CHAPTER-1 INTRODUCTION
1
INTRODUCTION
PREPERATION OF CASH FLOW ANALYSIS:
An organization should prepare a cash flow statement according to account accounting ing stande standered red-3. -3. The follow following ing basic basic inform informati ation’ on’ss are requir required ed for the pr3peration of a cash flow statement: 1. Comp Compara arati tie e balan balance ce shee sheets ts !. "rof "rofit it and and los losss acc accou ount nt 3. Addi Additi tion onal al data data.. This statement is prepared in three stages as gien below# •
$et profit before ta%ation and e%traordinar& items.
•
Cash flow from operating' inesting and financing actiities.
•
Cash flow statement. Changes in fi%ed assets and fi%ed liabilities hae not
been ad(usted as
these are shown separatel& in the cash flow statement. )t is so because current assets and current liabilities are directl& related to operations. Cash paid is deducted from cash generated from operations in order to get the figure of cash flow before e%traordinar& items in order to get the figure of cash proided b& or using from operating actiiti& SPECIAL ITEMS:
)n addition to the general classification of three t&pes of cash flows accounting standard-3 for the treatment of cash flows of certain social item as u nder# a* +orei +oreign gn curr curren enc& c& cash cash flow flowss b* ,%traordinar& items c* )nte )ntere rest st and and di diid idend endss d* Ta%es %es on on inc incom omee 2
e* )nestments )nestments in in subsidiari subsidiaries' es' associat associates es and (oint (oint entures entures f* Acquisitio Acquisitions ns and disposa disposall of subsidi subsidiaries aries and other other business business units. units. g* $on-c $on-cas ash h tran transa sact ctio ions ns##
•
The acquisition of assets assets b& assuming directl& directl& related liabilities#
•
The acquisition of an enterprise b& means of issue of shares# and
•
The conersion of debt to equit&. o cash flow anal&sis reeals the arious items of inflow and outflow of
cash. )t is an essential tool for short term financing anal&sis and is er& helpful in the ealuation of current liabilit& of a business concern. )t helps the business OBJECTIVES OF THE STUDY
")/,0 2,CT)4,:
Cash +low statement is prepared with an ob(ectie to high light the sources and uses of cash and cash equialents for a period.
Cash flow statement is classified under operating actiities and financing actiities.
The economic decisions that are ta5en b& users require an ealuation of the abilit& of an enterprise to generate cash and cash equialents and the timing and certaint& of their generation.
3
,C$6A0 2,CT)4,:
)t deals with the proision of information about the historical changes in cash and cash equialents of an enterprise b& means of a cash flow statement which classifies cash flows during the period from operating' inesting and financing actiities.
)nformation about the cash flows of an enterprise is useful in proiding users of financial statements.
A basis to assess the abilit& of enterprise to generate cash 'cash equialents and the needs of
the enterprise to utilize those cash flows
SCOPE OF THE STUDY
An enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented.
7sers of an enterprise’s financial statements are interested in how the enterprise generates and uses cash and cash equialents.
This is the case regardless of the nature of the enterprise’s actiities and irrespectie of whether cash can be iewed as the product of the enterprise' as ma& be the case with a financial enterprise.
,nterprises need cash for essentiall& the same reasons' howeer different their principal reenue-producing actiities might be.
The& need cash to conduct their operations' to pa& their obligations' and to proide returns to their inestors
4
NEED FOR THE STUDY
The choice of area of the stud& for the pro(ect wor5 was gien after initial stud& of compan&’s cash flows.
Through the compan& has seeral departments# the prime of m& interest was in finance. Cash is er& important basic input needed to 5eep the operations of the business going on a continuous basis.
)t is also the final output e%pected to be realized b& selling the product manufactured b& the manufacturing unit.
To anal&ze the arious cash outflows and inflows of compan& and also to stud& the arious sources of the cash in this compan& is needed to stud& this cash flow anal&sis.
RESEARCH METHODOLOGY OF THE STUDY
The following is the methodolog& of the stud&. The collection of data is done in two principle sources. The& are as follows:
1 "rimar& data. ! econdar& data.
5
PRIMARY DATA
The primar& data needed for the stud& is gathered through interiew with concerned officers and staff' either indiiduall& or collectiel&. ome of the information has been erified or supplemented with personal obseration conduct.
SECONDARY DATA
The secondar& data needed for the stud& was collected from published sources such as pamphlets of annual reports' returns and internal records' reference from te%t boo5 and (ournals of financial management.
LIMITATIONS OF THE STUDY
)n spite of arious uses of cash flow statement' it has the following limitations:
Cash flow statement gies the main of inflow and outflow of cash onl& and does not show the liquidit& position of the compan&.
This statement is not a substitute of income statement which shows both cash and non-items. Therefore' net cash flow does not necessar& mean net income of the business.
)t cannot replace funds flow statement as it cannot show the financial position of the concern in totall&
6
CHAPTER-2
7
REVIEW OF LITRATURE
Cash is the basic input needed to 5eep the operations of the business going on a continuing basis# it is also the final output e%pected to be realized b& selling the product manufactured b& the manufacturing unit. Cash is both the beginning and the end of the business operations.
ometimes' it so happens that a business unit earns sufficient profit' but inspire of this is not able to pa& its liabilities when the& become due. Therefore' a business unit should alwa&s tr& to 5eep sufficient cash' neither more nor less because shortage of cash will threaten the firm’s liquidit& and solenc&' whereas e%cessie of cash will not be fruitfull& utilized' will simpl& remain idle and will affect the profitabilit& of a concern. ,ffectie cash management' therefore' implies a proper balancing between the two conflicting ob(ecties of liquidit& and profitabilit&. 8
The management of cash also assumes importance because it is difficult to predict cash inflows and outflows accuratel& and there is no perfect coincidence between the inflows and outflows of cash giing rise to either cash outflows e%ceeding inflows or cash inflows e%ceeding cash outflows. Cash flow statement is one important tool of cash management because it throws light on cash inflows and cash outflows of a particular period.
MEANING OF CASH FLOW ANALYSIS:
A cash anal&sis is more useful because it gies detailed information to the management about the sources of cash inflows and outflows. Cash flow anal&sis means to reeal the cash outflows and cash inflows in a particular period. An anal&sis of cash flows is useful for short-run planning.
DEFINITION OF CASH FLOW ANALYSIS:
A cash flow anal&sis can be defined' 8As a statement which summaries sources of cash inflow and of cash outflows of a during a particular period of time' sa& a month or a &ear9 9
uch statement can be prepared from the data made aailable from comparatie balance sheets' profit and loss account and additional information. )t is an essential tool short-term financial anal&sis and is er& helpful in the ealuation of current liquidit& of a business concern. )t helps the business e%ecuties of a business in the efficient cash management and internal financial management. )t is ealuating the cash inflows and out flows of compan&’s during a particular period. )t reeals the cash position of the compan&.
CLASSIFICATION OF CASH FLOWS:
Cash flows for a period can be classified into the three categories of cash inflows and cash out flows as gien below: 1.
Cash flows from operating actiities
!.
Cash flows from inesting actiities
3.
Cash flow from financing actiities
1. CASH FLOW FROM OPERATING ACTIVITIES:
The amount of cash flows arising from operating actiities is a 5e& indicator of the e%tent to which the operations of the enterprise hae generated sufficient cash flows to maintain the operating capabilit& of the enterprise' pa& diidends' repa& loans' and ma5e new inentions without recourse to e%ternal sources of financing. )nformation about the specific components of historical operating cash flows' in con(unction with other information' in forecasting future operating cash flows. Cash flows from operating actiities are primaril& deried from the principal reenue-producing actiities of the enterprise. Therefore' the& generall& result
10
from the transactions and other eents that enter into the determination of net profit or loss. ,%amples of cash flows from operating actiities are#
Cash receipts from the sale of goods and the rendering of serices#
Cash receipts from ro&alties' fees' commissions' and other reenue#
Cash pa&ments to suppliers for goods and serices#
Cash pa&ments to and on behalf of emplo&ees#
Cash receipts and cash pa&ments of an insurance enterprise for premiums and claims' annuities and other benefits#
Cash pa&ments or refunds of income ta%es unless the& cash be specificall& identified with financing and inesting actiities# and
Cash receipts and pa&ments relating to future contracts' forward contracts' option contracts' and swap contracts when the contracts are held for dealing or trading purposes. ome transactions' such as the sale of an item of plant' ma& gie
rise to a gain or loss which is included in the determination of net profit or loss. oweer' the cash flows relating to such transactions are cash flows from inesting actiities. An enterprise ma& hold securities and loans for dealing or trading purposes in which case the& are similar to inentor& acquired specificall& for resale. Therefore' cash flows arising the purchases and sale of dealing or trading securities are classified as operating actiities. imilarl&' cash adances and loans made b& financial enterprises are usuall& classified as operating actiities since the& relate to the main reenue producing actiit& of that enterprise.
)). CASH FLOW FROM INVESTING ACTIVITIES :
The separate disclosure of cash flows arising from inesting actiities is important because the cash flows represent the e%tent to which e%penditures hae been 11
made for resources intended to generate future income and cash flows. ,%amples of cash flows arising from inesting actiities are#
Cash pa&ments to acquire fi%ed assets ;including intangibles*. These pa&ments include those relating to capitalized research < deelopment costs and selfconstructed fi%ed assets#
Cash receipts from disposal of fi%ed assets ;including intangibles*
Cash pa&ments to acquire shares' warrants' or debt instruments of other enterprises and interests in (oint entures ;other than pa&ments for those instruments considered to be cash equialents and those held for dealing or trading purposes*#
Cash receipts and disposal of shares' or debt instruments of other enterprises and interests in (oint entures ;other than receipts for those instruments considered to be cash equialents and those held for dealing or trading purposes*#
Cash adances and loans made to third parties ;other than adances and loans made b& a financial enterprise*#
Cash receipts from the repa&ment of adances and loans made to third parties ;other than adances and loans made b& a financial enterprise*#
Cash pa&ments for future contracts' forward contracts' opinion contracts' and swap contracts e%cept when the contracts are held for dealing or trading purposes' or the pa&ments are classified as financing actiities# and
Cash receipts for future contracts' forward contracts' opinion contracts' and swap contracts e%cept when the contracts are held for dealing or trading purposes' or the pa&ments are classified as financing actiities# and =hen a contract is accounted for as a hedge of an identifiable
position' the cash flows of the contracts are classified in the same manner as the cash flows of the position being hedged.
))). CASH FLOWS FROM FINANCING ACTIVITIES:
The separate disclosure of cash flows arising from financing actiities is important because it is useful in predicting claims or future cash flows b& proiders of 12
funds ;both capital and borrowings* to the enterprise. ,%amples of cash flows arising from financing actiities are#
Cash proceeds from issuing shares or other similar instruments#
Cash proceeds from issuing debentures' loans' notes' bonds' and other short-term or long-term borrowings# and
Cash repa&ments of amounts borrow
Cash pa&ments to redeem preference sha
MOTIVES FOR HOLDING CASH:
The firm’s need to hold cash ma& be attributed to the following three moties# 1. The Transactions /otie !. The "recautionar& /otie 3. The peculatie /otie >. The Compensation /otie. 1. The Transa!"#ns M#!"$e :
An important reason for maintaining cash balances is the transactions motie. This refers to the holding of cash' to meet routine cash requirements to finance the transactions which a firm carries on in the ordinar& course of business. A firm enters into a ariet& of transactions to accomplish its ob(ecties which hae to be paid form in the form of cash. +or e%ample' cash pa&ments hae to be made for purchases' wages operating e%penses' financial charges' li5e interest' ta%es' diidends' and so on.
13
imilarl&' there is a regular inflow of cash to the firm from sales operations' returns on outside inestments' etc. These receipts and pa&ments constitute a continuous two wa& flow of cash. 2ut the inflows ;receipts* and outflows ;disbursements* do not perfectl& coincide or s&nchronies' that is the& do not e%actl& match. At time’s' receipts e%ceed outflows while' at other times' pa&ments e%ceed inflows. To ensure that firm can meet its obligations when pa&ments becoming due in a situation in which disbursements are in e%cess of the current receipts' it must hae an adequate cash balances.
The requirement of cash balances to meet routine cash needs is 5nown as the transactions motie at such cash balances are termed as transaction balances. Thus' the transaction motie refers to the holding of cash to meet anticipated obligations whose timing is not perfectl& s&nchronized with cash receipts. )f the receipts of cash and its disbursements could e%actl& coincide in the normal course of operations' a firm would not need cash for transaction purposes. Although a ma(or part of transaction balances are held in cash' a part ma& also be in such mar5etable securities whose maturit& confirms to the timing of the anticipated pa&ments' such as pa&ment of ta%es' diidends' etc. !. The %rea&!"#nar' (#!"$e:
)n addition the non-s&nchronization of anticipated cash inflows and outflows in the ordinar& course of business' a firm ma& hae to pa& cash for purposes which cannot be predicted or anticipated. The une%pected cash needs at short notice ma& be result of# +loods' stri5es and failure of important customers# •
2ills ma& be presented for settlement earlier than e%pected#
•
7ne%pected show down in collection of accounts receiable#
•
harp increase in cost of materials.
14
The cash balances held in resere for such random and unforeseen fluctuations in cash flows are called as ?precautionar& balances’. )n other words' a precautionar& motie of holding cash implies the need to hold cash to meet unpredictable obligations. Thus' precautionar& cash balance seres to proide a cushion to meet une%pected contingencies. Another factor which has a bearing on the leel of such cash balances is the aailabilit& of short term credit. )f firm cash borrow at short notice to pa& for unforeseen obligations' it will need to maintain a relatiel& small balance and ice -ersa. uch cash balances are usuall& held in the form of mar5etable securities so that the& earn a return.
).The s%e&*a!"$e (#!"$e:
)t refers to the desire of a firm to ta5e adantage of opportunities which present themseles at une%pected moments and which are t&picall& outside the normal course of business. =hile the precautionar& motie is defensie in nature' in that' firms must ta5e proisions to tide oer une%pected contingencies' the speculatie motie represents a motie represents a positie and aggressie approach. +irms aim to e%ploit profitable opportunities and 5eep cash in resere to do so. The speculatie motie helps to ta5e in adantage of#
An opportunit& to purchase raw materials at a reduced price on pa&ment of immediate cash#
A chance to speculate to interest rate moements b& using securities when interest rates are e%pected to decline #
6ela& purchases of raw materials on the anticipation >. C#(%ensa!"$e (#!"$e: 15
Another motie to hold cash balances is to compensate ban5s for proiding certain serices and loans. 2an5s proide a ariet& of serices to business firms' such as clearance of cheque' suppl& of credit information' transfer of funds' etc. =hile for some of the serices ban5s charge a commission or fee' for others a see5 indirect compensation. 7suall&' clients are required to maintain a minimum balance of cash at the ban5. ince this balance cannot be utilized b& the firm for transaction purposes' the ban5s themseles can use the amount to earn a return. To be compensated for their serices indirectl& in this firm' the& require the clients to alwa&s 5eep a ban5 balances sufficient to earn a return equal to the cost of serices. uch balances are compensating balances.
CLASSIFICATION OF CASH FLOWS:
Cash flows for a period can be classified into the three categories of cash inflows and cash out flows as gien below: 1. Cash flows from operating actiities !. Cash flows from inesting actiities 3. Cash flow from financing actiities 1. CASH FLOW FROM OPERATING ACTIVITIES:
The amount of cash flows arising from operating actiities is a 5e& indicator of the e%tent to which the operations of the enterprise hae generated sufficient cash flows to maintain the operating capabilit& of the enterprise' pa& diidends' repa& loans' and ma5e new inentions without recourse to e%ternal sources of
16
financing. )nformation about the specific components of historical operating cash flows' in con(unction with other information' in forecasting future operating cash flows. Cash flows from operating actiities are primaril& deried from the principal reenue-producing actiities of the enterprise. Therefore' the& generall& result from the transactions and other eents that enter into the determination of net profit or loss. ,%amples of cash flows from operating actiities are#
Cash receipts from the sale of goods and the rendering of serices#
Cash receipts from ro&alties' fees' commissions' and other reenue#
Cash pa&ments to suppliers for goods and serices#
Cash pa&ments to and on behalf of emplo&ees#
Cash receipts and cash pa&ments of an insurance enterprise for premiums and claims' annuities and other benefits#
Cash pa&ments or refunds of income ta%es unless the& cash be specificall& identified with financing and inesting actiities# and
Cash receipts and pa&ments relating to future contracts' forward contracts' option contracts' and swap contracts when the contracts are held for dealing or trading purposes. ome transactions' such as the sale of an item of plant' ma& gie
rise to a gain or loss which is included in the determination of net profit or loss. oweer' the cash flows relating to such transactions are cash flows from inesting actiities.
)). CASH FLOW FROM INVESTING ACTIVITIES :
The separate disclosure of cash flows arising from inesting actiities is important because the cash flows represent the e%tent to which e%penditures hae been made for resources intended to generate future income and cash flows. ,%amples of cash flows arising from inesting actiities are#
17
Cash pa&ments to acquire fi%ed assets ;including intangibles*. These pa&ments include those relating to capitalized research < deelopment costs and selfconstructed fi%ed assets#
Cash receipts from disposal of fi%ed assets ;including intangibles*
Cash pa&ments to acquire shares' warrants' or debt instruments of other enterprises and interests in (oint entures ;other than pa&ments for those instruments considered to be cash equialents and those held for dealing or trading purposes*#
Cash receipts and disposal of shares' or debt instruments of other enterprises and interests in (oint entures ;other than receipts for those instruments considered to be cash equialents and those held for dealing or trading purposes*#
Cash adances and loans made to third parties ;other than adances and loans made b& a financial enterprise*#
Cash receipts from the repa&ment of adances and loans made to third parties ;other than adances and loans made b& a financial enterprise*#
Cash pa&ments for future contracts' forward contracts' opinion contracts' and swap contracts e%cept when the contracts are held for dealing or trading purposes' or the pa&ments are classified as financing actiities# and
Cash receipts for future contracts' forward contracts' opinion contracts' and swap contracts e%cept when the contracts are held for dealing or trading purposes' or the pa&ments are classified as financing actiities# and =hen a contract is accounted for as a hedge of an identifiable
position' the cash flows of the contracts are classified in the same manner as the cash flows of the position being hedged.
))). CASH FLOWS FROM FINANCING ACTIVITIES:
The separate disclosure of cash flows arising from financing actiities is important because it is useful in predicting claims or future cash flows b& proiders of funds ;both capital and borrowings* to the enterprise. ,%amples of cash flows arising from financing actiities are# 18
•
Cash proceeds from issuing shares or other similar instruments#
•
Cash proceeds from issuing debentures' loans' notes' bonds' and other short-term or long-term borrowings# and
•
Cash repa&ments of amounts borrowed#
•
Cash pa&ments to redeem preference shares
•
"a&ment of diidend
19
CHAPTER-3 INDUSTRY PROFILE
20
O$er$"e+ #, In-"an In,ras!r&!&re Rea* Es!a!e / C#ns!r&!"#n In-&s!r': The construction sector is the second largest emplo&er in )ndia after agriculture. Currentl&' the construction industr& in )ndia' directl& or indirectl&' emplo&s appro%imatel& 3!.@ million wor5ers and also accounts for >@.@ of gross inestment and B@.@ of infrastructure costs. The construction sector accounts for a gross annual business olume of s.!'3@@ billion and accounts for .@ of )ndia‟s D6" ;)ndia‟s total D6" is appro%imatel& E1 trillion*.
)nestment in the construction sector ma& be broadl& classified into the following categories: F )nfrastructure construction inestments ;i.e. roads' urban infrastructure' power' irrigation and railwa&s* F )ndustrial construction inestments ;i.e. steel plants' te%tiles plants' oil pipelines and refineries* F eal estate construction inestments ;i.e. residential and commercial construction*
Drowth in the construction industr& is e%pected to be led b& growth in infrastructure and industrial construction inestments' which are e%pected to grow at a faster rate than real estate construction inestments. Consequentl&' the share of real estate construction inestments in total construction inestments is e%pected to fall. $eertheless' real estate construction inestments will continue to be the biggest component of total construction inestments.
Fa!#rs -r"$"n0 "n,ras!r&!&re 0r#+!h: •
"olitical will: 2uilding further on the initiaties ta5en b& preious goernments' the
current Do) is underta5ing seeral measures to enhance inestments in the infrastructure segment. F +unding from multi-lateral agencies: /ultilateral agencies such as the =orld 2an5 21
and the Asian 6eelopment 2an5 ;8A629* are funding arious infrastructure pro(ects on a large scale in )ndia. Agencies such as the apan )nternational 2an5 for Cooperation ;8)2C9*' which funded the 6elhi /etro ;7nderground ailwa&* "ro(ect' are also proiding funding to the sector. 4arious state goernments are mobilizing funds from these agencies to support rural roads and sanitation pro(ects.
The R#*e #, !he Pr"$a!e Se!#r "n In,ras!r&!&re De$e*#%(en! 1 P&2*" Pr"$a!e Par!nersh"% istoricall&' the goernment has pla&ed a 5e& role in suppl&ing and regulating infrastructure serices
in )ndia
and priate sector has not participated in
infrastructure deelopment. oweer' due to the public sectorGs limited abilit& to meet the massie infrastructure funding requirements' priate sector inestment in infrastructure is critical. Therefore' the )ndian goernment is actiel& encouraging priate inestments in infrastructure. According to =orld 2an5' )ndia needs to inest an additional 3-> of D6" on infrastructure to sustain its current leels of growth in the medium term and to spread the benefits of growth more widel&. ;ource: )ndia Countr& eriew !@@H' =orld 2an5* )n order to boost the participation of the priate sector in road deelopment' the Doernment has planned the following initiaties:
•
The Doernment will carr& out all preparator& wor5' including land acquisition and utilit&
remoal. ight of wa& will be made aailable to contractor' free from all eencumbrances. $ational ighwa& Authorit& of )ndia ;$A)*Ithe Doernment will proide a capital grant of up to >@ of the pro(ect cost to enhance iabilit& on a case-b&-case basis ealuation. F The contractor will receie a 1@@ ta% e%emption for fie &ears and 3@ relief for the following fie &ears' which ma& be utilized in !@ &ears. F "ermitted concession period of up to 3@ &ears. F 6ut& free importation of specified modern high capacit& equipment for highwa& construction. ;ource: "ublic "artnerships in )ndia' /inistr& of +inance' Doernment of )ndia*
22
TYPES
OF
CONTRACTS
IN
THE
CONSTRUCTION
AND
INFRASTRUCTURE SECTORS •
B&"*-3O%era!e3Trans,er 45BOT67
7nder this t&pe of "ublic "riate "artnership ;"""* contract' the Doernment grants to a contractor a concession to finance' build' operate and maintain a facilit& for the concession period. 6uring the concession period' the operator collects user fees and applies these to coer the costs of construction' debt-sericing and operations. At the end of the concession period' the facilit& is transferred bac5 to the public authorit&. 2T is the most commonl& used approach in relation to new highwa& pro(ects in )ndia' and is also used in the energ& and port sectors. 2T pro(ects can be annuit&-based or toll-based' as defined below:
F BOT ann&"!'32ase- %r#8e!s 7nder this form' the concessionaire is responsible for constructing and maintaining the pro(ect facilit&. The Do)' usuall& through the $ational ighwa&s Authorit& of )ndia ;8$A)9* in the case of highwa& pro(ects' pa&s the concessionaire a semi-annual pa&ment' or annuit&. 7nder this approach' the amount of income collected b& the concessionaire is not directl& related to the usage leel of the pro(ect. )n the conte%t of highwa& pro(ects' the amount of income is not b& direct reference to the number of ehicles using the highwa&. )nstead' the ris5 that traffic' and consequentl& user fees' ma& be lower than e%pected is borne b& the $A) alone.
•
BOT !#**32ase- %r#8e!s
)n order to reduce the dependence on its own funds and to promote priate sector inolement in deeloping pro(ects' the $A) has awarded some highwa& pro(ects on a toll basis. )n this case' the concessionaire is responsible for constructing and maintaining the pro(ect as well as being allowed to collect reenues through tolls during the concession period. After the e%pir& of the concession period' the pro(ect is transferred bac5 to the $A). 23
B&"*-3O+n3O%era!e3Trans,er 45BOOT67
2T contracts are similar to 2T contracts' e%cept that in this case the contractor owns the underl&ing asset' instead of onl& owning a concession to operate the asset. +or e%ample' in the case of h&droelectric power pro(ects' the contractor would own the asset during the underl&ing concession period and the asset would be transferred to the Doernment at the end of that period pursuant to the terms of the concession agreement. Des"0n3B&"*-3F"nane3O%era!e 45DBFO67
The $A) is planning to award new highwa& pro(ect contracts under the 62+ scheme' wherein the detailed design wor5 is done b& the concessionaire. The $A) would restrict itself to setting out the e%act requirements in terms of qualit& and other structures of the road' and the design of the roads will be at the discretion of the concessionaire. The $A) e%pects that the 62+ scheme will improe the design efficienc&' reduce the cost of construction and reduce time to commence operations' in addition to giing the concessionaire greater fle%ibilit& in terms of determining the finer details of the pro(ect in the most efficient manner. I!e( Ra!e C#n!ra!s
These contracts are also 5nown as unit-price contracts or schedule contracts. +or item rate contracts' contractors are required to quote rates for indiidual items of wor5 on the basis of a schedule of quantities furnished b& the customer. The design and drawings are proided b& the customer. The contractor bears almost no ris5 in these contracts' e%cept the ris5 of an escalation in the rate of items quoted b& the contractor' as it is paid according to the actual amount of wor5 on the basis of the per-unit price quoted. En0"neer"n0
Pr#&re(en!
C#ns!r&!"#n9L&(%3S&(
T&rne'
45EPC9T&rne'67
C#n!ra!s
)n this form of contract' contractors are required to quote a fi%ed sum for the e%ecution of an entire pro(ect including design' engineering and e%ecution in accordance with drawings' designs and specifications submitted b& the contractor and approed b& the customer. The 24
contractor bears the ris5 of incorrect estimation of the amount of wor5' materials or time required for the (ob. ,scalation clauses might e%ist in some cases to coer' at least partiall&' cost oerruns. O%era!"#ns an- Ma"n!enane 45O/M67 C#n!ra!s
T&picall& an operations and maintenance contract is issued for operating and maintaining facilities. This could be in sectors such as water' highwa&s' buildings and power. The contract specifies routine maintenance actiities to be underta5en at a predetermined frequenc& as well as brea5-down maintenance during the contract period. =hile the contractor is paid for the routine maintenance based on the quoted rates which are largel& a function of manpower' consumables and maintenance equipment to be deplo&ed at the site' an& brea5down maintenance is paid for on a cost-plus basis. Fr#n! En- En0"neer"n0 an- Des"0n 45FEED67 C#n!ra!s
rdinaril&' +,,6 wor5 is carried out as a part of a consultanc& assignment where the consultant proides +,,6 data to the pro(ect owner to enable it to ta5e a decision on ma5ing a tender for construction. )n addition to this' the +,,6 is also a prerequisite to enable a contractor to bid for ,"CITurn5e& pro(ects. A +,,6 pro(ect can be an independent consultanc& pro(ect or a part of an ,"CITurn5e& contract. TYPICAL RETURNS FROM PRIVATE INVESTMENTS IN INFRASTRUCTURE
6espite the critical role pla&ed b& infrastructure deelopment in growth' there still e%ists a er& wide gap of 7E1@-1 billion between the current and required leels of priate inestments in infrastructure. eturns ar& from contract to contract. T&picall&' in an annuit&' the pro(ect )nternal ate of eturn ;)* would be in the range of 1!-1> and equit& ) would be in the range of 1> -1B . +or toll' where the concessionaire ;contractor* assumes the traffic ris5' the pro(ect ) would be in the range of 1>- 1B and equit& ) would be in the range of 1J-!@ .
25
Pr#%#se- "n,ras!r&!&re "n$es!(en! "n ;;!h F"$e Year P*an
The 11th +ie 0ear "lan enisages an infrastructure inestment of s. !@'B1 billion' to be shared between the Centre' states and priate sector in the ratio of 3K.!' 3!.B and
[email protected]. 2elow is the estimated leel of inestment in the infrastructure sector oer L) plan:
26
ROAD INFRASTRUCTURE
)nestment )nestment in the roads sector is e%pected to grow at a Compounded Annual Drowth Drowth ate ;CAD* of 1 oer the ne%t fie &ears' with an estimated increase from s.1'1BK billion in the past fie &ears ;fiscal &ears !@@!-!@@B* to about s.!'3@B billion in the ne%t fie &ears ;fiscal &ears !@@K-!@11*.
)ndia continues to need significant inestment in the road sector as the population and econom& continues to grow. The )ndian road networ5 consists of:
According to the $A)' roads form the most common t&pe of transportation in )ndia and accounted accounted for appro%imatel& J@.@ of passenger traffic and B.@ of freight traffic. traffic. $ational highwa&s accounts acc ounts for nearl& >@.@ of the th e total road traffic in )ndia. 27
The following table sets forth information relating to the status of $ational ighwa&s:
The number of ehicles grew at an aerage pace of
[email protected]@ per annum oer the period from +0 !@@@ to +0 !@@>. "assenger traffic on roads as a percentage of total passenger traffic has also witnessed a huge increase from 3@ in 1H1 to JB in !@@J. ;ource: C))M esearch' oad $etwor5 in )ndia' une 3@' !@@H*.
The focus of the road modernization program in )ndia is the Dolden Nuadrilateral ;DN* pro(ect. The flagship program to deelop and upgrade )ndian national highwa&s is the $ational ighwa&s igh wa&s 6eelopment "rogram ;8$6"9*. 2esides $6"' the road sector in )ndia is e%pected to see a greater leel of deelopment deelopment actiit& through road programmes such as "radhan /antri Drameen ada5 0o(ana ;8"/D09*' and pecial Accelerated oad 6eelopment "rogramme O $orth ,ast ;8A6"-$,9* as well as road pro(ects at the state leel.
The scope of the $6" pro(ect is illustrated b& the multi-phase approach set forth 28
below: F "hase ) of $6"' Dolden Nuadrilateral "ro(ect ;DN* inoles four-laning of appro%imatel& 'J>B 5m of national highwa&s between 6elhi' /umbai' Chennai and Pol5ata. "hase ) is almost complete. F "hase )) $orth-outh and ,ast-=est corridors ;$,=* inoles upgrading of the e%isting two-lane highwa&s and the four-laning of appro%imatel& K'!K> 5m of national highwa&s connecting four e%treme points of the countr&. "hase )) is e%pected to be completed b& !@@HI!@1@. F "hase ))) inoles the deelopment of roads' connecting state capitals and places of economic and tourist importance to "hase ) and "hase )). "hase ))) inoles two deelopment sections O "hase )))A and "hase )))2. =hile approal has been receied for the widening and the strengthening of >'@15m in "hase )))A' onl& in-principle approal has been granted for the deelopment of B'@@@ 5m in "hase )))2. F "hase )4 inoles the two-laning of a single lane networ5 of appro%imatel& !@'@@@ 5m. "hase )4 has onl& receied an in-principle approal and has been planned completel& on a 2T-annuit& basis. F "hase 4 inoles the si%-laning of B'@@ 5m of high-densit& four-laned roads. "hase 4 has onl& receied in-principle approal. F "hase 4) inoles the construction of e%presswa&s coering appro%imatel& 1'@@@ 5m of national highwa&s. "hase 4) has onl& receied an in-principle approal. F "hase 4)) inoles the deelopment of ring roads' b&-passes' oer-bridges' fl&oers' etc. "hase 4)) is still in a conceptual stage. ource: C))M' oads and ighwa&s Annual eiew' eptember !@@B. The table below sets forth the status of the $6" as at une 3@' !@@H:
29
The targets for completion of the various components of the NHDP are as follows:
(Source: Plan Document, 11 th Five Year Plan; CRISIL Research, NHDP Review !utloo", Fe# $% $&&') ,
30
31
32
THE REAL ESTATE SECTOR IN INDIA The )ndian real estate sector inoles the deelopment of commercial offices' industrial facilities' hotels' restaurants' cinemas' residential housing' retail outlets and the purchase and sale of land and land deelopment rights.
istoricall&' the real estate sector in )ndia has been unorganized and characterized b& arious factors that impeded organized dealing' such as the absence of a centralized title registr& proiding title guarantees' a lac5 of uniformit& in local laws and their application' non-aailabilit& of ban5 financing' high interest rates and transfer ta%es and the lac5 of transparenc& in transaction alues. )n recent &ears' howeer' the real estate sector in )ndia has e%hibited a trend towards greater organization and transparenc&' accompanied b& arious regulator& reforms. These reforms include: F Do) support for the repeal of the 7rban Mand Ceiling Act' with nine state goernments haing alread& repealed the Act# F /odifications in the ent Control Act to proide greater protection to homeowners wishing to rent out their properties# F ationalization of propert& ta%es in a number of states# and F Computerization of land records.
eal estate inestments are e%pected to grow from s.1@'!1J billion inested between !@@!-!@@B to s.1J'1K billion oer !@@K-!@11.
33
RESIDENTIAL REAL ESTATE The main factors that are driing demand in the residential segment are described in more detail below: Chan0"n0 -e(#0ra%h"s an- "nreas"n0 a,,*&ene: )ndia‟s demographics hae been impacted b& large increases in emplo&ment
opportunities' people in the earning age brac5et ;! to >> &ear olds* and higher salaries. uch factors are increasing disposable incomes and driing demand for new residential and retail properties.
The table below shows historic and pro(ected annual growth rates for different segments of )ndia‟s population' classified b& leels of annual income. The figures highlight that strong growth is e%pected especiall& in the higher income segments. +or e%ample' the number of households with annual incomes of between s. ! million and s. million per &ear' s. million and s. 1@ million per &ear and in e%cess of s. 1@ million per &ear is e%pected to increase in size b& !3' !B and !J' respectiel&' between financial &ear !@@! and !@1@' as illustrated b& the table.These higher income segments of )ndia’s growing middle class are e%pected to proide a strong impetus for the continued deelopment and growth of the )ndian real estate sector.
34
Lar0e se0(en! #, !he %#%&*a!"#n e#n#("a**' a!"$e:
)ndia s growing population in the earning age brac5et is recognized as a 5e& drier of growth ‟
in housing demand. The size of )ndia‟s main wor5ing age group' ! to >> &ear olds' has increased oer the last two decades. According to C) )$+AC estimates' as of !@@' appro%imatel& !J.! of )ndia‟s population was in this age brac5et. This figure is e%pected to rise to appro%imatel&
[email protected] b& !@!' an increase of appro%imatel& . million people each &ear' which could translate into a further !.K million new households per &ear. Also' the aerage age of a home purchaser has fallen from >! to 31 &ears old ;ource: C))$+AC etail +inance' ul& !@@B*.
Sh",! "n #ns&(er %re,erenes ,r#( ren!"n0 !# #+n"n0 h#&ses:
6ue to the changing demographic profile in )ndia' there has been a stead& decline in the portion of households liing in rented premises. To a certain e%tent' this ma& be attributed to rising income leels. oweer' with fewer properties aailable to rent toda& and an increase in the rents being charged to tenants' consumers hae increasingl& been inesting in 35
propert&. +actors such as the increase in the standard
of liing of consumers and the greater aailabilit& of financing for consumers are expected to fuel a further decline in the number of households renting premises (CR! N"#C #nnual Review on Housing ndustr$% &anuar$ ')*+
36
Inreas"n0 Ur2an"
)ndia has witnessed a trend of increased urbanization as people migrate from rural to urban areas see5ing emplo&ment opportunities. According to C) )$+AC estimates' )ndia‟s urban population is e%pected to grow at a CAD of !.B oer the fie &ear period from financial &ear !@@ through !@1@' as illustrated in the table below. 7rban areas must accommodate this increase in population which' in turn' is e%pected to increase in demand for new urban areas and townships ;C) )$+AC Annual eiew on ousing )ndustr&' anuar& !@@B*.
37
Shr"n"n0 H#&seh#*- S"
)ndia‟s traditional (oint famil& ;or multi-occupant* residences are graduall& being replaced b& indiidual or smaller nuclear famil& residences. +or e%ample' according to C) )$+AC' the aerage size of )ndian households decreased from appro%imatel& .! persons in 1HH1 to appro%imatel& .3@ persons in !@@1. This trend is e%pected to continue as factors such as increasing urbanization and migration for emplo&ment opportunities cause a decrease in the size of the aerage )ndian household to a n estimated
.@J
persons
b&
!@11.
Dien
)ndia‟s increasing
population' such
contraction in the size of the aerage household is e%pected to increase demand for housing ;ource: C) )$+AC Annual eiew on ousing )ndustr&' anuar& !@@B*.
38
S*&( Reha2"*"!a!"#n She(e 45SRS67:
ne sector of the real estate deelopment mar5et that is unique to /umbai is it s ‟
lum ehabilitation cheme. )n 1HH' the Doernment of /aharashtra initiated the lum ehabilitation cheme to be administered b& the newl&-created lum ehabilitation Authorit& ;A*. The ob(ectie of the is to redeelop slums in the /umbai area. Through the scheme' slum dwellings are replaced b& residential buildings containing flats of !! square feet that are constructed free of cost to former slum dwellers b& priate real estate deelopers participating in the scheme. The goernment of /umbai subsidizes this clearance and construction b& granting deelopers the right to deelop a proportion of former slum land for their own purposes' or b& granting them transferable deelopment rights ;8T6s9* which ma& be used to deelop land elsewhere in /umbai north of the slum land concerned. )n other words' in e%change for the construction of flats for slum dwellers' real estate deelopers are allowed to construct residential' commercial and retail properties on slum land' whether it is goernment or priate land' which the& can then freel& sell. /oreoer' T6s permit deelopers to deelop land in certain parts of /umbai that are outside the rehabilitated slum area. A T6 is made aailable in the form of a certificate issued b& the municipal corporation of /umbai' and its owner can use it either for actual construction or can sell it on the open mar5et. esidential deelopment on slum land that is sub(ect to the also benefits from a superior +loor pace )nde% ;+)* allowance which determines the total permitted construction area as a portion of the total land area of a site. 7nder the ' the +) is generall& around !. as against a normal +) of 1.33 thereb& ma5ing deelopment more attractie for deelopers. /oreoer' the can enable a deeloper to acquire land in prime locations in /umbai' a cit& where the scarcit& of land is a constraint on real estate deelopment. The acquisition can be made at' in effect' lower cost ;e.g.' the cost of constructing replacement housing for the slum dwellers* than traditional purchases of land for cash' thereb& reducing the asset c&cle ris5 for the deeloper between land acquisition and sale of deeloped propert& or +)IT6s. The innoatie subsid& mechanism of the has spurred redeelopment actiit& in certain depried areas of /umbai which
were
preiousl&
unattractie
to
real
estate deelopers. )n addition to
helping fulfill the social obligations of the goernment' which does not hae the 39
resources to underta5e rehabilitation pro(ects on a large scale' an on-going benefit of the to the goernment of /umbai includes the addition of indiiduals to the ta% rolls when the& occup& new housing who' as slum dwellers' were not preiousl& part of the ta% base.
COMMERCIAL REAL STATE C#((er"a* *#a!"#ns "n In-"a: er the past fie &ears' locations such as 2angalore'
Durgaon' &derabad' Chennai' Pol5ata and "une hae established themseles as emerging business destinations that are competing with traditional business destinations such as /umbai and 6elhi' especiall& with respect to their commercial real estate sector. These emerging destinations hae succeeded in matching their human resources base with necessar& s5ill sets' competitie business enironments' operating cost adantages and improed urban infrastructure. The current relatie position of the urban growth centers in )ndia can be summarized either as ;i* mature' ;ii* in transition' ;iii* emerging' or ;i* tier ))) destinations. These classifications are described below: Ma!&re Des!"na!"#ns: Mocations such as /umbai and 6elhi hae a metropolitan
character and hae consistentl& been traditional business destinations with a faorable record in attracting inestment opportunities. oweer' factors such as increasing operating costs and constraints on the aailabilit& of land ma& impede such areas from sustaining a high rate of growth in their respectie business districts. Therefore' commercial real estate growth is e%pected to be focused in the suburbs and other peripheral locations of these cities. +or e%ample' with respect to /umbai' commercial real estate growth is e%pected to be focused in areas north of central /umbai and $ai /umbai and to the east of the cit& center. Des!"na!"#ns "n Trans"!"#n: Mocations such as 2angalore and Durgaon hae human
resource potential' qualit& real estate and operating cost adantages. As such' these locations are best positioned to attract inestment in the near future. Mac5 of infrastructure is currentl& the main inhibiting factor precluding robust growth in these areas. E(er0"n0 Des!"na!"#ns: Mocations such as "une' Chennai' &derabad and Pol5ata offer
cost adantages' well deeloped infrastructure' supportie cit& goernments and minimal restraints on the suppl& of real estate. =hile the number of large occupiers in 40
these locations has &et to reach optimum leels' these locations attract a large amount of real estate inestment. Drowth in these emerging destinations is predominantl& led b& the e%pansion and consolidation plans of corporations in the )T and )T, sectors. T"er III C"!"es: Mocations such as aipur' Coimbatore' Ahmedabad' and Muc5now hae a
large talent pool combined with low cost real estate. As such' businesses in the technolog& sector hae demonstrated a growing interest in these locations as the& see5 to e%pand their operations.
The Re!a"* Se0(en!:
=hile real estate deelopment in the retail sector is a relatiel& new phenomenon in )ndia' the retail sector has been growing rapidl&. A.T. Pearne& s !@@ Dlobal etail ‟
6eelopment )nde% suggests that the )ndian retail mar5et has the largest growth potential of worldwide retail mar5ets. The following factors contribute to the emergence and growth of the organized retail segment in )ndia: )ncrease in per capita income and household consumption# Changing demographics and improed standards of liing# Changing consumption patterns and access to low-cost consumer credit )nfrastructure improements and increased aailabilit& of retail space.
istoricall&' the )ndian retail sector has been dominated b& small independent lo cal retailers such as traditional neighborhood grocer& stores. oweer' during the 1HH@s' organized retail outlets gained increased acceptance due to changing demographic factors such as an increase in the number of women wor5ing' changes in the perception of branded products' the entr& of international retailers into the mar5et and the growing number of retail malls. The size of the organized retail segment is e%pected to grow b& ! to 3@ per &ear' reaching appro%imatel& s. 1'@H billion of sales in !@1@. Although operators in the organized retail segment hae concentrated on larger cities' retailers also hae announced e%pansion plans into towns and rural areas. /a(or )ndian business groups such as eliance' 2ennett < Coleman' industan Meer' ero Droup and 2harti as well as international retailers such as /etro' hoprite' Mifest&le and 6air& +arm )nternational =al-/art' Carrefour 41
and Tesco hae alread& commenced or are considering commencing operations in )ndia. There are !1H operational shopping malls in the si% largest cities of )ndia' spread oer BB million square feet of land at an aerage size of @.3 million square feet per mall ;C) )$+AC Annual eiew on etailing )ndustr& O eptember !@@*. A significant number of specialized malls' such as automobile' (eweller&' furniture and electronic malls also are being deeloped. The H#s%"!a*"!' Se0(en!:
The hospitalit& industr& in )ndia is witnessing robust growth' supported b& )ndia
s
‟
growing econom& as well as increased business trael and tourism. The cost of trael has decreased following the Doernment s liberalization of the airline industr& in the ‟
1HH@s. Also' the increase in disposable income among )ndian wor5ers has increased demand for qualit& hotels and resorts across the countr&. According to the =orld Trael and Tourism Council ;8=TTC9*' )ndia‟s trael and tourism sector is e%pected to grow J per annum' in real terms' between !@@K and !@1B. The trael and tourism sector is e%pected to contribute 1.K of total D6" ;7E !H.B bn* b& !@1B. According to C) )$+AC room demand will grow at a CAD of 1@ oer the ne%t fie &ears ;C) )$+AC otels Annual eiew' ul& !@@B*. This is e%pected to be accompanied b& increases in aerage room rates of !@ and 1@ in fiscal !@@K and !@@J' respectiel&. )t is e%pected that the growth in occupanc& rates will be assisted b& factors such as 1@ CAD in the number of incoming traelers to )ndia oer the ne%t fie &ears.
The following chart shows changes in room demand andaailabilit& as well as 42
occupation rates since fiscal !@@@ and
pro(ections through to fiscal !@1@:
According to its publication 8otels Annual eiew ;ul& !@@B*'9 C) )$+AC estimates that inestments in the hotel industr& will total appro%imatel& s. H@ billion oer the ne%t fie &ears. S%e"a* E#n#(" =#nes 45SE=67:
The Doernment introduced ,Qs in !@@@ to proide an internationall& competitie enironment for e%ports free of bureaucratic barriers. ,Qs are specificall& designated dut&-free zones deemed to be foreign territories for purposes of )ndian customs controls' duties and tariffs. The introduction of ,Qs is aimed at attracting foreign inestment and increasing e%portsin order to
promote
economic
deelopment and emplo&ment. There are three main t&pes of ,Qs: integrated ,Qs' 43
which ma& consist of a number of industries# serices ,Qs' which ma& operate across a range of defined serices# and sector-specific ,Qs' which focus on one particular industr&. /inimum sizes for ,Qs are !'@@ acres for a multi-product ,Q' !@ acres for a sector-specific ,Q' and ! acres for ,Qs in certain specific industries' such as biotech' )T serices' gems' and (eweller&. 7nder current legislation' ,Q deelopers and tenants are granted arious income ta% benefits' which are e%pected to attract software companies in particular' gien that certain ta% brea5s in e%isting software technolog& par5s e%pire in !@@H. En!er!a"n(en!:
)ndia s entertainment industr& is currentl& estimated at appro%imatel& s. !3> billion ‟
with cinema accounting for a significant amount ;!J* of the industr& ;The )ndian ,ntertainment and /edia )ndustr& ;+)CC) O "wC eport ;!@@B**. =hile the entertainment industr& is e%pected to grow appro%imatel& !1 annuall& and reach appro%imatel& s. B1K billion b& !@1@' the )ndian cinema industr& is e%pected to reach appro%imatel& s. 13 billion in !@1@' contributing appro%imatel& ! to )ndia‟s entertainment industr&. The 5e& economic adantages of multiple% cinemas oer single-screen cinemas include better occupanc& ratios and the abilit& for cinema operators to choose to show moies in a larger or a smaller theatre based on e%pected audience size. /ultiple% cinema operators are therefore able to maintain higher capacit& utilization compared to single-screen cinemas and can proide a greater number of film showings. As each moie has a different screening duration' a multiple% cinema operator has the fle%ibilit& to decide on the screening schedule so as to ma%imize the number of shows in the multiple%es' thus generating a greater number of patrons. /ultiple%es also allow for better e%ploitation of the reenue potential of the moie. The 5e& driers of growth responsible for the e%pected increase in the number of multiple% cinemas include an increase in disposable income across an e%panding )ndian middle class' faorable demographic changes' strong growth in organized retail and the aailabilit& of entertainment ta% benefits for multiple% cinema deelopers.
44
RECENT REFORMS IN THE INDIAN REAL ESTATE SECTOR
F#re"0n -"re! "n$es!(en! "n rea* es!a!e: )n !@@' the goernment modified the
foreign direct inestment ;+6)* rules applicable to the real estate sector b& permitting 1@@ +6) with respect to certain real estate pro(ects such as townships' housing' built-up infrastructure infrastructure and construction construction deelopment pro(ects' sub(ect to a number of guidelines. The new +6) rules mainl& relate to the minimum area required to be deeloped b& such su ch a pro(ect' minimum min imum amounts amo unts to be inested and time limits within wi thin which such a pro(ect must be completed.
H#&s"n0 re0&*a!"#ns: The )ndian Doernment enacted the 7rban Mand ;Ceiling and
egulation* Act ;87MCA9* in 1HKB to preent speculation and profiteering in land and to ensure equitable distribution of land in urban areas in order to sere the common good. "ursuant to 7MCA' urban cities were classified into A' 2 and C categories. The act imposed a ceiling on the amount of acant land that an& indiidual can possess in a particular urban area' based on the classification of the cit& in question. )n A class cities' such as 6elhi and /umbai' this amounts to no more R
‟
than @@ square meters. The e%cess land identified was acquired b& the goernment after compensating the owners thereof and used to proide housing to arious sections of the public. oweer' it is widel& ac5nowledged that 7MCA has failed to achiee its ob(ectie and has resulted in inflated prices pri ces and e%acerbated e%ac erbated housing shortages. shortages. The Doernment therefore therefore suggested suggested the repeal of 7MCA b& wa& of the 7rban Mand ;Ceiling ;Ceiling and egulation* egulation* epeal Act 1HHH ;8epeal ;8epeal Act9*' Act9*' which has so far been adopted adopted b& the state state goernments goernments of ar&ana ar&ana'' "un(ab' "un(ab' 7ttar 7ttar "rades "radesh' h' Du(ar Du(arat' at' Parnata5a' Parnata5a' /adh&a /adh&a "radesh' a(asthan and rissa' rissa' but has not been repealed in a number of states' including /aharastra where /umbai is located. 45
46
CHALLENGES FACING THE INDIAN REAL ESTATE SECTOR ighl& regional reach of e%isting pla&ers: Considering the peculiar features of the real estate sector such as the differing tastes of population across arious geographies' diffi difficul culti ties es in mass mass land land acquis acquisiti ition on on unfami unfamilia liarr terrai terrain' n' absenc absencee of bus busine iness ss infrastructure to mar5et pro(ects at new locations' wide number of approals to be obtained from different authorities at arious stages of construction under the local laws' and the long gestation period of pro(ects' most real estate deelopers in )ndia tend to hoer in tried and tested areas where the conditions are most familiar to them. As a result' currentl& there are er& few pla&ers in the countr&' who can claim to hae pannational area of operations.
/a(orit& of mar5et belonging to unorganized segment: The )ndian eal ,state ector is highl& fragmented with the disorganized segment comprising of the small builders and contractors accounting for a ma(orit& of the housing units constructed. co nstructed. As a result' there is a lesser degree of transparenc& in dealings or sharing of data across pla&ers. 6emand dependent on man& factors: A challenge that the real estate deelopers face is genera generati ting ng the requis requisite ite demand demand for the proper properti ties es constru constructe cted. d. The factor factorss that that influence a customer ‟s choice in propert& is not restricted to qualit& alone' but is dependent on a number of other e%ternal factors including pro%imit& to urban areas' amenities such as schools' roads' water suppl& which are often be&ond the deeloper ‟s sphere of reach. Also' demand for housing units is also influenced b& polic& decisions relating to housing incenties.
)ncreasing )ncreasing aw /aterial /aterial "rices: Construction Construction actiities actiities are often funded b& the client who ma5es cash adances adances at different different stages of constructi construction. on. )n other words' the final amount of reenue from a pro(ect is pre-determined and the realization of this reenue is scattered across the period of construction. A big challenge that real estate deelopers face is dealing with aderse moements in costs. The real estate sector is dependent on a number of components such as cement' steel' bric5s' wood' sand' grael and paints. 47
As the reenues from sale of units are pre-decided' aderse price changes in an& of the raw materials directl& affect the bottom lines of the deelopers.
)nterest ates: ne of the main driers of the growth in demand for housing units is the aailabilit& of finance at cheap rates. ising interest rates ma& dampen the growth rate of demand for housing units.
Ta% incenties: )nterest pa&ment on housing loans are ta% deductible and it is one of the ma(or factors influencing demand. The phasing out aailable ta% incenties could affect the e%istent demand for housing units.
48
CHAPTER-4
COMPANY PROFILE
49
>. COMPANY PROFILE >.;In!r#-&!"#n:3 Lan# is one of the fastest growing )ntegrated )nfrastructure ,nterprises of )ndia'
operating across a s&nergistic span of erticals comprising "ower Deneration' "ower Trading' $on-"ower )nfrastructure' Construction' ,"C' "ropert& 6eelopment and enewable. Manco )nfratech MtdGs current mar5et capitalisation is appro%imatel& s. 1!'@@@ Crores ;76 !.H billion*' of which about BJ equit& sta5e is held b& its promoters. )ts gross reenue as on /arch !@@H was oer s. B'@@@ Crores ;76 1.3 billion*. Manco is fast emerging as one of the leading priate sector power deelopers in )ndia with !@JK /= under operation' J>BJ /= under construction' and 1@3H /= of pro(ects under deelopment. ut of the total portfolio of 11H> /=' the compan& has achieed financial closure for >33 /=. aing oer two and a half decades of e%perience in Construction and Ciil ,ngineering' Manco has created a niche for itself besides building powerful 5nowledge ban5 and s&stems which facilitate continuous adoption and implementation of best practices and technologies. Manco has strategic global partnership with top-notch companies which include: M of pain' =estports and Denting of /ala&sia' arbin' D,' 6ongfang' 6oosan etc. Toda&' Manco is one of )ndiaGs largest "ower Traders in the priate sector. A people drien organization' Manco operates from !@ tates in )ndia and has a human resource base of @@ people. Manco is also a priileged member of the =orld ,conomic +orum and it has been ac5nowledged as an elite member of the top two hundred 8Dlobal Drowth Companies9. As part of its business strateg&' the compan& has eoled MancoGs 4ision for !@1: to build a igh "erformance rganisation with an operating capacit& of 1@@@ /= in "ower. Manco also enisages aggressie growth plan for the Construction and ,"C diision to achiee an Annual Turnoer of s >@'@@@ Crores;76 J.B> billion* b& !@1. 50
The &ear !@1@ is being celebrated as MancoGs iler ubilee 0ear. )t has been twent& fie &ears since the founder chairman M a(agopal' ta5ing inspiration from his uncle Magadapati Amrappa $aidu' began his career as an entrepreneur. Manco has risen to its present leel on the strength of their ision and inspiration and under the leadership of M /adhusudhan ao the Chairman of Manco Droup.
>.?C#r%#ra!e S!r&!&re:3
>.)Lan# In,ra!eh L!- has !he ,#**#+"n0 #(%an"es &n-er "!s #%era!"#ns: M"ss"#n:3
6eelopment of ociet& through ,ntrepreneurship V"s"#n:3
/ost Admired )ntegrated )nfrastructure ,nterprise
51
Va*&es:3 Or0an"
=e recognize that organization interest is supreme' aboe indiidual preferences and goals. )n all our decisions' actions and dealings we put the rganization before selfn P#s"!"$e A!!"!&-e
=e alwa&s demonstrate a ?can-do’ mind-set and engage to delier organizational goals. =e loo5 upon challenging circumstances as opportunities to enhance our capabilities and find wa&s of achieing. Tea( W#r
=e wor5 harmoniousl& with a shared ision' energized b& our collectie talent. =e Trust' Misten to' hare with and ,mpower team members and ta5e collectie responsibilit& for the results.
H&("*"!' / Res%e!
=e are consistentl& humble in our approach to and interactions with people. =e treat eer& person with respect at all times' unconditionall&. Ah"e$e(en! Dr"$e
=e hae an urge that dries us to intensel& focus on performance and act decisiel& with high energ& to achiee the desired results. =e strie to continuousl& learn and consistentl& set higher tandards of ,%cellence. A#&n!a2"*"!'
=e own up to our words' actions and outcome. =hen we commit to do something' we own it and we do it O decisiel& and responsibl&.
52
Inn#$a!"#n
=e alue and encourage application of creatie ideas that enhance the effectieness of our business. =e freel& e%press ideas and ta5e actions to generate successful olutions.
>.>C#r%#ra!e G#$ernane:3 At MA$C' our ob(ectie is to create alue for our sta5eholders' including our shareholders' clients' emplo&ees' and communities. Dood corporate goernance standards that promote the principles of integrit&' transparenc&' and accountabilit& will protect and li5el& enhance our sta5eholder alue. Thus' we beliee that good business practices' transparenc& in corporate financial reporting' and the highest leels of corporate goernance are essential components of our success.
>.@C#ns"s!en! +"!h !h"s 2e*"e, !#-a' a! LANCO:3 •
,%cluding the C,' all 2oard members are independent.
•
2oard committees that address auditing' compensation' corporate goernance' and nominating functions are comprised solel& of independent directors.
•
Committee charters clearl& establish the committeesG roles and responsibilities.
Corporate Doernance Duidelines are regularl& reiewed and updated in response to changing regulations and sta5eholder concerns. ur b&laws hae recentl& been updated to proide for ma(orit& oting in uncontested director
4.6Lanco Businesses:•
Construction "ower
•
,ngineering' "rocurement and Construction
•
53
•
)nfrastructure
>.;C#ns!r&!"#n:3 MA$C )nfratech Mtd has an e%cellent trac5 record in Construction pro(ects. )ts pro(ect e%pertise spans: •
"ower plants based on Das' Coal' 2io-mass and &dro.
•
)rrigation and water suppl& pro(ects' including dams' tunnels' lift irrigation' sewerage schemes and marine wor5s.
•
Ciil construction including commercial and residential buildings' mass housing pro(ects and townships' industrial structures' information technolog& par5s' corporate offices' ospitals and more. Transportation engineering pro(ects including roads' highwa&s' bridges and fl&oers.
>.?P#+er: 3 MA$C has proen e%pertise in power generation from conentional and nonconentional sources of energ& including gas' coal' biomass' h&dro and wind. Manco has operational and under e%ecution pro(ects amounting to oer 11@@@/=.
54
O%era!"#na* Pr#8e!s:
Ca%a"!' P*an!s
F&e*
L#a!"#n
4MW7
Manco Pondapalli ;tage )<))*
B@1 Andhra "radesh
Das
Tamil $adu
Coal
Chhattisgarh
;3BJS!33*
A2A$ "ower
1!@
Manco Amar5anta5 ;tage )
B@@
< ))*
Das
;!%3@@*
Manco' Chitradurga
3
=ind ,nerg& Parnata5a
Manco' Tiruneleli
1@
=ind ,nerg& Tamil $adu
4amshi &dro ,nergies
1@
&dro
imachal "radesh
4amshi )ndustrial "ower
&dro
imachal "radesh
T#!a*
;)>
Pr#8e!s &n-er #ns!r&!"#n:3
55
Pr#8e!s
Ca%a"!' 4MW7
JK Manco Pondapalli ))< ))) ;133SK>!* Manco Amar5anta5 ))) < )4
1'3!@
Manco 4idarbha Thermal
1'3!@
Manco Anpara
1'!@@
7dupi "ower )<))
1'!@@
MA$C Dreen "ower
K@
4amshi )ndustrial "ower
MA$C ,nerg&
@@
MA$C &dro ,nergies
KB
T#!a*
@
Pr#8e!s &n-er De$e*#%(en!:3
Ca%a"!' Pr#8e!s
F&e*
L#a!"#n
4MW7
Manco Anpara
BB@
Coal
7ttar "radesh
Manco' 2abandh )
13!@
Coal
rissa
+atehpur
13!@
Coal
7ttar "radesh
&dro
7ttara5hand
MA$C &dro ,nergies T#!a*
KB ))
56
Manco Pondapalli A2A$ "ower Manco Amar5anta5a Manco Chitrdurga Manco Triendram 4amsi &dro ,nergies 4amsi )ndustrial "ower
• • • • • • •
Un-er I(%*e(en!a!"#n:3
•
Manco Pondapalli
•
Manco Amar5anta5a
•
Manco Anpara
•
7dipi "ower )<))
•
Manco 2abandh
•
Manco Dreeen "ower
•
4amsi industrial power
•
Manco ,nerg&
•
Manco &dro ,nergies
P#+er Tra-"n0 •
Manco "ower Trading
En0neer"n0 Pr#&re(en! / C#ns!r&!"#n:3
57
The ,"C group at Manco ensures pro(ect delier& c&cles' greater capital e%penditure control' sourcing the best serice and technolog& proiders and most importantl& allows its clients to focus on their core business. The core competence of Manco is its e%perienced team for managing contracts during all phases of a pro(ect' while meeting the highest international standards Manco proides engineering' procurement' construction' pro(ect management and commissioning serices on a Turn5e& basis to the "ower ector leeraging on the e%perience and e%pertise of its Droup companies' its construction capabilit& and competent manpower. Manco has ongoing pro(ects across )ndia and has in place an established networ5 of resources. The completed list of power pro(ects includes Thermal' &dro and $on conentional ,nerg&
>.)In,ras!r&!&re:3 MA$C )nfratech Mtd has e%ecuted man& challenging infrastructure pro(ects across )ndia including ighwa&s. Manco is currentl& e%ecuting the 4aranasi $on /etro Airport "ro(ect.
>.>R#a-s:3 MA$C has constructed roads and highwa&s across )ndia for the $ational ighwa&s Authorit& of )ndia. MA$C has won the contract for construction and operation of two road pro(ects in Parnata5a' the J1 5m 2angalore-os5ote-/udbagal stretch on $ational ighwa& > and the J! 5m $eelamangla - 6eihalli stretch on $ational ighwa& >J on 2uild' perate and Transfer ;2T* basis under the $ational ighwa&s 6eelopment "ro(ect
;$6"*
"hase
))).
The concession agreements for the pro(ects hae been signed with the $ational ighwa&s Authorit& Mtd. The total pro(ect cost is estimated at s 13@@ crores and inoles si% laning of 1B 5m stretch and four laning of the remaining stretches. The concession periods are !@ and ! &ears for the two pro(ects respectiel&' including 3@ months of 58
construction period The contracts hae been awarded through a competitie bidding process.
>.In$es!#rs:3 Manco )nfratech Mimited became a listed entit& in $oember !@@B following the )nitial "ublic ffering of shares. "resentl& the mar5et capitalization of the compan& is around 7E 3 billion. f the total !>@.KJ million shares outstanding BK.H is held b& the founder promoters of the compan&.
S!# !a2*e:3
+rom anuar& !@11 Mast "rice igh Mow 4olume
2, BK.@ BK.B B.K KB'!H>
$, BK.B BK.3 B.K@ !'H!'!BH
>.A+ar-s:3 Manco
)nfratech
Mimited
Award for ,%cellence in 2ridge ,ngineering 1HHH from the )ndian )nstitute of 2ridge ,ngineers. Manco Pondapalli "ower "t Mtd A 1J@@1 :1HHH Certification in respect of ,nironmental /anagement &stem b& Mlo&dGs egister Nualit& Assurance Mtd in !@@. $ational Award for ,%cellence in =ater /anagement !@@ b& Cll - D2C Dreen 2usiness Centre. iler Award in Das "ower ector for utstanding Achieement in ,nironment 59
/anagement for !@@3-@> from Dreentech +oundation. Meadership ,fforts towards ,nironmental /anagement and ustainable )nitiatie among Corporates for !@@!-@3 b& T,). 2est ,nironment )mproement Actiit& Award !@@! - @3 from +A"CC). C/ Meadership and ,%cellence Award in afet&' ealth and ,nironment !@@!. A2A$
"ower
Compan&
Mtd
@A 1J@@1:1HHH Certificate from T74 76 /anagement erice Dmb Trading as T74 outh Asia "t Mtd.
Lan# Gr#&% C#r%#ra!e C#((&n"a!"#ns ? ") $ational Award for ouse ournal ;,nglish* +irst ") $ational Award for Corporate +ilm in ,nglish - +irst ") $ational Award for Corporate 2rochure - +irst "rize
"rize "rize
? ") $ational Award for )n- ouse /agazine ;Content and Ma&out*Oecond "rize ") $ational Award for Corporate Campaign econd "rize ") $ational Award for Corporate 2rochure - econd "rize ?@
") $ational Award for )n-ouse /agazine ;Content and Ma&out*-Third "rize ") tate ;Andhra "radesh* Award for )n- ouse /agazine ;Content and Ma&out* econd "rize.
60
CHAPTER-5 DATA ANALYSIS AND INTERPRETATION 61
Balance Sheet as at 31 st March , 2008
Schedules
Rs.
Rs.
1. SOURCES OF FUNDS: 1. Shaeh!ldes" Fu#ds: a. Ca$%&al
'
56(69(92(680
). Rese*es
+
157(25(55(583 213(95(48(263
2. ,!a# Fu#ds:
C
185(73(40(134
a. Secued ,!a#s
D
48(99(46(869
). U#secued ,!a#s
448(68(35(132
--. ',-C'/-ON OF FUNDS: 1. F%ed 'sse&s: !ss !&
E
337(35(07(089
,ess: De$eec%a&%!#
160(60(60(818
Ne& !&
176(74(46(271
Ca$%&al !%# $!ess
6(05(16(710 182(79(62(981
2.-#*es&e#&s
F
1(500
3. Cue#& 'ss&s( ,!a#s a#d 'd*a#ces Su#d De)&!s
1
14(12(92(290
Cash +a# +ala#ces
2
17(81(32(470
O&he Cue#& 'sse&s
3
4(81(30(040
,!a#s 'd*a#ces
8(61(72(470
62
45(45(72(470 ,ess: Cue#& ,%)%l%&%es $!*%s%!#s a. ,%a)l%l%&es
-
651(941(573
). $!*%s%!#s
;
2(05(61(230
Ne& Cue#& 'sse&s 4. De
21(79(53(160 ?
55 (48(82(327
5. !& ,!ss 'cc!u#&
232(19(41(484 448(68(35(132
63
Proft and Loss ccount !or the "ear ended 31st March, 2008 -NCO@E: !ss Sales Ec%se Du&
=%#clud%# 1341716993 ,
49259933
O&he -#c!e
1390976079
EAEND-/URE:
2781953005
RaB @a&e%als c!#sued
181903306
$ae#&s a#d +e#e&s !< E$!lees
@1
99557971
@a#u
@
892417716
Sell%#
O&he E$e#ses
598078982
Ec%se Du&
N
1497310
-#&ees&
28600214
De$ec%a&%!#
72918704
-#ceaseDecease %# s&!cs
135681510
!& =,!ss> )e
55178068
a#d %&e!s
80503442
'dd: Rel%e
741142301
Re!< Schedule !>
2832301456
+ala#ce Ca%ed
4829617
Ea#%# $e shae =Re
N!27
!<
+as%c
1.42
D%l&ed
1.42
#ash
$lo% State&ent !or the 'ear (nded 31 st
64
March, 2008 a&%culas
Rs.
Cash Fl!B F! O$ea&%# 'c&%*%&es !&=,!ss> as $e $!& a#d ,!ss 'cc!u#&
8(05(03(442
'dd=,ess>:'dGus&e#&s
1(85(30(324
De$ec%a&%!#
7(29(18(704
E&a!d%#a %&es =Rel%e
5(51(78(068
E&a!d%#a %&es =De
1(58(90(678
E&a!d%#a %&es De
12(000
Ced%& )ala#ces B%&&e# )ac
32(16(554
D%*%de#ds ece*%ded
33(45(291
-#&es& ece%*ed
21(028
'sse&s B%&&e# !
38(70(495
,ess !# sale !< asse&s
1(56(567
$!*%s%!#
14(04(32(984
$!*%s%!#
7(56(567
-#&es&
21(50(897
$!*%s%!#
7(67(416
$!& !# sale !< %#*es&e#&s
1(56(110
$!*%s%!#
519
$!*%s%!#
7(72(096
s&!es B%&&e# !
6(25(95(791
O$ea&%# $!& +e
11(43(152
'dGus&e#&s
6(13(85(596
-#*e#&!%es
13(90(64(443
/ade !&he ece%*a)les
19(93(06(887
/ade aa)les
13(67(11(096
Cash Fl!B F! -#*es&%# 'c&%*%&%es:
65
$uchase !< F%ed 'sse&s =Ne& a<&e &a#s
10(58(980
-#&ees& ece%*ed
21(27(742
sale !< ed asse&s
34(79(111
sale !< %#*es&e#&s
22(27(555
D%*%de#ds ece%*ed
7(72(415
/aes $a%d
12(000
De
9(05(990
Ne& cash used %# %#*es&%# ac&%*%&%es
23(98(369
C. cash Fl!B <! F%#a#c%# 'c&%*&%es: -#&ees& $a%d
4(44(32(595
U# secued l!a#s
2(96(83(876
Re$ae#& !< secued ,!a#s
7(04(88(164
Ne& %#cease %# cash a#d cash eHu%*ale#&s
14(46(04(635
Ne& cash <! #ac%# eHu%*ale#&s
54(95(170
'dd: Cash a#d cash eHu%*ale#&s as a& 31032002
5(36(25(210
Cash a#d cash eHu%*ale#&s as a& 31032003
Balance Sheet as 31st March ,200)
Schedule 1. SOURCES OF FUNDS: 1. Shaeh!ldes" Fu#ds:
66
Rs.
Rs.
a. '.
Ca$%&al '
566993
+
1(477(272
a. Secued ,!a#s
C
1961652
). U#secued ,!a#s
D
463580
E
3361813
). Rese*es
2. ,!a# Fu#ds:
4469498
--. ',-C'/-ON OF FUNDS: 1. F%ed 'sse&s: !ss !&
1(704(722
,ess: De$eec%a&%!#
1657091
Ne& !&
1714634
Ca$%&al !%# $!ess
F
0.02
2.-#*es&e#&s 3. Cue#& 'sse&s( ,!a#s a#d 'd*a#ces
112962
Su#d De)&!s
2
148221
Cash +a# +ala#ces
3
54587
O&he Cue#& 'sse&s
4
1.1
,!a#s 'd*a#ces
81563 398443
,ess: Cue#& ,%)%l%&%es $!*%s%!#s a. ,%a)l%l%&es
-
778984
). $!*%s%!#s
;
25552
Ne& Cue#& 'sse&s 4. De
406093 ?
5. !& ,!ss 'cc!u#&
558093 4469497
67
Note:The she!"#es $ %otes &%! st&te'e%t o% &o"%t(%) *o#((es +,o' &% (%te), *&,t o+ the &%e Sheet
Proft and Loss March,200).
ccount
!or
the
Schedule
"ear
ended
Rs.
-NCO@E: !ss Sales =%#clud%# Ec%se Du&
1255575
Rs. 26(30(22(805=Rs.29(00(23(286>
256178
O&he -#c!e
,
999397
EAEND-/URE: RaB @a&e%als c!#sued
185864
$ae#&s a#d +e#e&s !< E$!lees
@1
98768
@a#u
@2
815540
O&he E$e#ses
4.95
Ec%se Du&
165471
-#&ees&
16304
De$ec%a&%!#
1282442
-#cease> Decease %# s&!cs
17785
!& =,!ss> )e
2(851.60
a#d %&e!s
10.3
'dd: Rel%e
2(841.30
Re!< Schedule!> 2(809.19 +ala#ce Ca%ed
23(219.42
Ea#%# $e shae
26(028.61
=Re
68
31
st
+as%c
4.96
D%l&ed
4.96
#ash $lo% State&ent !or the 'ear (nded 31st March ,200) Rs. Cash Fl!B F! O$ea&%# 'c&%*%&es !&=,!ss> as $e $!& a#d ,!ss 'cc!u#&
2(809.20
'dd=,ess>:'dGus&e#&s
163.04
De$ec%a&%!#
10.3
E&a!d%#a %&es =Rel%e
E&a!d%#a %&es =De
32.11
E&a!d%#a %&es De
69.87
Ced%& )ala#ces B%&&e# )ac
D%*%de#ds ece*%ded
23.99
-#&es& ece%*ed
'sse&s B%&&e# !
23.99
,ess !# sale !< asse&s
$!*%s%!#
0.13
$!*%s%!#
33.94
-#&ees&
16.11
$!*%s%!#
1(654.71
$!& !# sale !< %#*es&e#&s
$!*%s%!#
6.05 1(083.59
69
O$ea&%# $!& +e
283.3
-#*e#&!%es
346.53
/ade !&he ece%*a)les
132919
/ade aa)les
1(959.02
Cash Fl!B F! -#*es&%# 'c&%*%&%es: $uchase !< F%ed 'sse&s =Ne& a<&e &a#s
8.61
<! ca$%&al B! %# $!ess
35.1
-#&ees& ece%*ed
21.11
sale !< ed asse&s
8.51
sale !< %#*es&e#&s
D%*%de#ds ece%*ed
/aes $a%d
3.49
De
Ne& cash used %# %#*es&%# ac&%*%&%es
59.6
C. cash Fl!B <! F%#a#c%# 'c&%*&%es: -#&ees& $a%d
793.35
U# secued l!a#s
294.52
Re$ae#& !< secued ,!a#s
221.41
Ne& %#cease %# cash a#d cash eHu%*ale#&s
870.46
Ne& cash <! #ac%# eHu%*ale#&s
64.57
'dd: Cash a#d cash eHu%*ale#&s as a& 31032002
481.3
Cash a#d cash eHu%*ale#&s as a& 31032003
545.87
70
Balance Sheet as 31st March ,2010 Schedule
Rs.
a. Ca$%&al
'
566993
). Rese*es
+
13(591.68
Rs.
1. SOURCES OF FUNDS: 1. Shaeh!ldes" Fu#ds:
2. ,!a# Fu#ds:
19(261.61
16079.06
a. Secued ,!a#s
C
6(040.28
). U#secued ,!a#s
D
22(119.34
71
14(380.95
--. ',-C'/-ON OF FUNDS: 1. F%ed 'sse&s: !ss !&
E
33(480.69
,ess: De$eec%a&%!#
18(077.65
Ne& !&
15(403.04
Ca$%&al !%# $!ess
559.07
2.-#*es&e#&s
F
15(962.11
0.02
3. Cue#& 'ss&s( ,!a#s a#d 'd*a#ces
1(042.05
Su#d De)&!s
2
1(537.42
Cash +a# +ala#ces
3
391.28
O&he Cue#& 'sse&s
4
21.32
,!a#s 'd*a#ces
1(223.55
a. ,%a)l%l%&es
-
9(944.67
). $!*%s%!#s
;
246.55
4(215.62
,ess: Cue#& ,%)%l%&%es $!*%s%!#s
Ne& Cue#& 'sse&s 4. De
59(756 ?
5. !& ,!ss 'cc!u#&
5(975.60 5(607.14
41(380.95
Proft and Loss ccount !or the 'ear ended 31 st March, 2010 Schedule
Rs.
Rs.
-NCO@E: !ss Sales =%#clud%# Ec%se Du&
15(599. 47
Rs. 26(30(22(805=Rs.29(00(23(286>
3(046.7 6
72
12(552. 71
O&he -#c!e
973.98 13(526. 69
, EAEND-/URE:
2(203.5 7
RaB @a&e%als c!#sued $ae#&s E$!lees
a#d
+e#e&s
@a#u
!< @1
1(017.77
@2
10(070.05
Sell%#
O&he E$e#ses
5.42
Ec%se Du&
1(844.9 2
-#&ees&
126.71
De$ec%a&%!#
15(257. 60
-#cease> Decease %# s&!cs
9.65
!& =,!ss> )e
1(740.5 6
a#d %&e!s
1(957.6 1
'dd: Rel%e
217.05
Re!< Schedule!>
1.93
+ala#ce Ca%ed
241.33
Ea#%# $e shae
26.028. 61
=Re
25(787. 28
+as%c
0.43
D%l&ed
0.43
73
#ash $lo% State&ent !or the 'ear (nded 31st March ,2010 Cash Fl!B F! O$ea&%# 'c&%*%&es !&=,!ss> as $e $!& a#d ,!ss 'cc!u#& 'dd=,ess>:'dGus&e#&s
126.71
De$ec%a&%!#
1(957.61
E&a!d%#a %&es =Rel%e E&a!d%#a E$e#d%&ue>
%&es
=De
1.93
Re*e#ue 26.21
E&a!d%#a %&es De
28.98
Ced%& )ala#ces B%&&e# )ac
0.44
D%*%de#ds ece*%ded
19.05
-#&es& ece%*ed
10.08
'sse&s B%&&e# !
1(844.92
,ess !# sale !< asse&s
19.99
$!*%s%!#
768.49
$!*%s%!#
596.62
-#&ees& $!*%s%!#
87.58
-#*e#&!%es
499.49
74
/ade !&he ece%*a)les
2(093.51
/ade aa)les
1(681.60
Cash Fl!B F! -#*es&%# 'c&%*%&%es: $uchase !< F%ed 'sse&s =Ne& a<&e &a#s
1(084.98
<! ca$%&al B! %# $!ess -#&ees& ece%*ed
138.59
sale !< ed asse&s
16.36
sale !< %#*es&e#&s
18.77
D%*%de#ds ece%*ed
14.63
/aes $a%d
780.72
De
1133.2
U# secued l!a#s
1(330.51
Re$ae#& !< secued ,!a#s
2(012.29
Ne& %#cease %# cash a#d cash eHu%*ale#&s
2(020.29
Ne& cash <! #ac%# eHu%*ale#&s
154.59
'dd: Cash a#d cash eHu%*ale#&s as a& 31032002
545.87
Cash a#d cash eHu%*ale#&s as a& 31032003
391.28
75
BL*#( S+(( S 30 + S(P(MB(, 2011 Schedule
Rs.
a. Ca$%&al
'
11(711.73
). Rese*es
+
12(607.63
a. Secued ,!a#s
C
6(601.83
). U#secued ,!a#s
D
5(581.34
1. SOURCES OF FUNDS: 1. Shaeh!ldes" Fu#ds:
24.319.36
2. ,!a# Fu#ds:
12(183.17 36(502.53
--. ',-C'/-ON OF FUNDS: 1. F%ed 'sse&s:
E
32(484.59
!ss +l!c
19.592.12
,ess: De$ec%a&%!#
12(892.47
Ne& +l!c
39.25
76
Ca$%&al !%# $!ess
2.-#*es&e#&s
12(931.72
F
1(293.06
3. Cue#& 'ss&s( ,!a#s a#d 'd*a#ces
1(293.06
Su#d De)&!s
2
1(070.44
Cash +a# +ala#ces
3
736.74
O&he Cue#& 'sse&s
4
26.42
,!a#s 'd*a#ces
1.904.46
0.02
1(070.44
5(031.12
,ess: Cue#& ,%)%l%&%es $!*%s%!#s a. ,%a)l%l%&es
-
8(472.77
). $!*%s%!#s
;
273
Ne& Cue#& 'sse&s 4. De
3712.65 ?
5(515.18
5. !& ,!ss 'cc!u#&
21(770.26
77
36(502.53
Proft and Loss ccount !or the 'ear ended 31st March, 2011 Schedule -NCO@E: !ss Sales =%#clud%# Ec%se Du&
12282.69
Rs. 26(30(22(805=Rs.29(00(23(286>
2143.2
O&he -#c!e
10139.49 3733.73 13873.22
EAEND-/UREI
@1
RaB @a&e%als c!#sued
@2
1469.92 10194.83
2737.52
$ae#&s a#d +e#e&s !< E$!lees
165.51
@a#u
16331.68
O&he E$e#ses
93.88
Ec%se Du&
16237.8
-#&ees&
2364.58
De$ec%a&%!# -#cease> Decease %# s&!cs
6501.01 4136.43
!& =,!ss> )e
0
a#d %&e!s
27.44
'dd: Rel%e
91.97
78
Re!< Schedul!>
4017.02 25787.28
+ala#ce Ca%ed
21770.26
Ea#%# $e shae =Re
Rs>
D%l&ed
=Rs>
3.43
79
#S+ $L/ S(M(* $ +( '( (*( 30th S(P(MB(, 2011 Rs. C'S F,O FRO@ OER'/-N 'C/-J-/ES: 4.017.0 2
ROF-/ 'ND ,OSS 'CCOUN/ 'dd =,ess> 'dGus&e#&s
165.51
E&a!d%#a %&es =Rel%e
6(501.0 1
Ced%& )ala#ce B%&&e# )ac
27.44
-#&ees& ece%*ed
91.97
'sse&s B%&&e# !
37.19
,!ss !# sale !< asse&s
78.22
!*%s%!#
523.74
-#&ees& '-D
!*%s%!#
7.95
$!*%s%!#
2(737.5 2
$!& !# sale !< asse&s
3(492.1 9
s&!es B%&&e# !
11.62 2(215.4 3
OER'/-N ROF-/ +EFORE OR?-N C'-/', C'NES: 'dGus&e#&s
80
263.18 539.26
-#*e#&!%es
1(505.6 7
/ade O&he ece%*a)les /ade $aa)les
703.23
C'S ENER'/ED FRO@ OER'/-ONS +. C'S F,O FRO@ -NJES/-N 'C/-J/-ES: $uchase !< F%ed 'sse&s =Ne& a<&e &a#s
13.73
!< F!e%h& EC'NE Fluc&ua&%!#s a#d dele&%!#s>
15.99
Ca$%&al B! %# $!ess
73.12
-#&ees& ece%*ed
4.92
Sale !< ed asse&s
12.51
/aes $a%d
35.81
Ne& cash used %# %#*es&%# ac&%*%&%es C. C'S F,O FRO@ F-N'CNC-N 'C/-J-/-ES: -#&eas& $a%d U#secued l!a#s
241.33
shae ca$%&al ece%*ed
899.82
shae $e%u ece%*ed
2(647.2 5
Re$ae#& !< Secued ,!a#s
1(352.7 4
Ne& cash <! #a#c%# ac&%*%&%es
650.70
Ne& %#cease %# cash a#d cash eHu%*ale#&s
1(821.8 5
'dd: Cash a#d cash eHu%*ale#&s as a& 31032005
345.46 391.28
81
Cash a#d cash eHu%*ale#&s as a& 30092006
736.74
BL*#( S+(( S 31 S M#+ 2012
Schedule
Rs.
a. Ca$%&al
'
11(711.73
). Rese*es
+
Rs.
1. SOURCES OF FUNDS: 1. Shaeh!ldes" Fu#ds:
12.607.63
24(502.34
2. ,!a# Fu#ds: a. Secued ,!a#s
C
6(601.83
). U#secued ,!a#s
D
5(353.43
--. ',-C'/-ON OF FUNDS: 1. F%ed 'sse&s:
36(503 E
!ss +l!c ,ess: De$eec%a&%!#
12(183.17
32(484.59 19(592.12
F
12(892.47
Ne& +l!c
39.25
Ca$%&al !%# $!ess
12(931.72
2.-#*es&e#&s
0.02
3. Cue#& 'ss&s( ,!a#s a#d 'd*a#ces
1
1(293.06
Su#d De)&!s
2
1(070.44
Cash +a# +ala#ces
3
736.74
O&he Cue#& 'sse&s
4
26.42
82
,!a#s 'd*a#ces
1(931.72
,ess: Cue#& ,%)%l%&%es $!*%s%!#s
5(031.12
a. ,%a)l%l%&es
-
8(472.77
). $!*%s%!#s
;
8(472.77
Ne& Cue#& 'sse&s
?
3(714.65
4. De
21(770.26
5. !& ,!ss 'cc!u#&
36(502.53
Proft and Loss ccount !or the 'ear ended 31 st March, 2012 Schedule
Rs.
Rs.
-NCO@E:
51538.99
!ss Sales =%#clud%# Ec%se Du&
7285.09
Rs. 26(30(22(805=Rs.29(00(23(286>
,
O&he -#c!e
44253.9 880.78
EAEND-/UREI
@1
RaB @a&e%als c!#sued
45134.68 6857.43
$ae#&s a#d +e#e&s !< E$!lees
@2
2479.33
@a#u
26909.33
O&he E$e#ses
18.14
Ec%se Du&
1609.45
-#&ees&
N1
129.18
De$ec%a&%!#
38003.38
-#cease> Decease %# s&!cs
70.6
!& =,!ss> )e
7201.90
83
a#d %&e!s
20.22
'dd: Rel%e
7222.12
Re!< Schedule !>
39.61
+ala#ce Ca%ed
21770.26
Ea#%# $e shae
14374.65
=Re
6.14
D%l&ed
5.66
#S+ $L/ S(M(* $ P( (*( 31 S M#+ 2013 '. C'S F,O FRO@ OER'/-N 'C/-J/-ES: ROF-/=,OSS> 'S ER ROF-/ 'ND ,OSS 'CCOUN/ 'dd=,ess>:'dGus&e#&s
7(395.61
E&a!d%#a %&es =Rel%e
129.18
E&a!d%#a %&es =De
213.09
E&a!d%#a %&es
39.6
Ced%& )ala#ces B%&&e# )ac
222.54
D%*%de#ds ece*%ded
98.8
-#&es& ece%*ed
2.69
'sse&s B%&&e# !
1.94
,ess !# sale !< asse&s
1(609.45
84
$!*%s%!#
$!*%s%!#
233.89
-#&es&
197.48
$!*%s%!#
8(192.45
$!& !# sale !< %#*es&e#&s
4(729.92
$!*%s%!#
4(729.92
'dGus&e#&s
14(214.84
-#*e#&!%es
473.29
/ade !&he ece%*a)les
19(418.04
/ade aa)les
11(225(59
Cash Fl!B F! -#*es&%# 'c&%*%&%es: $uchase !< F%ed 'sse&s =Ne& a<&e &a#s
96.22
<! ca$%&al B! %# $!ess
11(321.81
-#&ees& ece%*ed
326.68
sale !< ed asse&s
3(447.22
sale !< %#*es&e#&s
96.66
D%*%de#ds ece%*ed
279.29
/aes $a%d
3(397.95
De
2(030.30
Ne& cash used %# %#*es&%# ac&%*%&%es
330.7
C. cash Fl!B <! F%#a#c%# 'c&%*&%es: -#&ees& $a%d
874
U# secued l!a#s
1(625.64
Re$ae#& !< secued ,!a#s
15(143.52
Ne& %#cease %# cash a#d cash eHu%*ale#&s
15(943.56
85
Ne& cash <! #ac%# eHu%*ale#&s
1(223.80
'dd: Cash a#d cash eHu%*ale#&s as a& 310320087
736.73
Cash a#d cash eHu%*ale#&s as a& 31032007
1(960.53
BL*#( S+(( S * 31 S M#+, 2013
M* S.* P#LS
s lahs5 31-3-
.
2003
S#(S $ $*S 1>S'RE O,DERS FUNDS:
27)6.1
Shae Ca$%&al
4 17000.0
Shae a$$l%ca&%!# !#e
0 21)01.)
Rese*es a#d su$lus
3
L
646)8.07
25 Loan !unds: 2264.2
Secued l!a#s
3 4484.7)
U#secued l!a#s
27130.02 otal
)1828.0)
PPL#* $ $*S 15 $ied assets:
86
33.4
!ss )l!c
4 14266.8
,ess: De$ec%a&%!#
3 3)088.6
Ne& +l!c
1 78.64
Ca$%&al B!%#$!ess
3)167.2 25n9est&ents
36233.))
35#urrent ssets: -#*e#&!%es
26)3.46
Su#d De)&!s
1838.11
Cash a#d +a# )ala#ces
1371.0
,!a#s a#d 'd*a#ces
1)83.03 788.6
Less:
current
Liailities
and
;ro9isions Cue#& l%a)%l%&%es
37.46
!*%s%!#s
36.2) 3)3.7
*et current assets
42)1.)0
4>@%scella#e!us E$e#ses
378.60
5>!& a#d ,!ss acc!u#&
1176.3
)1828.0)
L
87
Proft and Loss ccount $or the 'ear (nded 2013
&ount s lahs5 S. *o.
Particulars
&ount
88
31-32003
nco&e Sales
31590.4 6
O&he %#c!e
364.26
otal
31954.72
nco&e
(;enditure uchase !< #%shed !!ds
1075.42
@a#u
29230.0 3
De$ec%a&%!#
2841.18
-#&ees& a#d !&he #a#ce chaes
5152.67
Decease %# s&!cs !< B!%# $!cess a#d
184.18
#%shed !!ds 38483.48 ,!ss
)ala#ce
6528.76 )!uh&
<!
5227.59
$e*%!us ea De)%& )ala#ce ca%ed &! )ala#ce shee&
89
11756.35
$**
%.e.(
L=35521.92>32728.29M
=2793.63>. /he
!$ea&%# %#c!e %s Rs 3783.33. 2. -# 20082009 ea( cash %#K!Bs ae !e &ha# &he cash !u&K!Bs. +ecause !< sales( ece%$&s a!u#& ae h%he &ha# &he $uchase a#d $ae#&s a#d %#&ees& a!u#&s %.e.( L16085.44=15740.36>M345.33. O$ea&%# %#c!e %s Rs 3780.02.
90
3. Du%# 20092010 ea( cash !u&K!Bs ae h%he &ha# &he cash %#K!Bs %.e.( L=11144.9>10719.21M=425.69>. +ecause $uchase !< ed asse&s( %#&ees& a#d $ae#&s !< )!!B%# %#&ees& ae !e &ha# &he sales !< ed asse&s( %#*es&e#&. /he !$ea&%# %#c!e %s Rs 3416.09. 4. -# 20102011 ea( cash %#K!Bs ae !e &ha# &he !u&K!Bs !< cash. +ecause )!!B%#s( sales !< ed asse&s( %#*es&e#&s ae !e &ha# &he $uchase
a#d
$ae#&
!<
a!u#&
L=20503.09>20595.73M
92.64.
O$ea&%# %#c!e %s Rs 8560.73. 5. -# 2011&he $e%!d !< 9 !#&hs( cash !u&K!Bs ae h%he &ha# cash %#K!Bs. L=17085.72>16892.59M193.13.
+ecause
uchase
!<
ed
asse&s(
%#*es&e#&s ae !e &ha# &he sales !< ed asse&s. -#*es&e#&s. /he !$ea&%# %#c!e %s 17085.72. 6. -# 2012 ea( als! cash !u&K!Bs ae h%he &ha# cash %#K!Bs. L30303.02 20471.75M9831.27. +ecause uchase !< ed asse&s( %#*es&e#&s ae !e &ha# &he sales !< ed asse&s. -#*es&e#&s. /he !$ea&%# %#c!e %s 30303.02. 7. C!$a# $u&&%# %#*es&e#&s %# S% J%sh#u cee#& ,&d e*e ea. 8. -# 2012 2013 ea( cash %#K!Bs a!u#& %s *e less &! c!$ae B%&h &he 2007 ea.
S<<(S*S:
C!$a# sh!uld & &! educe &he $uchases !< ed asse&s( cue#& %#*es&e#&s a#d %#*es&e#&s %# ,ac#c! %#<a ,&d. '#d als! educe &! ece%*e &he )!!B%#s <! !u&s%de !< &he c!$a#. -& B%ll sh!B eec&s !# &he &%e !< $ae#& !< %#&ees&. 91
/! & &! %#cease &he &ade de$!s%&s <! s&!c%es& a#d deales. '#d als! sh!uld %#cease %# cash ced%& a#d dea#d l!a#s.
/! educe &he $uchases a#d u&%l%e &h%s a!u#& %# &he $lace !< ece%*%# )!!B%#s. '#d & &! educe &he $!*%s%!#
C#n*&s"#n:3 ,er& enterprise needs budgeting for effectie running of the business actiities. 2udgeting is a wa& of managing business and industr&. )t emphasizes that management should anticipate problems and difficulties. Adance decision should be ta5en for the course of actiities during the forthcoming budget period. 2udgetar& control denotes a formal s&stem based on the concept of budgeting. 2udgetar& control is essential for polic& planning and control. )t also acts as an instrument of coordination. The main ob(ectie of budgetar& control is to ensure planning for future budget setting up arious budgets. The requirements and e%pected performance of the enterprise are anticipated. Manco )nfratech Mtd has introduced arious s&stems of budgetar& control in order to achiee the future ob(ecties of the organization
92
93
(.#(o),&*h/
B"2*#0ra%h':3 ;B##s:3
/anagement Accounting "rinciples and "ractice' ,ighth ,dition' .P. harma < hashi P. Dupta.
Adanced Cost Accounting ' 4asisth and u%ena
94