Annual Report 2010-2011 - Gammon India

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A NNUAL R EPORT I 2010/11
MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW OF GAMMON GROUP
Gammon India is amongst the largest physical infrastructure construction companies in India. Its track record spans significant
landmark projects built over several decades, with a prominent presence across all sectors of civil engineering, design and
construction. It has a track record of building landmark structures, some of which have become iconic. This includes ‘The
Gateway of India’, the piling and civil foundation work which was successfully executed by Gammon as its maiden project
way back in 1919.
Besides its large scale of operations in the Construction and Infrastructure domain, Gammon has a dominant presence in
energy business in which it operates in the hydro, nuclear and thermal power sectors. In fact, Gammon’s association with
the construction of nuclear power projects dates back to 1959 when it completed the Pre-Stresses Concrete (PSC) Ball
Tank of India’s first Atomic Reactor Plant in Trombay. Gammon’s projects cover businesses and projects involving highways,
public utilities, environmental engineering and marine structures. Gammon’s expertise also covers the design, financing,
construction and operation of modern bridges, viaducts, and metro rail, both on a Built-Operate–Transfer (BOT) basis as well
as contract execution. An example is the upcoming ‘Signature Bridge’ project in Wazirabad in North-West Delhi. This project
would significantly help in the efficient flow and management of traffic in the region. Gammon is also active in the Social
Infrastructure sector through its operations in the realty project segment. Examples include residential complexes such as
Pebble Bay and Godrej WoodsMan Estate in Bangalore, Godrej Kalyan in Mumbai, RNA Exotica, Mumbai; Hotel complexes
such as Hotel Leela Palace, Chennai and G Staad, Bangalore besides commercial complexes such as Galleria Mall (INXS) in
Bangalore. Gammon is also currently undertaking a major project for ISKON at Sri Mayapur in West Bengal involving the
construction of a temple complex and a modern cultural centre.
I. ECONOMIC OVERVIEW, INDUSTRY STRUCTURE AND DEVELOPMENT:
The construction industry under the infrastructure domain has in the recent past received a significant trust thanks
to an acknowledgment of its importance by the Government and policy makers as a key Owner of economic growth.
Despite this the fiscal year 2010-11 did not witness the unbundling of the full potential of the sector. This was due
to factors both internal and external to the industry and the country. Externally the impact of global slowdown and
consequent limitations of funding through the FII and the FDI route was a dampener for accelerated economic growth
on the sector. Internally, factors of inflation combined with rising interest rates posed challenges to mobilisation
of resources, a key requirement for large scale projects, covering civil, industrial structures, power transportation
and related infrastructure linked areas. The encouraging signals, of course, are the governments’ commitment to
infrastructure as a prime driver of the nation’s economic growth agenda. This would necessarily have to adopt the
proven Public Private Partnership (PPP) Model. This will involve the private sector as a key stake holder so as to ensure
that the plans translate to visible and time bound actions at the ground level. Indeed, the success of the PPP model
in the modernisation of the country’s major airports and some key national highway projects are encouraging. The
involvement of the private sector would also hopefully focus on the critical aspect of improving operational efficiencies
by adopting relevant and modern techniques in the information technology domain. Your Company has consciously
decided to focus on these areas to remain competitive and capable to tap encouraging market opportunities in the
construction sector which despite, very many challenges, is expected to clock a healthy 9% annual growth, against a
global average growth of just over 5% for the sector. The global slowdown thus presents an opportunity for attracting
large investment into the country at a time when the emerging economies with India as a key player are increasingly
becoming the focus of financial and industrial activity.
II. SPECTRUM OF ACTIVITY AND REVIEW OF PERFORMANCE:
Besides the range of executed projects, the order-book position becomes a lead indicator of a Company’s growth
trends. Given the scale, size and lead times in the construction and civil engineering projects, this does help in assessing
the Company’s potential for consolidating and sustaining its growth. The Company’s Order-book position, as of
March 31, 2011, stood at ` 15,600 crore.
1. Transportation Engineering:
Your Company is engaged in the design and construction of projects spanning roads, bridges, flyovers, metro
railway systems, marine structures, ports and airports.
(a) Roads:
The Indian road network has grown tremendously since 1950. The total road length has increased from
0.4 million km (1950) to 3.32 million km (2010), making India the third largest road network in the world