COMPANY OVERVIEW:

Hindustan Construction Company Limited is engaged in engineering and construction

activities. The Company's segments include Engineering and Construction, Infrastructure, Real
estate, Comprehensive Urban Development and Management, and Others. The Company
provides engineering and construction services for projects across sectors, such as power,
transportation, water and industrial projects. Its operations include construction of dams,
barrages, tunnels, underground power stations and surface power stations, along with water
conductor systems, such as surge shafts, pressure shafts and penstocks. Its operations also
include material handling, such as aerial cableways for concrete placement, tower cranes,
ropeways and hydraulic operated traveling/collapsible tunnel formwork, among others. It
provides solutions in nuclear power by tie-ups with engineering and construction solution
providers. In addition, the Company delivers transport systems, bridges and highways.

FINANCIALS
P/E (TTM):
EPS (TTM):
ROI:
ROE:

HCNS.BO
-----

Industry
21.93
-5.97
8.05

Sector
21.74
-5.79
8.38

OVERALL

Beta:

2.93

Market Cap(Mil.):

Rs27,699.10

Shares Outstanding(Mil.):

779.16

Dividend:

--

Yield (%):

--

CONSTRUCTION SECTOR OVERVIEW:

The construction industry in India is the second largest employer, next only to agriculture. The
construction sector employs more than 35 million people in India. From 2013 to September
2015,
the construction sector attracted the second highest FDI equity inflow. The Indian construction
industry is currently valued at over $126 billion. GDP from construction industry in India
increased to 2285.27 IND Billion in the first quarter of 2016 from 2213.23 IND Billion in the
fourth quarter of 2015. GDP from Construction in India averaged 1975.65 IND Billion from
2011 until 2016, reaching an all-time high of 2377.80 IND Billion in the second quarter of 2015.
Increasing investments in residential construction and transport infrastructure will drive growth
in Indias construction industry over the period (20162020), according to a study by Timetrics
Construction Intelligence Centre (CIC). Consequently, the average annual growth in real terms is
expected to improve from of 2.95% in 20112015 to 5.65% during the coming five years.
The Indian Construction industry is set to rise from a value of US$428.1 billion in 2015 to
US$563.4 billion in 2020. Infrastructure construction accounted for 23.0% of the total industrys
value in 2015. Infrastructure construction is anticipated to be fast growing with a CAGR of
9.94% in nominal terms, to value INR9.5 trillion (US$140.1 billion) in 2020. Residential
construction was the largest market in the Indian construction industry during 20112015, and is
anticipated to remain relatively sizeable over the next five years, with a 30.6% share of the
industrys total value in 2020.

GOVERNMENT POLICY:

Government Initiatives
The Government of India is taking every possible initiative to boost the infrastructure sector.
Some of the steps taken in the recent past are being discussed hereafter.

The Reserve Bank of India (RBI) has allowed companies in the infrastructure sector to
raise External Commercial Borrowings (ECB) with a minimum maturity of five years and
with an individual limit of US$ 750 million for borrowing under the automatic route.

The Securities and Exchange Board of India (SEBI) has allowed Foreign Portfolio
Investors (FPI) to invest in units of real estate investment trusts (REITs), infrastructure
investment trusts (InvITs), category III alternative investment funds (AIFs), and also
permitted them to acquire corporate bonds under default.

The Government of Japan, through Japan International Cooperation Agency (JICA), has
committed to provide a soft loan of JPY 19.064 billion (US$ 161.2 million) to
Government of India at an interest rate of 0.3 per cent per annum for the project of
pollution abatement of Mula-Mutha river in Pune, Maharashtra under the National River
Conservation Plan.

Government of India plans to use the new hybrid-annuity model for allocating contracts
under the Public Private Partnership (PPP) projects in highways, Namami Gange and
Railway Projects, which will help overcome the challenges faced by private developers in
the Build-Operate-Transfer (BOT) Toll and BOT-Annuity models.

Budgetary allocation for Roads and Railways in the Union Budget 2016 has been
increased to Rs 218,000 crore (US$ 31.98 billion) with an aim to boost the private
investment cycle.

The Ministry of Road Transport and Highways plans to build five more greenfield
expressways across the country, which are expected to reduce travel time and propel
economic growth.

The Union Ministry of Urban Development has approved an investment of Rs 495 crore
(US$ 72 million) under the Atal Mission for Rejuvenation and Urban Transformation
(AMRUT) for FY 2015-16 which will be used for water supply, sewerage networks and
septage management, storm water drains, urban transport and provision of green spaces
in 13 cities spread over six states.

Prime Minister of India Mr Narendra Modi indicated that the government has rolled out
stuck projects worth Rs 4 lakh crore (US$ 58.69 billion) in the past six months (ending

November 2015), while stating that infrastructure development is the government's top
priority in order to improve economic growth.

The Union Cabinet has approved several reforms such as allowing National Highways
Authority of India (NHAI) to extend the concession period for current incomplete
projects in build-operate-transfer (BOT) mode.

Government of India plans to launch the National Infrastructure Investment Fund (NIFF)
with an initial corpus of at least Rs 40,000 crore (US$ 5.87 billion).

The Ministry of Urban Development has approved an investment of Rs 19,170 crore

(US$ 2.81 billion) for improving basic urban infrastructure in 474 cities in 18 states and
Union Territories (UTs) under Atal Mission for Urban Rejuvenation and Transformation
(AMRUT) for 2015-16.

Department of Industrial Policy and Promotion (DIPP) has set up an online monitoring
system for on-going projects under the Industrial Infrastructure Upgradation Scheme
(IIUS).

The Ministry of Urban Development has decided to allow the use of construction &
demolition waste up to 20 per cent in construction of load bearing items and up to 100
per cent for non-load bearing purposes. This provision is expected to significantly help in
reuse of such waste, in line with ongoing efforts under Swachh Bharat Mission (SBM).

The central government has approved amendments to 'The National Waterways Bill,
2015' which will provide for enacting a central legislation to declare 106 additional
inland waterways, as the national waterways.

The Government of India plans to award 100 highway projects under the public-private
partnership (PPP) mode in 2016, with expectations that recent amendments in regulations
would revive investor sentiments in PPP projects in the infrastructure sector.

The Reserve Bank of India (RBI) has notified 100 per cent foreign direct investment
(FDI) under automatic route in the construction development sector. The new limit came
into effect in December 2014.

The Government of India has relaxed rules for FDI in the construction sector by reducing
minimum built-up area as well as capital requirement. It has also liberalised the exit
norms. In fact, the Cabinet has also approved the proposal to amend the FDI policy.

In the Budget 2015-16, the capital outlays for roads, and railways have been increased by
Rs 140.3 billion (US$ 2.05 billion) and Rs 100.5 billion (US$ 1.47 billion) respectively.

Mr Nitin Gadkari, Union Minister of Road Transport & Highways and Shipping, has
launched various online platforms such as ePACE (project appraisals portal),
INFRACON (portal for infrastructure consultancy firms and personnel) and INAM PRO
(web-based application for infrastructure and material providers), while also inviting
stakeholders in the infrastructure sector to consciously use global best practices in road
construction sector.

The Securities and Exchange Board of India (SEBI) has announced norms for public
issue of units of infrastructure investment trusts (InvITs) in order to facilitate
infrastructure developers raise capital from public investors.

1. The Smart Cities Mission is progressing, with Special Purpose Vehicles for 19 cities already
set up.
2. Delhi-Mumbai Industrial Corridor is a mega infra-structure project of USD 90 billion with
financial and technical aids from Japan, covering an overall length of 1,483 Kms.
3. The eight investment regions proposed to be developed in Phase I of Delhi Mumbai Industrial
Corridor are:

Dadri-Noida- Ghaziabad (in UP)

Manesar- Bawal (in Haryana)

Khushkhera-Bhiwadi- Neemrana (in Rajasthan)

Jodhpur- Pali-Marwar (in Rajasthan)

Pithampur-Dhar- Mhow (in MP)

Ahmedabad-Dholera Special Investment Region (SIR) in Gujarat

Shendra-Bidkin Industrial Park (in Maharashtra)

Dighi Port Industrial Area (in Maharashtra)

4. Fourteen National Investment and Manufacturing Zones outside the DMIC region have also
been given in-principle approval. These regions are in the states of Maharashtra, Andhra Pradesh,
Telangana, Karnataka, Tamil Nadu, Uttar Pradesh and Odisha
5. Industrial projects like Bengaluru Mumbai Economic Corridor (BMEC) project, Chennai
Bengaluru Industrial Corridor (CBIC), Amritsar Kolkata Industrial Corridor (AKIC) and
Visakhapatnam-Chennai Industrial Corridor (VCIC) are under initial stages of planning.

The final perspective plan for BMEC has been completed and submitted to Maharashtra
and Karnataka.

Draft shareholders agreement and state support agreement have been shared with state
governments for CBIC.

Major news of the company:

The norm of 75% disbursal against bank guarantee will help HCC, says CMD:
The awards in our favor and those that remain unpaid are worth 3,200 crores. Out of these, 75
per cent, or 2,400 crores, is what we expect to be paid. We expect this would be done against
giving a margin guarantee which the banks will be able to give because they do want the money
back as well. So they have lent us the money and have been very good to us, given the stress and
non-payment of dues. The banks have done a wonderful job of supporting the company. This
helps everybody. Cabinet took decision on Arbitration Awards which will reduce debt of HCC to
half.

HCC posts 17% rise in June quarter profit:

Infrastructure major Hindustan Construction Company (HCC) on Thursday reported a 17.49 per
cent rise in standalone net profit at Rs 10.88 crore for the quarter ended June 30 on the back of
higher income. The company had registered a standalone net profit of Rs 9.26 crore for the
corresponding period a year ago, it said in a filing to the BSE.

Hindustan Construction Co says lenders agree for debt restructuring of co under S4A
route :

ANALYST VIEWS ON THIS SECTOR:

Hailing government's announcement of array of measures to revive construction sector,

industry body CII said it has come at an opportune time as it seeks to distress the liquidity
woes of the construction companies that impacts the entire infrastructure sector. Director

General CII Chandrajit Banerjee said the decision by the government will translate into a
huge liquidity boost into the system which would save many of the companies from being
declared NPAs.
Commenting on the decision Atul Punj, Chairman of CII National Committee on
Construction and chairman of Punj Loyd said that the broad spectrum measures
announced by the government will help the construction sector that has the potential to
generate jobs and investments into the infrastructure projects, a must to revive the
economic growth.
One of the key problems is that there are a large number of awards where payments
have not been made. Consequently, the contractors have not been able to pay the bank
and it has adversely impacted the balance sheets of the companies as well as the banks.
And the projects have come to a halt," said Finance Minister Arun Jaitley
Gaurav Karnik, partner and leader-real estate & infrastructure at EY, said this will enable
contractors to service their obligations, which would help reduce bank NPAs. "At the
same time, the contractor would be able to restart the project, which will be good for the
infrastructure sector on the whole. All these disputes are a key issue for the industry as
litigation can go on for years and stall projects," he said.

GROWTH OF THIS SECTOR:

Figure 1 Source: The Boston consulting group

In last four years, construction sector has given excellent returns with CAGR of 24.8 per cent.
Revenue generated by construction is expected to grow at higher rate after recent announcement
by government about array of measures to revive construction sector, now construction sector
has the potential to generate jobs and investments into the infrastructure projects, a must to
revive the economic growth. The growth seems to be increased at more rate after Cabinet has
taken decision on Arbitration Awards to reduce HCC debt to half.

Figure 2 Source: Off-highway research

Net returns received from construction equipment selling from FY06 to FY13 is at CAGR of
14.20 per cent. The growth observed in last few years is more than CAGR observed from the last
ten years. Now with changing technology, construction equipment in current market will be
replaced by modified construction equipment. So, it

GDP from Construction in India increased to 2290.92 IND Billion in the second quarter of 2016
from 2285.27 IND Billion in the first quarter of 2016. GDP from Construction in India averaged
1990.66 IND Billion from 2011 until 2016, reaching an all-time high of 2377.80 IND Billion in
the second quarter of 2015 and a record low of 1736.49 IND Billion in the third quarter of 2012.
GDP from Construction in India is reported by the Central Statistical Organization, India.

With infrastructure investment set to go up, demand for construction equipment will rise further
Equipment sales are estimated to expand at a CAGR of 6.18 per cent to reach 96,700 units by
FY18 from 50,000 in FY07; Equipment sales reached 68,200 units in FY15.

COLLABORATIONS:
Sr.
Project Name
No.

Type
of
Name of Associate
Association

Country

Joint Venture Van Oord ACZ BV

Netherlands

2
3
4
5

Ennore Breakwater Project, Tamil Nadu

Nathpa Jhakri HEP - Construction of

Joint Venture
HRT, Himachal Pradesh
Ghatkopar
High
Level
Tunnel,
Joint Venture
Maharashtra
Gujarat State Highway Project - Phase I Joint Venture
Pkg GSHP2
Cable Stayed Bridge across river Yamuna
Joint Venture
between Naini-Allahabad

Impregilo SPA

McNally International
Canada
Inc.
Pati SDN BHD

Malaysia

Hyundai
Engg
&
Korea
Construction Co. Ltd

Dhauliganga HEP, Lot 2 - Construction of

Underground Powerhouse & waterways, Joint Venture Samsung Corporation Korea
Uttarakhand
Satara-Kolhapur State Highway upto
B.G.
Shirke
Joint Venture
India
Maharashtra State border
Construction Pvt. Ltd.
Kumagaigumi Co. Ltd. Japan
Delhi Metro Rail Project - Metro Corridor
Skanska
Civil
Joint Venture
Sweeden
- Contract MC1A
Engineering AB
Itochu Corporation
Japan
Karnataka State Highways Improvement
Sadbhav
Joint Venture
Project, Contract U3, Karnataka.
Ltd.

Engineering

EPC Contract for laying gas transmission

10 pipeline between Kalol & Mehsana, Joint Venture NOVA
Gujarat
11

Italy

Grand Trunk Road Improvement Project Joint Venture Larsen & Toubro
Pkg V-B, Jharkhand & Bihar

India

Russia

India

Japan
Purulia Pumped Storage Project, West Subcontractor Taisei Corporation
Bengal
Joint Venture Larsen & Toubro
India
Saurashtra Branch Canal Pumping
Kirloskar
Brothers
13
Joint Venture
India
Scheme Project, Gujarat
Limited
Godavari Lift Irrigation Scheme, Phase-I
14
Joint Venture Kirloskar Brothers Ltd.India
of Stage-I, A.P.
12

Bombay Sewage Disposal Project 15 Ghatkopar High Level Tunnel Works, Joint Venture McNally Project
Mumbai. (Contract 29AAA)
Continental
East-West Corridor Road Project, Pkg16
Joint Venture Engineering
EW-II (RJ-7), Rajasthan
Corporation (CEC)
Samsung Corporation
Delhi Metro Rail Project - Contract17
Joint Venture
AMEL C1, Delhi
Alpine Bau GMBH
Delhi Metro Rail Project - Contract18
Joint Venture Alpine Bau GMBH
AMEL C6, Delhi
19

MP Dhule NHDP Project on DBFOT

basis, Maharashtra

Sadbhav
Ltd.

Taiwan
Korea
Austria
Austria
United
Kingdom

Joint Venture John Laing

Joint Venture

India

Engineering

India

List of completed projects:

J. Chokkha Rao Devadulla Lift Irrigation Joint
Scheme, Phase-II, AP
Venture
Joint
2 Veligonda Tunnel, AP
Venture
1

J. Chokkha Rao Devadulla Lift Irrigation Joint

Scheme, Phase-III, Pkg-I, A.P.
Venture

J. Chokkha Rao Devadulla Lift Irrigation Joint

Scheme, Phase-III, Pkg-III, A.P.
Venture

Pranhitha-Chevella Lift Irrigation Scheme Joint

(Pkg-3), A.P.
Venture

Pranhitha-Chevella Lift Irrigation Scheme Joint

(Pkg-10), A.P.
Venture

Rajiv Sagar Lift

Package- 32, AP

Irrigation

Project, Joint
Venture

Nagarjuna
Construction
India
Co. Ltd. (NCC)
Coastal projects Ltd

India

Megha Engineering &

India
Infrastructures Ltd.
CKD Blansko Engineering Czech
(CBE)
Republic
CKD Blansko Engineering
India
(CBE)
Megha Engineering &
India
Infrastructures Ltd.
Andritz AG
Austria
Megha Engineering &
India
Infrastructures Ltd.
SEW Infrastructures Ltd. India
Megha Engineering &
India
Infrastructures Ltd.
Bharat Heavy Electrical
India
Ltd.
Megha Engineering &
India
Infrastructures Ltd.

8 Kishanganga Hydel Project, J&K

Halcrow

United
Kingdom

Alstom

France

10
11
12

Joint
Venture
Tehri Pumped Storage Plant (1000 MW), Joint
Uttarakhand
Venture
Joint
Bogibeel Rail-cum-Road Bridge, Assam
Venture
Joint
Yettinahole Pkg IV, Karnataka
Venture
Joint
Delhi Metro Phase III, Pkg-CC-34
Venture

DSD Bruckenbau Gmbh Germany

VNR Infrastructures Ltd. India
GVPR Engineers Ltd.

India

Samsung Corporation

Korea

Indias construction sector to boom:

The construction industry is a major contributor towards Indias GDP, both directly and
indirectly. It employs 33 million people, and any improvements in the construction sector affect a
number of associated industries such as cement, steel, technology, skill-enhancement, etc.
Despite many positive signs, activity in the construction sector appears to be quite slow
currently. The prolonged real estate market slowdown has resulted in a lot of unsold housing
projects across India.
Simultaneously, the construction sector is reeling under a severe shortage of skilled workforce,
and in many areas of the country, shortage of construction sand, raw materials, and political
disturbances are also acting as growth deterrents. The pace in the Indian construction sector on
the ground, however, does not reflect what lies in store for the future. For example, technological
advancements will soon begin increasing the pace and potential of this sector, and act as a
growth catalyst. Among its many positive influences, the arrival of new construction technology
and the entry of international infrastructure players into India is generating employment across a
vast array of different skill sets.
Apart from the Smart Cities project, the Government's Housing for All by 2022 will be a major
game changer for the industry. Increased impetus to the creation of affordable housing mission,
along with quicker approvals and other supportive policy changes will soon result in an increase
in construction activity. Likewise, the Atal Mission for Rejuvenation and Urban Transformation
(AMRUT) will bring in increased activity in infrastructure and related sectors.
Norms for FDI in 15 sectors including real estate and construction development have now been
eased, and this has very positive implications for these sectors and the larger economy. The
introduction of GST will ease tax-related complexities in the construction sector and bring with it
a major spurt in activity and growth.
Township housing and infrastructure will also become major drivers for the construction sector
in the immediate future. In most cases, the development of townships and their associated

infrastructure happens in new corridors of our cities, and the Government is extending a lot of
support for developing untapped areas.
All in all, better times lie ahead for Indias construction sector. What we are witnessing currently
is a buffer period, in which various policy changes and other growth drivers are still loading into
the system. It is only a matter of time before we will see renewed growth and vibrancy.