components
department. In 1955, it tied up with Fiat and started manufacturing engines in
India. By 1956, parts of chassis were locally made.
Legacy
In 1949, he suffered from a stroke and retired from business in 1950. He
passed away in 1953 at Siddhapur. However, his legacy remains important. By
1947, when India became independent, the Walchand group of companies was one of
the ten largest business houses in the country. He made the first Indian ship -
SS Loyalty – that made its maiden international voyage on 5 April 1919 by
sailing from Mumbai to London. After India became independent, 5 April has been
declared the National Maritime day to honor that voyage. Among the other
companies he pioneered were the Walchandnagar Industries Limited, located at
Walchandnagar, an industrial township near Pune and Ravalgaon Sugar. For years
to come, he would probably be remembered as the man who dared to dream.
In
short
A small railway contract in Maharashtra lead Seth Walchand
Hirachand to create enterprises that spanned the entire industrial spectrum.
Seth Walchand Hirachand’s ventures covered: • Construction • Shipping •
Engineering • Agriculture and Agricultural Products • Automobiles • Aerospace •
Finance
HCC
Construction
The HCC Group which spans Construction, Real Estate and
Infrastructure development, specializes in technically complex, new-age
construction in infrastructure projects, as well as EPC, BOT, Integrated projects
and townships. HCC’s group companies comprise HCC Construction, HCC
Infrastructure, HCC Real Estate and Lavasa Corporation.
Subject is a front-runner in the engineering construction space for the last 8
decades, having executed over 300 Bridges, 42 Dams and Barrages, 13 Hydel and 4
Nuclear Power plants, 140 Kms of Tunneling and 1,000 Kms of Roads and
expressways. Subject’s major engineering landmarks include the world’s longest
barrage at Farakka in West Bengal, India’s first underground metro at Kolkata
and the second one in New Delhi, the Mumbai-Pune Expressway – India’s first
six-lane expressway, the unique double curvature arch dam at Idukki in Kerala
and one of Asia’s largest breakwaters at Ennore Port in Tamil Nadu. Subject has
constructed four out of seven operational nuclear power plants and has
constructed more than 23% of India’s installed hydel capacity. The Company is
also developing free India’s largest Hill Station, Lavasa, spread across a
picturesque landscape of 100 sq kms, and is located 4 hours drive from Mumbai.
Subject leads in several fields in India’s engineering construction industry,
such as acquiring international certifications for three management systems –
Quality, Occupational Health and Safety and Environment, and has established
robust Corporate Governance norms. The Company is also setting global
benchmarks in the construction industry worldwide with the fastest
implementation of SAP-ERP coupled with high levels of complexity. 26 project
sites and offices are now SAP live and this includes implementation at Chutak
HEP in Kargil, Jammu and Kashmir, at an attitude of 11,000 feet, the highest
location of SAP operations in the world.
Respect for the environment and a focus on protecting environs, are core to
subject’s corporate culture. Among various initiatives undertaken by subject,
through its government recognized Centre for Research and Development and
Innovation (CRDI), is that of the use of fly ash in concrete which helps reduce
carbon emissions and makes for more environment friendly construction material.
Subject’s most important asset is the company’s talented manpower, which is
committed to construction standards of the highest quality. The Company has a
knowledge asset of 2,600 people, which includes a talent pool of about 1,900
engineers; and is a downstream employer of more than 25,000 workers at company
project sites across India.
Core
Business
Subject is distinguished by its boldness of vision and the
courage and confidence it displays in taking on the toughest of challenges.
Subject executes the construction of technically complex and high value
projects across segments such as Transportation, Power, Marine Projects, Oil
and Gas Pipeline Constructions, Irrigation and Water Supply, Utilities and
Urban Infrastructure.
In Power Generation, they have
constructed Hydroelectric, Nuclear, Thermal Gas and Diesel based Power
Projects. In the field of Water Supply and Irrigation, we have constructed
major dams, barrages, aqueducts and tunnels.
In Transportation, they have to the credit more than 300 road and rail bridges,
expressways and roads and marine construction. They have built over 100
Environmental Engineering projects. In addition to all this, they
have also built some of India's best-known industrial structures.
PRESS
RELEASE
Seth
Walchand Hirachand Doshi [23 November 1882-8 April 1953]
Founder
of HCC
“Seth Walchand Hirachand’s life was truly a triumph of persistence over adversities.” – Sardar Vallabbhai Patel
Walchand Hirachand, son of a cloth merchant in a small Maharashtra
town, dared to dream big. As a nationalist, he found British rule offensive and
resolved early in his life to fight it -- not by joining the political struggle
but by breaking the rules that forbade Indian businessmen from entering areas
of enterprise that challenged British monopolies. By the end of his life he
left behind an empire that is considered the foundation of modern
transportation in India. The empire included companies that built aircraft,
ships and automobiles and companies that specialized in heavy engineering and
construction. For his endeavours and achievements, Shri Walchand is known as
the Father of the Indian Transportation Industry.
Born in November 1882, pioneer
industrialist Walchand Hirachand started his empire-building from a small
project for the railways in 1920 when he successfully completed the Bhorghat
tunnel in Maharashtra.It was then considered to be beyond the capability of any
Indian company to carry out such a project. Taking cue from this success, Shri
Walchand set up Hindustan Construction Company (HCC) in 1926, which went on to
build some of India’s landmark construction projects.
HCC has been instrumental in the country's growth and development
for the last 76 years.
At a time when the British rulers were sounding the death knell
for the Indian shipping industry, Shri Walchand floated the Scindia Steam
Navigation Company Limited (SSNCL) after he acquired the ship -- S.S. Loyalty –
from Maharaja Madhavrao Scindia of Gwalior. He had outbid a giant British
company. In fact, the founding day of SSNCL -- April 5 -- is now celebrated as
India’s National Maritime Day. Shri Walchand’s foresight led to the
establishment of the first indigenous shipbuilding yard in the country in
Visakhapatnam, Scindia Shipyard, in 1941. The company, taken over by the
Government of India in 1952 and re-christened as the Hindustan Shipyard Limited
(HSL), has put India firmly among the shipping nations of the world.
Shri
Walchand also founded the Indian aircraft industry when he established
Hindustan Aircraft Limited (HAL) in December 1940. When India was freed from
British rule, Hindustan Aeronautics became the Indian government's first
companies to make airplanes. 
Having successfully ventured into building bridges,
manufacturing ships and aircrafts, it was natural for Shri Walchand to turn to
the road transport sector. Premier Automobiles Limited took shape and made a
mark on the road transportation sector by rolling out the first of indigenously
built trucks and cars in 1947.
Shri Walchand was among the
first Indian industrialists to venture into agriculture. He realized that
unless agriculture was modernized, rural poverty, massive in post-colonial
India, could never be fought. He set up Ravalgaon Sugar Farm Limited which used
modern techniques to produced sugar whose quality matched the best produced
anywhere in the world.
If most of the companies Shri Walchand set up continue to flourish to this day, so do some of the institutions he has helped build. To protect the interests of Indian industry and to provide businessmen with their own forum, he started the Indian Merchant's Chambers, the Maharashtra Chamber of Commerce and the Federation of India Chambers of Commerce and Industries (FICCI). He also set up two charitable trusts, the Kasturbai Walchand Trust and the Walchand Hirachand Lokakalyan Trust. These trusts are a testimony to his initiatives in improving the plight of the poor.
As a tribute to his highly developed sense of social
responsibility his heirs set up two engineering colleges in Maharashtra that are
today among the most highly regarded in India.
The vast industrial empire that Shri Walchand built has proved
more than worthy of his faith and has taken Indian industry miles ahead. In the
process, it has earned him national and international acclaim for his
activities.
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.46.25 |
|
UK Pound |
1 |
Rs.85.92 |
|
Euro |
1 |
Rs.68.11 |
SCORE & RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
9 |
|
PAID-UP CAPITAL |
1~10 |
9 |
|
OPERATING SCALE |
1~10 |
9 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
10 |
|
--PROFITABILIRY |
1~10 |
8 |
|
--LIQUIDITY |
1~10 |
9 |
|
--LEVERAGE |
1~10 |
9 |
|
--RESERVES |
1~10 |
9 |
|
--CREDIT LINES |
1~10 |
9 |
|
--MARGINS |
-5~5 |
- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
NO |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
81 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
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 |
|