gayatri projects limited - Edelweiss

GAYATRI PROJECTS LIMITEDcontracts (which are signed contracts for which all pre-conditions to entry into force have been met including letters of intentissued by the client prior to execution of the final contract). The amount of our backlog does not necessarily indicate futureearnings related to the performance of that work. Owing to changes in project scope and schedule, we cannot predict withcertainty when or if the backlog will be performed and will generate revenues. In addition, even where a project proceeds onschedule, it is possible that contracting parties may default and fail to pay amounts owed. There may also be delays associatedwith collection of receivables from our clients. Any delay, cancellation or payment default could materially harm our cashflow position and/or revenues.Our revenues are also dependent on the stage of the project and the nature and level of activity involved during each stage.In addition, our operations are also adversely affected during summer months by difficult working conditions and extremelyhigh temperatures and during monsoon, which restricts our ability to carry out construction activities and fully utilize ourresources. Accordingly, revenues recorded in the first half of our financial year between April and September are traditionallylower than revenues recorded during the second half of our financial year. During periods of curtailed activity due to adverseweather conditions or otherwise, we may continue to incur operating expenses, but our revenues from operations may bedelayed or reduced.Our revenues are also dependent on the payment terms involved in a project. Our contracts typically stipulate payment termson the basis of achievement of specified milestones and schedules for the project, but in some contracts, the payment termscould include reduced advance payments, and payment schedules that are back-ended resulting in increased requirementof working capital requirements.ExpenditureOur expenditure comprises of (i) work expenditure (ii) staff cost (iii) administration expenses, (iv) financial charges, (v) Interestand (vi) depreciation.Comparison of our financial resultsYear ended March 31, 2006 compared to year ended March 31, 2005Our results of operations in the year ended March 31, 2006 were affected by, amongst other factors, the following: The development in infrastructure sector has taken a shift during 2005-06 through award of many contracts tocompanies and thus during the FY 2005-06 our company has received various orders, some on stand alone basisand some on joint venture basis.We experienced marginally increase in the average purchase price of steel, cement and other construction materialsin the year ended March 31, 2005 and is continued for the FY 2005-06 also. We experienced significant unanticipated cost escalation on certain projects resulting from contract variations anddelays attributable to our clients. We have raised claims on our clients for such contractual variations and during FY2005-06, there is a significant progress in the claims made by the company however, these claims have not beenrecorded as income in our financial statements as they are yet to be finally accepted by our clients. We expect torecord the income on account of these claims in our financial statements in future periods on final acceptance ofthese claims by our clients.IncomeGross Contract ReceiptsOur income is increased by 23.21% from Rs. 30125.79 lakhs in the year ended March 31, 2005 to Rs. 37117.74 lacs in theyear ended March 31, 2006, on account of completion of backlog and works-on-hand as per the schedule.Other IncomeThere is significant reduction of 48.63% in other income from Rs.205.37 lakhs in the year ended 31 st March, 2005 to Rs.105.49 lakhs in the year ended March 31, 2006 primarily due to reduction in the income generated from the joint venturecontracts.140