Engineering Procurement and Construction

Engineering
Procurement &
Construction (EPC)
Braving the headwinds
EPC World media group

p u b l i c a t i o n s a w a r d s c o n f e r e n c e s
Foreword
EPC World
“If you want to build a ship, don’t drum up testimony to the tyranny of the present. Yet, as famous poet
people to collect wood and don’t assign PB Shelley suggested more than two hundred years ago: “If
them tasks and work, but rather teach winter comes, can spring be far behind?”
them to long for the immensity of the sea.”
Global rating and consulting institutions are unanimous
We belong to and represent an industry in saying that the longer-term prospects for the Indian
that is literally building a new 21st century economy remain extremely bright. And let us not forget
India driven by aspirations of tens of one fact — when the famous BRICS report released early
millions who seek a better life, a better livelihood and more this century predicted that India will become the second-
opportunity to build on their dreams. Hidden in the string largest economy of the world by 2050, it was based on
of highways, factories, airports, ports, metro rail networks, the assumption that GDP growth rates will average 5% to
dams, commercial towers and nuclear power plants is the 6% a year. The fact is, India will build infrastructure across
potential for India to forge its most successful partnership the board and both domestic and foreign investors will
ever — that between entrepreneurs and workers. As the EPC hYjla[ahYl]aflàkka_faÕ[Yfl]f\]Yngj$bmklYkl`]q`Yn]
industry moves toward more maturity and more established done in China since the late 1980s. The sheer numbers are
norms and protocols, let us never forget the unique ability of too tempting for a smart investor to ignore. I do not want to
this industry to transform India. Even though we live in the deluge you with statistics right here; so allow me to quote
age of information and information technology, it is bricks bmklgf]fmeZ]j&AÂf\aYaklgmk]Yeg\]kl)(gâlk?<Hlg
and mortar that will craft the second-largest economy of invest in Infrastructure, we are talking of annual investment
the world and the largest middle class consumer base in the in excess of US$200 billion a year. It has been estimated
world in a decade or two. that India’s GDP will touch US$10 trillion by 2020. That
translates into infrastructure investment of at least US$1
There is always the temptation to be swayed and spooked by trillion a year. As India builds more to feed more dreams,
the present. To that extent, the present state of the Indian both GDP and infrastructure investment will keep growing.
economy does appear cloudy and depressing. After years of
a more than impressive surge, GDP growth rate has dipped G^[gmjk]$^gjl`]k]dgf_%l]je\j]YeklgZ]j]Ydar]\$hgda[q
lgY\akYhhgaflaf_-Yq]Yj&:gl`l`]Õk[YdYf\[mjj]fl makers will need to play a more proactive role to become
Y[[gmfl\]Õ[alkl`j]Yl]flg\]jYadl`]_jgolège]flme& catalytic agents. As this intensively researched report will
NajlmYddq\gmZd]%\a_al[gfkme]jafÖYlagfakeYcaf_da^] show, almost all the bottlenecks faced by the EPC industry
\a^Õ[mdl^gj[alar]fk&9f\l`]e]\aYakh]hh]j]\oal`j]hgjlk can be swept away by more nuanced policies emerging
of how investors and entrepreneurs are holding back when from Delhi and state capitals of the country. If that happens,
it comes to letting their money talk with India. Problems the EPC industry will not only build a swanky, modern and
j]dYl]\lg\]dYqk$[gklgn]jjmfk$ÕfYf[aYd[dgkmj]Yf\ forward-looking India, but also harness the skills of 10 million
hjgÕlYZadalql`Yl[gf^jgfleYfqà_`hjgÕd]=H;hjgb][lkYj] youngsters who will enter the work force every year.
Mr. Tejasvi Sharma

Managing Director
EY
Dear Reader, afn]klgjk$Zmll`]_dgZYd[gfkljm[lagfeYbgjkeY\]kljYl]_a[

investments, further fuelling the growth story.
The Government of India’s continued focus
on developing India’s infrastructure has The increase in EPC activity is evident from increasing order
resulted in an ambitious target of INR56.3 ZggckYf\j]n]fm]kg^l`]dYj_]%Yf\ea\%kar][gfkljm[lagf
trillion in the Twelfth Five Year Plan. Out players. However, the sector is currently facing headwinds
of this amount approximately 50% of the from several directions. We have observed that the growth in
investments are to be contributed by the j]n]fm]kakfglljmdqj]Ö][lan]afl`]Zgllgedaf]$hjaeYjadq
hjanYl]k][lgj&;gfka\]jaf_làkeYbgjhgl]flaYdghhgjlmfalq \m]lgka_faÕ[Yfl[gklgn]jjmfk$j]_mdYlgjqZglld]f][ck
in the infrastructure segment, the EPC sector is likely to and aggressive bidding positions taken by a few of market
Z]Z]f]Õl]\&L`]=H;eYjc]lgÂf\aY`YkZ]]foalf]kkaf_ players. With increasing working capital requirements and
consistent changes over the last few years with increased the resultant increase in leverage, the EPC players are
hjgb][lkar]Yf\[gehd]palq$af[j]Ykaf_hjanYl][da]flkYf\ left with limited opportunity to raise further capital to fuel
entry of several foreign players. growth in the current scenario. PE funds too are cautious
with their new investments as there is limited opportunity of
In the current market landscape, EPC contractors have a exit due to unfavorable capital markets. Furthermore, the
healthy mix of both government and private sector clients, j][]fllmjegadafl`]ÕfYf[aYdk][lgj$af[dm\af_l`]jmh]]
as compared to their heavy dependence on government \]hj][aYlagf$`Ykaf[j]Yk]\l`]d]n]dg^mf[]jlYaflqafhjgb][l
clients until a few years ago. The concept of EPC has been ]p][mlagf&L`]j]^gj]$l`]k][lgjakj]]daf_mf\]jka_faÕ[Yfl
evolving over the last few years and has emerged as a liquidity constraints.
preferred form of contracting by clients along with PPP
eg\]dk&=n]fo`]fhjgb][lkYj]YoYj\]\gf:GLZYkak$ In this turbulent market situation, the contracting companies
there is an EPC opportunity for market players. Currently, have to realign their scaling strategies and focus on
clients prefer to go with a single point responsibility thereby, affgnYlagf$hjgb][leYfY_]e]flYf\hjgÕlYZd]_jgol`Yk
reducing the interface and the overall duration. This has compared to order book and revenue growth. Only those
been further strengthened by the fact that the highway o`g[Yfkmjnan]l`]`]Y\oaf\koaddZ]YZd]lg[YhalYdar]gf
sector, after several years of operating in the PPP mode, the opportunity being provided in the Twelfth Five Year Plan.
ak[gfka\]jaf_lgYoYj\egj]hjgb][lkgfl`]=H;eg\]d& JYlagfYdarYlagfafl`]Za\\af_hjg[]kkakimafl]kk]flaYdYl
Kh][aYdar]\=H;k][lgjkkm[`YkeYjaf]$lmff]daf_$`q\jg$ làkbmf[lmj]&ÉHjgÕlkÊYf\Éhjgb][lkÊf]]\lgZ]eYfY_]\
industrial, and oil and gas continue to prefer awarding ]^Õ[a]fldq&;mjj]fldq$l`]eYjc]lakafY^jY_e]fl]\klYl]
hjgb][lkafl`]=H;eg\]& and needs to undergo a high level of transformation if future
sustainability is to be assured. M&A activities in the market
When the Tenth Five Year Plan called for inclusion of place are expected to improve with consolidation on the
“Chapter on Construction” in the National Plan, the success `gjargf&;gfkgda\YlagfakYdkgdac]dqlgj]da]n]hj]kkmj]Yf\
klgjq`Y\bmklZ]_mf&L`]]jYoalf]kk]\hjanYl]]imalq provide exit options to a set of investors.
investments in some of the largest construction groups of
our country. The companies, with fresh capital infusion, This report discusses the potential opportunity; recent
]pàZal]\ka_faÕ[YfllmjfYjgmf\koal`j]n]fm]kemdlahda]\ trends witnessed by the sector, challenges for re-enforcing
ka_faÕ[Yfldq&=mh`gjaY[gflafm]\Yll`]Z]_affaf_g^ sustainability and possible ways to overcome the challenges.
l`]=d]n]fl`Õn]q]YjhdYfo`]fea\%kar]\[gehYfa]k O]`gh]qgm]fbgqj]Y\af_làkj]hgjlYf\Õf\alafka_`l^md&
klYjl]\lgYlljY[lafn]klgjkÌafl]j]kl&Fglgfdql`]ÕfYf[aYd
Sushi V. Shyamal
Partner, Transaction Advisory Services
Contents
Introduction 06
Opportunities for EPC business in India 14
Sector trends 38
Key challenges 52
Overcoming challenges 62
Conclusion 70
Supplemental 72
Abbreviations 78
Heading
1 Introduction
6 Engineering, Procurement and Construction (EPC): Braving the headwinds

1.1 Understanding EPC
From contracting to EPC – Why?
Over the years, the infrastructure business has witnessed several forms of contracting. The old models of contracting have
_an]foYqlgf]oeg\Ydala]koal`l`]hjgb][lkZ][geaf_egj][gehd]pYf\jakcd]n]jY_af_Y\ghl]\Zql`]gof]jk&;gfljY[lk
`Yn]]ngdn]\^jgeal]ejYl]hY[cY_]klgdmehkme$Õp]\%hja[]$Õp]\%lae]Zaf\af_[gfljY[lk&KdgodqZmlkl]Y\adq$l`]gfmkg^
hjgb][leYfY_]e]fl`Ykkà^l]\^jgel`]gof]j'\]n]dgh]jlgl`][gfljY[lgj&L`]j]akYnakaZd]kà^l^jgegof]j%eYfY_]\
hjgb][lklg=H;hjgb][lkYf\l`]jakcg^lae]Yf\[gklgn]jjmfk`YkZ]]fljYfk^]jj]\lgl`][gfljY[lgj$Ydgf_oal`l`]
responsibility of designing, procurement of material and construction. Although standard clauses and conditions prevailed,
l`]=H;[gfljY[leg\]d`Yk]ngdn]\lgj]Ö][ll`]kà^lafZYdYf[]g^jakcZ]lo]]fl`]gof]j'\]n]dgh]jYf\l`][gfljY[lgj&
Làk^gjeg^[gfljY[l]n]fhjgl][lkl`]gof]j'\]n]dgh]j^jge[mjj]f[qYf\afl]j]kljYl]Öm[lmYlagfk&Mfdac]gl`]j[gfljY[lk
where procurement and design are considered separate processes, in EPC contracts they are done simultaneously, reducing
l`]gn]jYdd\mjYlagfg^l`]hjgb][l&AfalaYddql`]j]o]j]gfdq^]o[gfljY[lgjko`g`Y\l`]j]imaj]\l][`fgdg_a[YdYf\ÕfYf[aYd
[YhYZadala]klglYc]gn]jYddj]khgfkaZadala]kg^l`][gehd]l]hjgb][l3l`]j]^gj]$dYj_]hjgb][lko]j]\ana\]\aflgkeYdd=H;
hY[cY_]k&?jY\mYddql`]=H;[gfljY[lgjk\]n]dgh]\l][`fa[Yd]ph]jlak]Yf\Z][Ye]ÕfYf[aYddq[geh]l]flYf\l`]hjgb][l
gof]jkZ]_YflgYoYj\l`]e[gehd]l]hjgb][lkYkYkaf_d]dmehkmelmjfc]q[gfljY[l&
Global outlook
Globally, EPC has become an accepted form of contract by the construction industry and the EPC contractors have
adopted a modern variation called EPCM — engineering, procurement and construction management. The EPC contractors
`Yn]]phYf\]\l`]ajjgd]kYf\`Yn]Y\ghl]\l`]jgd]kg^hjgb][l[gfkmdlYflkZqeYfY_af_l`]hjgb][l^jge\]ka_flg
commissioning. This has limited the role of engineering consultants and large EPC companies have transformed into solution
hjgna\]jk&?dgZYddq$dYj_]=H;hdYq]jkeYfY_]hjgb][lkaf\a^^]j]fl[gjf]jkg^l`]ogjd\oal`hjg\m[lagf`mZkkljYl]_a[Yddq
dg[Yl]\afk]n]jYd[gflaf]flk&L`]q`Yn]à_`dqkghàkla[Yl]\hjgb][leYfY_]e]flYf\jakceYfY_]e]fll][`faim]k$oà[`
`]dhl`]elgegfalgjYf\eYfY_]hjgb][lk]^Õ[a]fldqY[jgkk\a^^]j]fldg[Ylagfk&Al`YkZ]]fgZk]jn]\l`Ylkge]g^l`]
_dgZYdhdYq]jkYdkgY[imaj]YkljYl]_a[klYc]afl`]]imalqg^l`]hjgb][l$oà[`]phj]kkl`]aj[geeale]flYko]ddYkhjgna\]
[gfÕ\]f[]lgl`]gof]jkYf\afn]klgjk&
Engineering, Procurement and Construction (EPC): Braving the headwinds 7

How is EPC different from other models?
K]n]jYdeg\]dkg^[gfljY[l[g%]paklafl`]Zmkaf]kkYf\]Y[àkmfaim]Yf\Õlklgl`]j]imaj]e]flg^l`][da]fl&Oàd]kge]
Yj]al]ejYl]%ZYk]\[gfljY[lk$gl`]jkhjgna\]hYkk%l`jgm_`]k[YdYlagfkYf\afÖYlagfhjgl][lagflgl`][gfljY[lgj&Kge]
contracts include the client’s design requirements, while others place the onus of designing on the contractor. Such contracts,
oal`nYjqaf_Zmlkh][aÕ[hj]%\]Õf]\l]jekYf\[gf\alagfk$eYqZ][Yl]_gjar]\YkhY[cY_]%ZYk]\[gfljY[lk&;gfljY[lk
o`]j]l`]gfmklg\]dan]jl`]hjgb][l^gjY_mYjYfl]]\hja[]oalàfYÕp]\h]jag\Yf\oal`h]j^gjeYf[]gfl`]ZYkakg^hj]%
[geeall]\klYf\Yj\k$da]koal`l`][gfljY[lgjYj][Yl]_gjar]\Yklmjfc]q[gfljY[lkYdkgcfgofYk\]ka_fYf\Zmad\gj=H;&
This form of contract is attractive for customers, since the liability for the end product, including design and construction, lies
oal`l`][gfljY[lgj&;mklge]jkeYqYdkg[`ggk]l`]lmjfc]qeg\]d^gjgfdqhYjlg^l`]hjgb][l$oà[òaddl`]fljYfk^]jl`]
coordination role to the customer.
Under the package-based model, time and cost overrun risks may lie with the owner or developer. However, under the
turnkey model, failure to comply with any of the requirements will necessarily have an adverse impact on the contractor.
This model has gained popularity, since it places the responsibility for designing, procurement and construction as well as
km[[]kk^mdhjgb][l\]dan]jqgfl`][gfljY[lgj&@]f[]$al]fkmj]k]^Õ[a]f[qYf\eala_Yl]khjgb][l[gehd]lagflae]Yf\[gklk&
Turnkey contract vs. packaged-based contract
Criteria Turnkey contract Packaged-based contract
Price Guaranteed price for execution No guarantee on the price
Time Guaranteed timeline for completion No guarantee on the timeline
Procurement Undertaken solely by the contractor According to agreement between the two parties
Engineering/design Responsibility of the contractor J]khgfkaZadalqg^l`]gof]j'\]n]dgh]j
Responsibility Contractor has complete responsibility ;gfljY[lgj`Yk\]Õf]\j]khgfkaZadalq
Point of contact Contractor is single point of contact for all matters for Gof]j'\]n]dgh]j`Yklg[ggj\afYl]oal`k]n]jYd
l`]hjgb][l\]n]dgh]j participants along with the contractors
Level of Contractor is free to work with limited supervision Gof]j'\]n]dgh]jlgmf\]jlYc]Y\Yq%lg%\Yqkmh]jnakagf

Involvement delivering according to agreed milestones and of most of the activities
kh][aÕ[Ylagfk
Risk Ka_faÕ[YfljakckYj]ljYfk^]jj]\lgl`][gfljY[lgj Ka_faÕ[Yfljakckj]lYaf]\oal`l`]gof]j'\]n]dgh]j
=H;EakZ]da]n]\lgZ]kaeadYjlg=H;[gfljY[lk&Af=H;El`][gfljY[lgjlYc]kl`]j]khgfkaZadalqg^l`]]flaj]hjgb][l
afl]_jYlagfYko]ddYkl`]eYfY_]e]fl[gfljgdgfl`]hjgb][l&@go]n]j$alakfglj]khgfkaZd]\aj][ldq^gjl`]hjgb][l[gklYf\
schedule. It is a professional services contract, which has a different risk allocation as well as different legal consequences.
Af=H;E[gfljY[l$dYf\Y[imakalagf$dg[Ydakkm]k$gh]jYlagfYf\eYafl]fYf[]Yf\kYd]g^_gg\kY^l]j[gehd]lagfg^hjgb][l
da]koal`l`]hjgb][lgof]j&Af=H;El`][gfljY[lgj\]ka_fk$hjg[mj]kYf\eYfY_]kl`][gfkljm[lagfhjg[]kkgfl`]gof]jÌk
Z]`Yd^3`go]n]j$l`][gfkljm[lagfak\gf]Zqgl`]jhYjla]k&AfdYj_]hjgb][lk$=H;E[gfljY[lgjZj]Yckl`]]flaj]hjgb][lYf\
YoYj\kk]hYjYl]=H;hjgb][lkafkeYddhY[cY_]k&

Contractual relationship of EPC and EPCM model
EPC model EPCM model
Owner Owner
EPC EPCM
contractor contractor
Process Process
Vendors Contractors Site Services Vendors Contractors
engineering engineering
Sub- Sub-
contractors contractors
Afl`]gf_gaf_Lo]d^l`Õn]q]YjhdYf$l`]?gn]jfe]flgÂf\aY ?gA!`Ykk]lmhYfYeZalagmklYj_]lgÂFJ-.&+ljaddagf^gj
Infrastructure development1&L`]?gn]jfe]fl^mf\af_^gjYhdYfg^km[`Y[gfka\]jYZd]kar]oYkfglkm^Õ[a]flYf\l`]j]^gj]$
it has relaxed policies and encouraged private parties to participate in India’s infrastructure development through the public
hjanYl]hYjlf]jkàh HHH!eg\]&L`]egkl[geegfeg\]dafHHHakZmad\%gof%ljYfk^]j :GL!Yf\akmk]\afk]n]jYdjgY\$
ljYfkeakkagf$hgjlk$oYl]jYf\Yajhgjlhjgb][lk&HHHakimal]\a^^]j]fl^jge=H;[gfljY[lkYkl`]\]n]dgh]jafn]klklgZmad\l`]
asset as well as owns and operates it. The developer ultimately awards the contract to an EPC contractor and on completion,
gh]jYl]kal^gjYÕp]\\mjYlagfZ]^gj]ljYfk^]jjaf_alZY[clgl`]_gn]jfe]fl&L`]naYZadalqg^=H;gjHHHeg\]^gj
af^jYkljm[lmj]hjgb][lk`YkYdoYqkZ]]fYlgha[g^\]ZYl]3`go]n]j$l`]\qfYea[kYj]\a^^]j]fl^jgek]_e]fllgk]_e]flYf\
depend on the government’s priority to award the contracts. Some sectors, such as highways have reached a mature stage,
o`]j]Ykgl`]jkkm[`Ykl`]jYadoYqkYf\mjZYfaf^jYkljm[lmj]Yj]q]llgjgddgmldYj_]hjgb][lhjg_jYekZYk]\gfHHHeg\]d&
) ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'

hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+

1.2 EPC players in India
Currently, the Indian EPC sector, with its rising prominence and changing dynamics, has more than 150 participants and a
multitude of stakeholders. Players have carved out a niche for themselves and have developed their reputation, based on
their sector focus. Some have also divested their operations in other sectors, thereby segregating the entire EPC space,
based on operational segments.
Segment Major domestic players Major foreign players Insight
Infrastructure / Larsen & Toubro Limited, Hindustan Isolux Corsan, ITD Increasing opportunities in
General Contracting Construction Co. Ltd., Gammon India, IVRCL, Cementation India Limited, the infrastructure sector
Kaehd]pAf^jYkljm[lmj]Dl\&$?YqYljaHjgb][lkDl\&$ ABE Af\aY!Af^jYkljm[lmj] have attracted many new
Patel Engineering Ltd., Era Infra Engineering Limited, Leighton, ACS domestic as well as new
Dl\&$KY\Z`Yn=f_af]]jaf_Daeal]\$FY_YjbmfY Construction Group Ltd., entrants to this space.
Construction Company Ltd. Vinci Construction
Building DYjk]fLgmZjgDaeal]\$K`YhggjbaHYddgfba Arabian Construction KhY[]akmfgj_Yfar]\af

construction — ;g&Dl\&$9`dmoYdaY;gfljY[lk Af\aY!Dl\&$:D Company, Leighton, nature and is dominated
Residential and Kashyap & Sons Ltd, B. G. Shirke Construction Samsung Engineering primarily by local
Commercial Technology Private Limited, B. E. Billimoria & contractors.
Segments Co. Ltd., BSEL Infrastructure Realty Limited,
Consolidated Construction Consortium Ltd.,
Mackintosh Burn Ltd., Man Infraconstruction
Limited, Supreme Infrastructure India Ltd., Unity
Af^jYhjgb][lkDl\&$NYk[gf=f_af]]jkDl\&
Oil & Gas EPC DYjk]fLgmZjgDl\&$HmfbDdgq\Dl\&$H]ljgf Aker Solutions, Leighton Ka_faÕ[Yfl[geh]lalagf

=f_af]]jaf_;gfkljm[lagfDaeal]\$=kkYjHjgb][lk Welspun Contractors Pvt. from foreign participants,
Af\aY!Daeal]\$E[FYddq:`YjYl=f_af]]jaf_;g& Ltd., Bechtel Corporation, especially for offshore
Ltd., Leighton, Engineers India Limited, Fabtech Linde Engineering India contracts; business
Hjgb][lk=f_af]]jkDl\&$BYaàf\Hjgb][lkDl\& Pvt. Ltd., Tecnimont ICB, eg\]d^g[mk]\gfhjgb][l
Samsung Engineering, Uhde management rather than
India Limited, direct execution
Power EPC Power EPC Doosan Power Systems, Market segmented into
:@=D$DYjk]fLgmZjgDl\&$LYlYHjgb][lk Dongfang Electric niche areas; few players with
General Power Ltd., BGR Energy Systems Ltd., Gammon India, Corporation, Harbin Power presence across both BTG
EPC and Power ?YqYljaHjgb][lkDl\&$E[FYddq:`YjYl=f_af]]jaf_ Engineering Co. Ltd., and BoP
Transmission Co. Ltd., Shriram EPC Ltd., Tecpro Systems Ltd., KEPCO, ThyssenKrupp
Cethar Ltd. Industries India, Alstom T&D Dominated by equipment
Af\aY$9dklgeHjgb][lkAf\aY manufacturers who have
Power Transmission Limited, Mitsubishi Heavy forayed into EPC as forward
EMC Ltd., Jyoti Structures Ltd., Hythro Power Industries, Toshiba Thermal integration
Corporation Ltd., GET Power Pvt. Ltd., KEC and Hydro Power Systems
International Ltd., Kalpataru Power Transmission Company, Ansaldo STS, Global players entered the
Daeal]\$BE;Hjgb][lk Af\aY!Dl\&$L][`fg Babcock & Wilcox market in JV with Indian
Electric & Engineering Company Ltd., Unitech players to enhance their
Transmission equipment business
Specialized EPC K`jajYe=H;Dl\&$;gYklYdHjgb][lkDl\&$ ABB India Ltd., Uhde India Comprises niche players
Navayuga Engineering Company Ltd., Hindustan Ltd., Toyo Engineering in segments such as
Marine, Industrial, Construction Co. Ltd., Patel Engineering India Ltd., Continental hydel tunneling, marine
Railways, Ltd., Afcons Infrastructure Ltd., Simplex Engineering Corporation, construction, or industrial
Tunneling, Mining Infrastructure Ltd., McNally Bharat Engineering Marti India Private Ltd., construction
etc. Co. Ltd., Petron Engineering Construction Ltd., AG Group, Samsung
CYdaf\]]JYadFajeYf =f_af]]jk!Daeal]\$9EJ Engineering, ITD
Construction Ltd. Cementation India Ltd.

The Indian EPC sector has both Indian and international EPC contractors. While several international EPC players have already
]klYZdak`]\l`]ajhj]k]f[]afl`]Af\aYfeYjc]lafkh][aÕ[k]_e]flkg^[gfkljm[lagf$kge]`Yn]j][]fldq]fl]j]\Af\aYYf\
some are considering entering amid stagnant markets in Europe and the US.
Although the EPC contract and its fundamentals are similar in India and abroad, the quality and strength of the players vary.
Large global players have in-house research centers and possess state-of-the-art technologies. They have, over the years,
transformed themselves into solution providers from being a contractor. It has been observed that global EPC players are
n]jqkljgf_af]f_af]]jaf_Yf\\]ka_foàd]l`]ajAf\aYf[gmfl]jhYjlkYj]eYafdq^g[mkk]\gf[gfkljm[lagf&9eYbgjalqg^dg[Yd
hdYq]jkafAf\aY`Yn]Ybgmjf]qlgeYc]^jgeË;Ìlg=H;afl`]j]Ydk]fk]&
Foreign companies have entered India through different routes. Few have chosen to acquire Indian companies, while others
`Yn]]fl]j]\bgafln]flmj]k&Làk`Yk`]dh]\^gj]a_f[gehYfa]klg\aj][ldq_YafeYjc]lk`Yj]Yko]ddYk]paklaf_Ykk]lk
Yf\hjgb][lk&LàkakYoaf%oafkalmYlagf^gj\ge]kla[hdYq]jkYko]dd&Bgafln]flmj]k]fYZd]Af\aYf[gehYfa]klgimYda^q^gj
big ticket bids. There are several cases where domestic companies have tied up with foreign companies to bid for airport
hjgb][lk$hgo]jhjgb][lkYf\jgY\hjgb][lk&Afl`]k]YjjYf_]e]flk$]f_af]]jaf_Yf\l][`fgdg_a]kYj]hjgna\]\Zql`]_dgZYd
counterpart and on ground construction is taken care of by the Indian company. This has also given an opportunity to the
Indian company to upgrade on technologies and engineering.
Entry strategy of foreign EPC companies in India 2, 3, 4, 5, 6, 7
Modality :]f]Ôlklgl`]hdYq]j Precedence
Joint venture Access to knowledge capital for In 2007, Shriram EPC formed a JV with a Belgium-based company.
with existing India entry The JV enabled it to tap the fast-growing wet cooling and air pollution
players :]f]Õlg^ZjYf\]imalqg^l`] control market in India2.
existing player In December 2010, Leighton International Limited and Welspun
Acquisition of
Advantage of existing resource Group formed a strategic JV to pursue EPC opportunities. Welspun
an Indian entity
base `Y\Y[imaj]\Y+-klYc]afD]a_`lgf;gfljY[lgjk Af\aY!Hnl&Dl\&^gj
INR4.7 billion3.
Scale of operations achievable
through acquisitions Af*()($L`]KYm\a:afDY\af?jgmh K:?!g^KYm\a9jYZaYY[imaj]\Y
*(klYc]afEYqlYkAf^jYkljm[lmj]Dl\& EAD!^gjAFJ+&(Zaddagf4.
In November 2011, a Germany-based company acquired a small Oil &
Gas EPC company5.
In January 2012, Vinci entered the Indian market by buying a 100%
stake in NAPC6.
Af9hjad*()*$@g[`la]^]fl]j]\YfY_j]]e]floal`;gYklYdHjgb][lk
Daeal]\lgbgafldqZa\^gjhjgb][lkafAf\aY7.
L`]k][lgj$kljgf_dqmh`]d\Zql`]af^jYkljm[lmj]klgjq$`YkYkljgf_hgl]flaYdlg_jgo^mjl`]joal`l`]Lo]d^l`Õn]q]YjhdYf
>QH!lYj_]laf_af^jYkljm[lmj]kh]f\gÂFJ-.&+ljaddagf&=n]faf^mlmj]$af^jYkljm[lmj]\]n]dghe]flakdac]dqlgj]eYafl`]
focus area of the GoI.
* ÉK`jajYe=H;^gjekn]flmj]oal`:]d_aYf?jgmh$ÊAf\aYf:mkaf]kkAfka_`l$)0>]ZjmYjq*((/$naY>Y[lanY¡*()*Af^gjeYla[k Af\aY!Dl\&
3 “Welspun, Leighton forms JV for infra business,” DNA - Daily News & Analysis, 25 December 2010, via Factiva, © 2010. Diligent Media
Corporation Ltd.
4 “SBG buys 20% stake in Maytas Infra,” Mist News, 4 August 2010, via Factiva, © 2010 Misr Information Serivices and Trading.
- É?]jeYf]f_af]]jaf_ÕjeY[imaj]kKmjYl[gfkljm[lagf[gehYfq$ÊL`]Lae]kgÂf\aY$,9hjad*()*$naY>Y[lanY¡*()*L`]Lae]kg^
India Group
6 “French company Vinci buys NAPC,” The Hindu, 12 January 2012, via Factiva, © 2012 Kasturi & Sons Ltd.
/ É@g[`la]^]fl]jkaflgY_j]]e]floal`;gYklYdHjgb][lk^gjl][`fgdg_qYkkaklYf[]$ÊThe Economic Times, 10 April 2012, via Factiva,
© 2012 The Times of India Group

Comparison of investments in FYPs
Tenth FYP (2002–07) Eleventh FYP (2007–12) Twelfth FYP (2012–17)

(INR trillion) (INR trillion) (INR trillion)
Planned investments 8.7 20.6 56.3
Actual Investments 9.2 23.9 NA
EPC opportunity 4.5 11.4 26.7
Sectoral mix Power: 30% Power: 33% Power: 32%
Roads: 17% Roads: 19% Roads: 17%
Telecom: 16% Telecom: 16% Telecom: 17%
Railways: 11% Railways: 8% Railways: 9%
Irrigation: 13% Irrigation: 10% Irrigation: 9%
Ports: 3% Ports: 3% Ports: 3%
Oil & Gas: 2% Oil & Gas: 2% Oil & Gas: 4%
Others: 8% Others: 9% Others: 9%
~50% spend on power and Power and roads consistently Increased thrust on
roads — above targeted amounting to ~50% of planned telecommunications — increased
achievement in power sector expenditure — added focus on expenditure on ports, oil and
telecom gas pipelines
Source: Eleventh and Twelfth Five year plan, Planning Commission
@go]n]j$l`]k[]fYjagafl`][gfkljm[lagfaf\mkljq`Yk[`Yf_]\afl`]dYkl^]oq]Yjk&L`]k][lgjak^Y[af_Yka_faÕ[Yfl
daima\alq[jmf[`$oà[àk^gj[af_d]Y\af_[gehYfa]klgoYalYf\oYl[`Z]^gj]lYcaf_mheYbgjogjc&L`]j][]flÕfYf[aYd
lmjegadYf\l`]jmh]]\]hj][aYlagf`Yn]Y\\]\lgl`]mf[]jlYaflq^Y[]\Zql`]af\mkljq&L`]k][lgjakYdkg^Y[af_kge]eYbgj
Zglld]f][ck&Akkm]kh]jlYafaf_lghjgb][llYc]%g^^$hYjla[mdYjdql`gk]j]dYlaf_lgdYf\Y[imakalagfYf\]fnajgfe]flYd[d]YjYf[]k$
delay due to regulatory changes and indecision call for immediate attention of the government to reduce execution delays
and thereby control cost overruns. With such delays and uncertainty round the construction commencement, EPC pricing
dgk]kalknYda\alq&>mjl`]jegj][Yk`klj]kkkalmYlagf$o]Yc]faf_ÕfYf[aYdklj]f_l`g^Zgl`[gfljY[lgjkYf\\]n]dgh]jk$Ydgf_
oal`ngdYladalqafeYl]jaYdhja[]`YkeY\]hjgb][l]p][mlagf\a^Õ[mdl&<m]lgmfj]Ydakla[Za\kZqf]o]fljYflkafl`]af\mkljqYf\
YdkgZql`]]klYZdak`]\hdYq]jk\m]lgafl]fk][geh]lalagf$k]n]jYdhjgb][lkYj]klm[cafZ]lo]]f&
L`]=H;[gehYfa]k`Yn]lgj]khgf\dggcaf_Yll`]YZgn][`Ydd]f_]k$Éhjgb][lkÊYf\ÉhjgÕlkÊf]]\lgZ]eYfY_]\o]ddafl`]
]paklaf_hjgb][lkYf\ja_`lk]d][lagfg^hjgb][lkYdgf_oal`[ge^gjlYZd]imgl]kafZa\\af_oaddZ]l`]c]qlgkm[[]kkaf^mlmj]
hjgb][lk&EYfY_af_ogjcaf_[YhalYdoaddZ][jm[aYd^gjl`]=H;[gehYfa]kYf\oaddYdkg\][a\]l`]^Yl]g^l`]ajkmjnanYdafl`]k]
tough times. Apart from construction capabilities domestic players have to transform and raise capabilities in engineering and
hjgb][leYfY_]e]floal`l`]ja_`ll][`fgdg_a[YdYddaYf[]k&

2 Opportunities for
EPC business in
India

April 2008
A Newsletter from Ernst & Young
2.1 Ghhgjlmfalqafl`]Lo]d^l`>an]Q]YjHdYf Lo]d^l`>QH!

The Twelfth FYP envisages investment of approximately INR56.3 trillion in Indian infrastructure between 2012 and
*()/&Làk$aflmjf$ak]ph][l]\lgg^^]jka_faÕ[Yflghhgjlmfala]k^gj=H;Y[jgkknYjagmkk][lgjk8. During the period, the
[gfkljm[lagfghhgjlmfalqafl`]af^jYkljm[lmj]k][lgjak]klaeYl]\lgZ]Yjgmf\AFJ*.&/ljaddagf YhhjgpaeYl]dq,/g^hdYff]\
afn]kle]flk!&Ka_faÕ[Yflafn]kle]flkafaf^jYkljm[lmj]hjgb][lk$Ydgf_oal`l`]j]nanYdafl`]j]Yd]klYl]k][lgjYf\_jgolàf
industrial capex are likely to boost the construction industry and act as catalyst for growth of EPC companies in India9.
Oàd]=H;[gfljY[lgjk[gflafm]lgZ]l`]mdlaeYl]Z]f]Õ[aYja]kgâf^jYkljm[lmj]afn]kle]flk$l`]Y\n]flg^f]oeg\]dk`Yk
changed the clientele base for them — from government authorities to a mix of public and private clients.
Planned investments in infrastructure in the Twelfth FYP: INR56,316.9 billion
3% 2%2%1% Power Ports and Inland Water Transport

3%
5% Roads & Bridges Oil & Gas
32% Telecommunications Mass Rapid Transit System
9% Railways Airports
Irrigation and Watershed Storage
9% Water supply and Sanitation
17% 17%
Source: Twelfth Five Year Plan document, Planning Commission
0 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$ÊPlanning Commission website$`llh2''

hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW)&h\^$Y[[]kk]\*-G[lgZ]j*()+&
1 ÉJ]hgjlg^l`]ogjcaf__jgmhgf[gfkljm[lagf^gjl`]=d]n]fl`Õn]q]YjhdYf *((/%*()*!$ÊPlanning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'YZgmlmk'[geeall]]'ojc_jh))'o_))W[gfkljf&h\^$Y[[]kk]\gf(,Fgn]eZ]j*()+&

Construction opportunity in the Twelfth FYP 10
Sector Total planned investment in Construction intensity10 Construction opportunity

Twelfth FYP (INR billion) (INR billion)
Roads and bridges 9,694.1 65% 6,301.1
Railways 5,218.0 78% 4,070.0
Mass Rapid Transit System (MRTS) 1,241.6 78% 968.4
Ports and Inland Water Transport (IWT) 1,977.8 50% 988.9
Airports 877.1 42% 368.4
Water supply and sanitation 2,549.5 66% 1,682.7
Irrigation and watershed 5,043.7 75% 3,782.8
Power 18,202.4 38% 6,916.9
Telecommunications* 9,439.0 10% 943.9
Storage* 584.4 50% 292.2
Oil & Gas 1,489.3 25% 372.3
Total 56,316.9 26,687.7
Source: Twelfth Five Year Plan document, Planning Commission, EY research, Engineering, Procurement and Construction (EPC): Driving
_jgol`]^Õ[a]fldq$ EY, 2011;
*Construction intensity is assumed with comparison to buildings as per data available in the Planning Commission’s report. In the case of
telecom, construction intensity of 10% has been assumed.
L`][gfkljm[lagfafl]fkalq$oà[`nYja]kka_faÕ[YfldqY[jgkkaf^jYkljm[lmj]k][lgjk$aehY[lkl`]ghhgjlmfalq^gj=H;hdYq]jk
more directly than the investment planned. While construction-intensive sectors such as roads, railways and MRTS together
account for 28% of infrastructure investments, they contribute nearly 42% to the total EPC opportunity. On the other
hand, the telecom sector, which has the third-largest investment in infrastructure, accounts for only 3.5% of the total EPC
opportunity11.
Planned infrastructure investments

The GoI has been strengthening its focus on infrastructure development to drive the growth of the economy at a sustainable
pace. It has increased its infrastructure spend as a percentage of the country’s GDP from 5.2% during the Tenth Five Year
HdYf*((*Ç(/ L]fl`>QH!lg/&.\mjaf_l`]=d]n]fl`>an]Q]YjHdYf*((/Ç)* =d]n]fl`>QH!&Làkaf^jYkljm[lmj]kh]f\ak
expected to increase to more than 9% of the GDP during the Twelfth FYP 2012–1712.
Since the beginning of the Twelfth FYP, the Central and state governments have been particularly pushing the mega
af^jYkljm[lmj]Yf\af\mkljaYdhjgb][lk ]p[]]\af_afn]kle]flkgÂFJ)(Zaddagf!$l`jgm_`k]n]jYdd]_akdYlan]Yf\j]_mdYlgjq
e]Ykmj]k&Km[`hjgb][lkYj]Zjgc]f\gofaflgnYjagmkh`Yk]kaflgkeYdd]jhjgb][lklgkaehda^ql`]hdYffaf_Yf\]p][mlagf$

hdYffaf_[geeakkagf&fa[&af'YZgmlmk'[geeall]]'ojc_jh))'o_))W[gfkljf&h\^$Y[[]kk]\gf(,Fgn]eZ]j*()+&
hdYffaf_[geeakkagf&fa[&af'YZgmlmk'[geeall]]'ojc_jh))'o_))W[gfkljf&h\^$Y[[]kk]\gf(,Fgn]eZ]j*()+3=Qj]k]Yj[`
12 “Mid-Term Appraisal-Eleventh Five Year Plan 2007-2012,” Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'$Y[[]kk]\
25 October 2013, p.293–295; “Column: Target 9% growth. Riders aplenty,” Financial Express, 9 September 2011, via Factiva, © 2013
Indian Express Online Media Pvt. Ltd.

thereby, increasing the number of opportunities for companies to grab13. As of 31 May 2013, approximately 207 such
hjgb][lk$Yegmflaf_lgAFJ/$0)-&(Zaddagf$a\]flaÕ]\Zql`]?gAo]j]afhjg_j]kkafl`][gmfljq14.
The GoI has more than doubled its investment in infrastructure to INR56.3 trillion during the Twelfth FYP from INR20.6
trillion during the Eleventh FYP period, and more than six times the planned infrastructure investments of INR8.7 trillion
during the Tenth FYP period15. In both Tenth and Eleventh FYP, the actual investments had exceeded the planned
investments16.
Comparison of segment-wise composition of infrastructure expenditure

32.7%
32.3%
30.0%
35%
30%
19.0%
25%
17.2%
16.8%
16.7%
16.1%
15.8%
20%
13.3%
11.0%
10.2%
15%
9.3%
9.0%
8.4%
6.6%
10%
5.1%
4.5%
3.5%
2.6%
2.6%
2.6%
2.4%
2.2%
1.9%
1.7%
1.6%
1.5%
1.0%
0.8%
0.8%
0.6%
0.3%
5%
0%
Power
Roads & Bridges
Water supply
and Sanitation
Ports and Inland

Telecommunications
Railways
Irrigation
and Watershed
Water Transport
Oil & Gas
Mass Rapid
Transit System
Airports
Storage
10th FYP [INR9.2 billion] 11th FYP [INR23.9 billion] 12th FYP (P) [INR56.3 billion]
Source: Twelfth Five Year Plan and Eleventh Five Year Plan, Planning Commission
H!ÇhdYff]\Õ_mj]k^gjl`]Lo]d^l`>QH
The telecom sector has been witnessing increasing investment over the past 10 years. During the Twelfth FYP period, almost
17% of investments, expected to be invested in this sector, is estimated to witness a CAGR of ~10% from 2012 to 2017.
Another sector, which has gained increasing prominence is the MRTS segment — with the GoI’s spend on the sector expected
to increase from 0.3% of its total infrastructure spend during the Tenth FYP to 2.2% in the Twelfth FYP17.
13 ÉHYf]dlg^Ykl%ljY[ce]_Yhjgb][lk_]lk?gnlÌkfg\$ÊHgdala[YdYf\:mkaf]kk<Yadq$)+<][]eZ]j*()*$naY>Y[lanY¡*()*hZ\&af3ÉKl]]d
aehgjlfgjek]Yk]\^gje]_Yhjgb][lk$ÊBusiness Standard, 9 August 2013, via Factiva © 2013 via Factiva © 2013 Business Standard
Ltd.
14 É,0l`>dYk`J]hgjlgfE]_YHjgb][lk$ÊEafakljqg^KlYlakla[kYf\Hjg_jYee]Aehd]e]flYlagf$EYq*()+$`llh2''ooo&[khe&_gn&af'
]f_dak`'eh'EHWE9QW*()+&h\^$Y[[]kk]\*-G[lgZ]j*()+&
15 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$ÊPlanning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW)&h\^$Y[[]kk]\*-G[lgZ]j*()+&
16 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$ÊPlanning Commission; “Eleventh Five
Year Plan 2007-2012,” Planning Commission.
17 =Qj]k]Yj[`3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&

2.2 Key infrastructure sectors: investment scenario
Roads and bridges
India’s road network spans 4.7 million km and is the second largest in the world, behind the US, and accounts for
YhhjgpaeYl]dq.-g^^j]a_`lYf\0(hYkk]f_]jljY^Õ[afl`][gmfljq&L`]k][lgjoalf]kk]\afn]kle]flgÂFJ,&-ljaddagfaf
the Eleventh FYP, which was approximately thrice the investment made in the Tenth FYP18.
Investments in roads and bridges (INR billion)
12,000
10,000
8,000
6,000
4,000
2,000
0
10th FYP 11th FYP 12th FYP (P)
Private States Centre

(P) – Planned
With a planned investment of INR9.7 trillion and construction intensity of 65%, the sector offers construction opportunities
worth INR6.3 trillion in the Twelfth FYP. During the Twelfth FYP period, around INR3.3 trillion of investments are expected
from the private sector, out of which INR2.4 trillion is planned to be awarded through National Highway Development
Hjg_jYee] F@<H!hjgb][lkYf\l`]ZYdYf[]l`jgm_`klYl]hjgb][lYoYj\k19.
The GoI has continued with NHDP with a planned expenditure of INR2.4 trillion. It seeks to award 29,000 km of national
à_òYqk\mjaf_>Q)*Ç)-$af[dm\af_0$0((ceaf>Q)+ Y[lmYdYoYj\]\*(gj)$/.(ce!Yf\1$(((ceaf>Q),20.
18 Eafakljqg^JgY\LjYfkhgjlYf\@a_òYqk EGJL@!*()+YffmYdj]hgjl3ÉAf\aYJgY\F]logjc$ÊNHAI website$`llh2''ooo&f`Ya&gj_'

jgY\f]logjc&`le$Y[[]kk]\*(Fgn]eZ]j*()+3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
19 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'
hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
20 ÉJgY\eafakljqÕp]k1$(((CefYlagfYdà_òYqlYj_]l^gjlàkÕk[Yd$ÊThe Economic Times, 17 April 2013, via Factiva © 2013 The
Lae]kgÂf\aY?jgmh3=H;2<janaf__jgol`]^Õ[a]fldq$=Q$*())

Physical progress of NHDP, in kms., at the end of October 2013
Particulars Completed till 31 October 2013 In progress To be awarded Total
Golden Quadrilateral 5,846 0 0 5,846
Phase I, II 6,177 646 372 7,195
Phase III 5,750 4,762 1,685 12,197
Phase IV 324 4,268 10,242 14,834
Phase V 1,653 2,456 2,419 6,528
Phase VII 21 22 659 702
Port connectivity 374 8 0 382
Total 20,145 12,162 15,377 47,684
Source: National Highway Authority of India
At the end of October 2013, approximately 42% of the total 47,684 km of NHDP roads was completed, while another 26%
was in progress21.
In order to develop the north-eastern states, the GoI has proposed construction of 6,418 km of highways with an investment
gÂFJ++.&1Zaddagfmf\]jl`]Kh][aYd9[[]d]jYl]\JgY\Hjg_jYee]^gjFgjl`=Ykl K9J<H%F=!\mjaf_l`]Lo]d^l`>QH&
Mf\]jl`]HjY\`YfEYflja?jYeKY\YcQgbYfY$Yf]ph]f\almj]gÂFJ1)-Zaddagf`YkZ]]faf[mjj]\ladd>Q)*$gmlg^YlglYdg^
INR1,277.9 billion sanctioned22.
Railways
Af\aYfJYadoYqkf]logjckhYfkegj]l`Yf.,$.((ce$eYcaf_all`]ogjd\Ìk^gmjl`%dYj_]kljYadf]logjcafl]jekg^kar]&Af
addition it is the largest passenger carrier and the fourth-largest rail freight carrier globally. In the Twelfth FYP, the total
investment for railways is estimated to be INR5.2 trillion. Construction intensity in railways is around 78%, which will result in
opportunities worth INR4.1 trillion during the Twelfth FYP23.
Investments in railways (INR billion)

6,000
5,000
4,000
3,000
2,000
1,000
0
Private Centre
21 ÉFYlagfYd@a_òYq<]n]dghe]flHjgb][l F@<H!$ÊNHAI website$`llh2''ooo&f`Ya&gj_'O@9LALAK&Ykh$Y[[]kk]\*(Fgn]eZ]j*()+&

22 “Northeast witnesses spate of highway construction,” Indian Business Insight, 30 September 2013, via Factiva © 2013
Af^gjeYla[k Af\aY!Dl\&3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
23 “Indian Railways: Statistical Summary,” Af\aYfJYadoYqko]Zkal]$`llh2''ooo&af\aYfjYadoYqk&_gn&af'jYadoYqZgYj\'mhdgY\k'\aj][lgjYl]'
klYlW][gf'h\^'KmeeYjq*(K`]]lW=f_&h\^$Y[[]kk]\)/G[lgZ]j*()+

Afl`]=d]n]fl`>QH$AFJ*&(ljaddagfoYkafn]kl]\afjYadoYqkYk[gehYj]\lgYlYj_]lgÂFJ*&-ljaddagf&JYadhjgb][lkafAf\aY
have been typically the domain of the public sector. However, based on the success of PPP in other infrastructure sectors,
l`]Af\aYfJYadoYqk`YkbmklZ]_mflglYc]kl]hklg]phdgj]l`]HHHjgml]$Yf\YaeklgYoYj\AFJ)&(ljaddagfl`jgm_`l`]HHH
route in the Twelfth FYP24.
Physical progress, (in kms.), during the Tenth FYP and Eleventh FYP
Tenth FYP (actual) Eleventh FYP (estimated) Eleventh FYP (actual)
New lines 920 2,000 2,205
Gauge conversion 4,289 10,000 5,290
Doubling 1,300 6,000 2,756
JYadoYq]d][ljaÕ[Ylagf 1,810 3,500 4,501
L`]Eafakljqg^JYadoYqk EgJ!Yf\l`]<]hYjle]flgÂf\mkljaYdHgda[qYf\Hjgeglagf <AHH!`Ykhjghgk]\)((><AafjYad

af^jYkljm[lmj]hjgb][lk$km[`Ykl`]AFJ*)-ZaddagfEmeZYa]d]nYl]\jYad[gjja\gjYf\l`]\]\a[Yl]\^j]a_`l[gjja\gjk25. The
Af\aYfJYadoYqk`YkYdkga\]flaÕ]\**klYlagfkY[jgkkl`][gmfljql`YloaddZ]eg\]jfar]\aflgogjd\%[dYkk^Y[adala]k26.
L`]EgJdYmf[`]\l`]@a_`Kh]]\JYad;gjhgjYlagfgÂf\aYDl\& @KJ;!$YkmZka\aYjqg^JYadNacYkFa_YeDl\& JNFD!$af

gj\]jlg[gfka\]jà_`%kh]]\jYadhjgb][lkYkYnalYdhYjlg^l`]mh[geaf_jYadaf^jYkljm[lmj]hjgb][lk&L`]ljYafkgfl`]k]
hjgb][lkoaddZ]YZd]lgY[à]n]kh]]\kg^).(lg*((ceh`$l`]j]Zq$eYcaf_al^]YkaZd]lgaf[j]Yk]l`]^j]im]f[qg^ljYafkYf\
consequently the capacity of railways. A preliminary study of the Mumbai-Ahmedabad high-speed rail route has estimated its
cost to be around INR650 billion27.
Mass Rapid Transit System (MRTS)

L`]?gA`YkZ]]f^g[mkkaf_gf\]n]dghaf_EJLKgn]jl`]dYkl\][Y\]&9kg^Bmf]*()+$l`j]]e]ljgjYadhjgb][lkYf\^gmj
ZmkjYha\ljYfkal :JL!hjgb][lkYj]gh]jYlagfYd&<mjaf_l`]Lo]d^l`>QHh]jag\$hjanYl]k][lgjkh]f\af_ak]ph][l]\afEJLK
systems in cities such as Ahmedabad, Bengaluru, Hyderabad, Chandigarh, Chennai, Delhi, Jaipur, Kochi, Kolkata, Mumbai,
Patna, Pune and Surat28&EJLKhjgb][lk$km[`Yke]ljgjYadYj]mkmYddq\]hdgq]\af[ala]koal`hghmdYlagfgêgj]l`Yf)
million. The number of such million-plus cities increased from 35 in 2001 to 53 in 2011, and is expected to go up to 85 by
205129.

hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+3ÉJYadoYqEafakljqoYflk[`Yf_]kaf<AHHÌk><AhdYf$ÊL`]=[gfgea[
Times, 18 October 2013, via Factiva © 2013 The Times of India Group.
25 É<AHHhjghgk]k)((><AafjYadoYqhjgb][lk$ÊThe Economic Times, 26 September 2013, via Factiva © 2013 The Times of India Group;
ÉJYadoYqkk]]ck><AafjYadaf^jYkljm[lmj]hjgb][lk$ÊL`]=[gfgea[Lae]k$+G[lgZ]j*()+$naY>Y[lanY¡*()+L`]Lae]kgÂf\aY?jgmh&
26 =H;2<janaf_?jgol`=^Õ[a]fldq$=Q$*())3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission
website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
27 ÉJYadoYqEafakl]jDYmf[`]k@a_`Kh]]\JYad;gjhgjYlagfgÂf\aYDaeal]\ @KJ;!$ÊPress Information Bureau website$`llh2''haZ&fa[&af'
f]okal]']j]d]Yk]&Ykhp7j]da\5)((+(0$Y[[]kk]\+)G[lgZ]j*()+&
28 “Metro systems in India: Case study DMRC,” United Nations Environment Programme website$`llh2''ooo&mf]h&gj_'ljYfkhgjl'
dgo[YjZgf'KlYc]@gd\]jkW*())WF]o<]`da'G[l*(*('K]kkagf*(N'E]ljg*(Kqkl]ek*(af*(Af\aYW;Yk]*(Klm\q*(<EJ;WLaoYja&
h\^$Y[[]kk]\*1G[lgZ]j*()+3É:JLhjgb][lkafAf\aYf[ala]kYkaf[dmkan]ljYfkhgjlkqkl]ek7$ÊMnited Nations Environment Programme
website$`llh2''ooo&mf]h&gj_'ljYfkhgjl'dgo[YjZgf'KlYc]@gd\]jkW*())WF]o<]`da'G[l*(*('K]kkagf*(N':JL*(Hjgb][lk*(
af*(Af\aYf*(;ala]k*(Yk*(Af[dmkan]*(LjYfkhgjl*(Kqkl]ekW<YjkàfaWBgkà&h\^$Y[[]kk]\*1G[lgZ]j*()+3ÉLo]d^l`>an]
Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'
Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
29 ÉEg\]d?ma\]daf]k^gjMjZYfDYf\Hgda[q$ÊEafakljqg^MjZYf<]n]dghe]flo]Zkal]$`llh2''l[hgem\&_gn&af'<anakagfk'EMLH'EG<=DW
?MA<=DAF=KW>GJWMJ:9FWD9F<WHGDA;Q&h\^$Y[[]kk]\*1G[lgZ]j*()+3ÉË><Aafj]lYadlglgm[`gfdq)+&+g^hghmdYlagf$ÊThe Times
of India - Mumbai Edition, 23 February 2013, via Factiva © 2013 The Times of India Group.

Investments in MRTS (INR billion)
1,400
1,200
1,000
800
600
400
200
0
Investment in MRTS has increased from INR27.4 billion in the Tenth FYP to an estimated INR1,241.6 billion in the Twelfth
FYP, with the private sector contributing 42%. With a construction intensity of 78%, the sector provides INR1.0 trillion of EPC
opportunity. Apart from the seven operational MRTSs, seven more are likely to commence operations by 2017, while 15
egj]hjgb][lk`Yn]Z]]fhdYff]\$oà[àf[dm\]e]ljgjYad$egfgjYad$:JLYf\da_`ljYadljYfkal DJL!30. The Ministry of Urban
<]n]dghe]fl EgM<!]klaeYl]\YlglYd]ph]f\almj]gÂFJ*&(ljaddagf^gj\]n]dghaf_mjZYfhmZda[ljYfkhgjlZq*(+)&
L`]EgM<akogjcaf_gfl`]klYf\Yj\arYlagfgê]ljgjYadhjgb][lkafl`][gmfljq$Yf\`Yk^gje]\kapkmZ%[geeall]]kdggcaf_
Y^l]j\a^^]j]flYkh][lkg^l`]e]ljg&9dl`gm_`l`]EJLKhjgb][lkYj]dYj_]dq=H;[gfljY[lk$l`]?gA`YkYdkgZ]_mflg
[gfka\]jl`]HHHeg\]d&@go]n]j$HHHhjgb][lk`Yn]Z]]fàlZqegj]jgY\Zdg[ckYf\\]dYqk&Af\aYÌkÕjklHHH%ZYk]\jYha\
metro rail in Gurgaon has been delayed by more than 10 months31.
30 “Report on urban infrastructure and services by the high powered expert committee,” National Institute of Urban Affairs website$`llh2''
ooo&famY&gj_'hjgb][lk'`h]['ÕfYdj]hgjl%`h][&h\^$Y[[]kk]\*1G[lgZ]j*()+3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk
Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-
October 2013
31 “Gurgaon Rapid Metro misses deadline again,” The Indian Express, 7 October 2013, via Factiva; “Government to set standardised norms
^gjE]ljgJYadhjgb][lk$ÊThe Economic Times, 3 September 2013, via Factiva © 2013 The Times of India Group

Ports and inland water transport (IWT)
India has an extensive coastline of more than 7,515 km and 14,500 km of navigable waterways, with an infrastructure of
)+eYbgjhgjlk YddY\eafakl]j]\Zql`]Eafakljqg^Kàhhaf_$)*_gn]jf]\ZqEYbgjHgjlLjmklk9[l$)1.+Yf\gf]_gn]jf]\
Zql`];gehYfa]k9[l$)1-.!$)11eafgjhgjlk$Yf\.fYlagfYdoYl]joYqkkalmYl]\Ydgf_alkd]f_l`&E]j[`Yf\ar]ljY\]
[gfljaZml]kegj]l`Yf-(g^l`][gmfljqÌkj]Yd?<HYf\1-g^làke]j[`Yf\ar]ljY\] Zqngdme]!akljYfkhgjl]\l`jgm_`
maritime transport32.
Investments in ports and IWT (INR billion)

2,500
2,000
1,500
1,000
500
0
The planned investment of INR2.0 trillion in the Twelfth FYP is approximately three times the actual investment in the
sector in the Tenth FYP and Eleventh FYP combined. The private sector is expected to contribute 87% to the Twelfth FYP
investments. The sector is expected to result in a construction opportunity worth INR1.0 trillion, given the construction
intensity of 50%33.
32 India Maritime 2012: Building a global maritime sector, EY, 2012

hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&

L`][Yj_gljY^Õ[`Yf\d]\YleYbgjYf\eafgjhgjlkaf[j]Yk]\YlY;9?Jg^-&*\mjaf_>Q(0Ç>Q)+lg1+,eaddagfe]lja[
lgff]k EEL!$oàd]l`][Yj_gljY^Õ[`Yf\d]\afl`]fYlagfYdoYl]joYqk\gmZd]\\mjaf_>Q(0Ç>Q)*lg/&)EEL&Alak
]ph][l]\l`Yll`][YhY[alqYf\ljY^Õ[Yll`]hgjlkoaddaf[j]Yk]lg+$)+(EELYf\*$,1-EEL$j]kh][lan]dqZq*(*(34.
Development projects for major ports, Maritime Agenda 2010–2020
Category No. of projects Internal funding Private sector funding

(INR billion) (INR billion)
Construction/reconstruction of berths and jetties 115 117.5 429.6
Equipment procurement 72 32.1 17.3
Deepening of channels and berths 40 85.9 0.0
Rail-road connectivity 26 31.8 17.9
Other works 99 98.3 264.0
Total 352 355.6 728.8
Source: Maritime Agenda 2010-2020
9lglYdg^+-*hjgb][lk`Yn]Z]]fa\]flaÕ]\^gjaehd]e]flYlagfYleYbgjhgjlkmf\]jl`]EYjalae]9_]f\Y*()(Ç*(*(&
9hhjgpaeYl]dq+)g^l`]lglYdhjgb][lkYj]dYj_]dq[gfkljm[lagfgjj][gfkljm[lagfg^Z]jl`kYf\b]lla]k&C]qhjgb][lkaf[dm\]
the fourth container terminal and 330 meter extension of the container berth at Jawaharlal Nehru port terminal, the iron ore
terminal at Mormugao port, the coal-handling facility and container terminal at New Mangalore port, and the mega container
terminal, dry port and multi-modal logistics hub at Chennai port35.
L`]?gA`YkYdkg\][a\]\lg\]n]dghlogf]oeYbgjhgjlkafO]kl:]f_YdYf\9f\`jYHjY\]k`YlYf]klaeYl]\[gklgÂFJ).(
Zaddagf$Yko]ddYkAOLhjgb][lkogjlÀFJ)(-Zaddagf36.
34 ÉMh\Yl]gfAf\aYfhgjlk][lgj +)&(+&*()+!$ÊLjYfkhgjlJ]k]Yj[Òaf_$Eafakljqg^Kàhhaf_$JgY\LjYfkhgjlYf\@a_òYqk$Bmf]

2012; Inland Waterways Authority of India 2013 annual report; “Maritime agenda: 2010 – 2020, Ministry of Shipping, January 2011.
35 ÉMh\Yl]gfAf\aYfhgjlk][lgj +)&(+&*()+!$ÊLjYfkhgjlJ]k]Yj[Òaf_$Eafakljqg^Kàhhaf_$JgY\LjYfkhgjlYf\@a_òYqk$Bmf]
2012; “Basic port statistics of India 2010-11,” Transport Research Wing, Ministry of Shipping, Road Transport and Highways, April
2012; “Maritime agenda: 2010 – 2020, Ministry of Shipping, January 2011.
36 ÉAf\aYlgk]lmhlogegj]eYbgjhgjlk$ÊFYlagfYdLmjc$-9m_mkl*()+$`llh2''ooo&fYlagfYdlmjc&[ge']f'af\aY%lg%k]l%mh%log%egj]%
eYbgj%hgjlk%,)*.03É?gnl]phdgjaf_oYqklgaf[j]Yk]afdYf\oYl]joYqk$Ê The Economic Times, 15 February 2013, via Factiva © 2013
L`]Lae]kgÂf\aY?jgmh3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&

Airports
L`]9ajhgjl9ml`gjalqgÂf\aY 99A!eYfY_]k)*-Yajhgjlk$af[dm\af_))afl]jfYlagfYd$0)
domestic, 8 customs airports and 27 civil enclaves. During FY08–FY13, total passenger and
[Yj_gljY^Õ[l`jgm_Àf\aYfYajhgjlkaf[j]Yk]\YlY;9?Jg^.&,Yf\-lg)-1&+eaddagfYf\
2.2 MMT, respectively37&L`]hYkk]f_]jljY^Õ[ak]ph][l]\lglgm[`+((eaddagfZq*(*(38.
Investments in airports (INR billion)

1,000
900
800
700
600
500
400
300
200
100
0
LglYdafn]kle]flak]klaeYl]\lgZ]AFJ0//Zaddagfafl`]Lo]d^l`>QH 0(Zql`]hjanYl]k][lgj!&;gfkljm[lagfafl]fkalqaf
airports is around 42%, which is expected to result in construction opportunity worth INR368 billion.
The GoI has proposed to build 17 new airports in 11 states, including under-penetrated states such as Arunachal Pradesh,
B`Yjc`Yf\Yf\JYbYkl`Yf$Yko]ddYk)((YajhgjlkafkeYdd]j[ala]k39&L`]Eafakljqg^;anad9naYlagf Eg;9!`YkYhhjgn]\f]o
_j]]fÕ]d\YajhgjlkYlYlglYdafn]kle]flgÂFJ+*(Zaddagf40. The passenger terminal capacity in all airports put together is
expected to be 370 million by 2017 from 230–240 million in 2012. Private players are now allowed to acquire 100% equity
stake at the six airports developed on PPP mode41.
Power
=H;afl`]hgo]jk][lgjakZjgY\dq\ana\]\afloghYjlkÈhgo]j_]f]jYlagfYf\ljYfkeakkagfYf\\akljaZmlagf L<!&Hgo]j
_]f]jYlagfak^mjl`]j\ana\]\aflgZgad]j$lmjZaf]$_]f]jYlgj :L?!Yf\ZYdYf[]g^hdYfl :gH!&;gfljY[lgjkkh][aYdaraf_
in the BTG works usually take up supply, erection and commissioning of the BTG as well as related civil works. The BoP
contracts include construction and commissioning of coal handling, ash handling and water treatment systems, as well as
j]dYl]\[anadogjck&9eYbgjalqgÂf\aYf:L?eYfm^Y[lmj]jk`Yn]^gjYq]\aflgl`]=H;k]_e]flYkY^gjoYj\afl]_jYlagfg^
their capabilities, particularly in the boilers segment. Most Indian BoP players have evolved from general civil contractors,
leveraging their expertise in civil works. Foreign players, especially Chinese and Korean, have adopted the JV route to bid for
super critical boilers in the Indian power EPC market42.
37 ÉGj_YfarYlagf$Ê9ajhgjl9ml`gjalqgÂf\aYo]Zkal]$`llh2''ooo&YYa&Y]jg'hmZda[Wfgla[]k'YYakal]Wl]kl'gja_f&bkh$Y[[]kk]\*1G[lgZ]j
*()+3ÉLjY^Õ[kmeeYjq$Ê9ajhgjl9ml`gjalqgÂf\aYo]Zkal]$`llh2''ooo&YYa&Y]jg'ljY^Õ[Wf]ok'eYj*c0Yff]p)&h\^$Y[[]kk]\*1
G[lgZ]j*()+3ÉLjY^Õ[kmeeYjq$Ê9ajhgjl9ml`gjalqgÂf\aYo]Zkal]$`llh2''ooo&YYa&Y]jg'ljY^Õ[Wf]ok'eYj*c)+Yff]p)&h\^$Y[[]kk]\
29 October 2013
38 “Govt unveils 100 airports in smaller cities,” NBM & CW, 24 September 2013, via Factiva © 2013 NBM Media.
40 “Government proposes to build 17 new airports in 11 states,” The Times of India, 8 August 2013, via Factiva © 2013 The Times of India
Group.
41 “Govt open to offering 100 % stake to private parties at six airports,” The Hindu, 30 August 2013, via Factiva.
42 Indian EPC Market: consolidation on horizon$=Q$*()*3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning

India’s total installed power generation capacity stood at 228.7 GW as of September 2013. Robust economic growth and
]f`Yf[]\af\mkljaYdY[lanalq`Ykka_faÕ[Yfldqaf[j]Yk]\l`]\]eYf\^gjhgo]jafl`][gmfljq$d]Y\af_lgYkem[`Yk)*h]Yc
hour power shortages. This makes a compelling case for further large scale investments in the sector43.
Investments in power (INR billion)
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Non-renewable Renewable Non-renewable Renewable Non-renewable Renewable
Note: investments by the centre, states and private sectors for renewable energy segment are not given separately in the Tenth plan.
During the period, the total expenditure incurred by the public sector in renewable energy was INR40 billion.
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
43 ÉEgfl`dq9ddAf\aYafklYdd]\_]f]jYlagf[YhY[alqj]hgjl$Ê;]fljYd=d][lja[alq9ml`gjalq$`llh2''[]Y&fa[&af'j]hgjlk'egfl`dq'afklW[YhY[alq'
sep13.pdf, accessed 17 October 2013; Sector focus: power,” Indian Infrastructure, August 2011; “Twelfth Five Year Plan 2012-2017 –
=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$
Y[[]kk]\*-G[lgZ]j*()+3=H;2<janaf__jgol`]^Õ[a]fldq$=Q$*())

The power generation capacity increased by 54,964 MW during the Eleventh FYP. In the Twelfth FYP, total investment
in the power sector is estimated to be INR18,202 billion, with a planned non-renewable generation capacity addition of
88,537 MW and renewable generation capacity addition of 30,000 MW. Construction intensity in the power sector is around
38% currently and is expected to result in construction opportunity worth INR6,917 billion44. The GoI’s increased focus on
renewable energy sources is expected to raise the share of renewables in power generation from around 6% in 2012 to 9% in
2017 and 16% in 2030. The planned renewable energy capacity addition comprises 15,000 MW in wind energy, 10,000 MW
in solar energy, 2,100 MW in small hydro energy, while the balance is primarily planned from biomass45. Around 13,000 MW
of captive power capacity is planned to be added during the Twelfth FYP, from which surplus power, if any, is fed into the grid.
In addition, the Twelfth FYP also provides for 110,340 ckm of transmission lines and 270,000 MVA of substations46.
Power generation capacity addition during Eleventh FYP and Twelfth FYP, in MW
Type Eleventh FYP actual Twelfth FYP target
Central State Private Total % of target Central State Private Total

achieved
Hydro 1,550 2,702 1,292 5,544 35% 6,004 1,608 3,285 10,897
Thermal 12,790 14,030 21,720 48,540 81% 14,878 13,922 43,540 72,340
Nuclear 880 0 0 880 26% 5,300 0 0 5,300
Total 15,220 16,732 23,012 54,964 70% 26,182 15,530 46,825 88,537
The private sector participation is expected to be 47.5% and 88% for non-renewable and renewable sectors, respectively in
the Twelfth FYP47&HjanYl]k][lgjafn]kle]flak]ph][l]\lgaf[j]Yk]oal`l`]Yffgmf[]e]flg^),mdljY%e]_Yhgo]jhjgb][lk
MEHHk!&Gmlg^l`]k]$^gmjMEHHk KYkYf$Emf\jY$Cjak`fYHYlfYeYf\LadYaqY!`Yn]Ydj]Y\qZ]]fYoYj\]\lghjanYl]
players48. However, the hydro-electric power generation potential from the north-eastern region still remains untapped, with
only 7% of the potential capacity developed49.

48 =H;2<janaf__jgol`]^Õ[a]fldq, EY, 2011.

L`]BYoY`YjdYdF]`jmFYlagfYdKgdYjEakkagf BFFKE!dYmf[`]\Zql`]?gAaf*()(hdYfk
to deploy 10,000 MW of grid-connected solar power by 2017 and 20,000 MW by 2022.
The Indo-German “green energy” corridors involves an investment of INR430 billion to
add 30,000 MW to the national grid by 202050.
Oil & Gas

L`]Gad?Ykk][lgjak\ana\]\aflgl`j]]eYbgj[gehgf]flkÈmhklj]Ye ]phdgjYlagfYf\
hjg\m[lagf =H!!$ea\klj]Ye ljYfkhgjlYlagf$Zqhah]daf]$jYadgjljm[c$Yf\klgjY_]!
Yf\\gofklj]Ye j]Õfaf_Yf\hjg[]kkaf_!&Af\aYÌkGad?Ykaf\mkljq[gflafm]klg_jgo
steadily, boosted by enhanced investments, increased production and an increase in
private participation.
Investments in oil and gas (INR billion)

1,600
1,400
1,200
1,000
800
600
400
200
0
Total investment is estimated to be INR1,489 billion in the Twelfth FYP. Construction

intensity in oil and gas is around 25%, which is expected to result in construction
opportunities worth INR372 billion. Crude oil production was 177 MMT and gas
production was 213 BCM in the Eleventh FYP, which are expected to rise to 216 MMT
Yf\+,)Zaddagf[mZa[e]lj]k :;E!afl`]Lo]d^l`>QH51.
50 “MNRE sets target of 10,000 mw of solar power by 2017,” The Economic Times, 25 September
2013, via Factiva © 2013 The Times of India Group; “Green corridor to see wind and solar
^YjekafJYbYkl`Yf$LYeadFY\m$ÊL`]=[gfgea[Lae]k$1G[lgZ]j*()+$naY>Y[lanY¡*()+
L`]Lae]kgÂf\aY?jgmh3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$Ê
Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'
ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
51 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission
website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\
25 October 2013.

;jm\]gadYf\_Ykhjg\m[lagf\mjaf_=d]n]fl`>QHYf\Lo]d^l`>QH$Yf\j]Ôfaf_
capacity at the end of Eleventh FYP and Twelfth FYP
Type Eleventh FYP actual Twelfth FYP target

ONGC OIL Private Total % of target ONGC OIL Private Total
achieved
Crude oil 124 18 35 177 86% 133 20 63 216

production
EEL!
Gas 114 12 86 213 83% 144 20 177 341
production
:;E!
J]Õfaf_ - - - 213 88% - - - 314
capacity
EELH9!
EYbgj\gofklj]Yehjgb][lkafl`]gadYf\_Ykk]_e]flaf[dm\]Y1eaddagfe]lja[lgff]kh]j
Yffme EELH9!j]Õf]jqZq@af\mklYfH]ljgd]me;gjhgjYlagfDaeal]\ @H;D!afJYbYkl`Yf
ogjlÀFJ+/+Zaddagf$Y)-EELH9j]Õf]jqZ]af_k]lmhZql`]Af\aYfGad;gjhgjYlagf
Daeal]\ AG;D!afGjakkYogjlÀFJ*10Zaddagf$Yf\Y)*EELH9j]Õf]jqZqFY_YjbmfY
Gad;gjhgjYlagfDaeal]\ FG;D!ogjlÀFJ*-(Zaddagf&Ea\%klj]Yehjgb][lkaf[dm\]DF?
j]_YkaÕ[Ylagfhjgb][lkoal`YlglYd[YhY[alqg^-*EELH9Yf\]klaeYl]\[gklgÂFJ,/(
ZaddagfYf\hah]daf]%dYqaf_hjgb][lkg^YhhjgpaeYl]dq)($(((ceogjlÀFJ+0.Zaddagf52.
In the upstream segment, the GoI cleared 25 exploration and production blocks out of the
31 blocks where work had been stalled on account of security restrictions imposed by the
Ministry of Defence. This was worth approximately INR250 billion investments. The New
=phdgjYlagfDa[]fkaf_Hgda[q F=DH!akYfgl`]jeYbgjafalaYlan]Yae]\YlYlljY[laf_hjanYl]
investment into oil and natural gas. There have been nine rounds of bidding, entailing a
total investment of IN722 billion, made by various operators in E&P till FY11. Out of 235
hjg\m[lagfk`Yjaf_[gfljY[lk HK;k!$/+o]j]ka_f]\\mjaf_l`]=d]n]fl`>QH&GadHKMk
GND$GAD$?9AD$AG;D$:H;DYf\@H;D!`Y\afn]kl]\AFJ-1)Zaddagfladd>Q))&Gn]jk]Yk
oil and gas blocks account for approximately 10% of India’s domestic production. There
Yj]faf]eYbgjhjg\m[lagfYkk]lkafJmkkaY$Km\Yf$:jYrad$KqjaY$Na]lfYe$N]f]rm]dYYf\
;gdgeZaY&<mjaf_l`]Lo]d^l`>QH$GF?;$GADYf\hjanYl]'BN[gehYfa]kYj]]ph][l]\lg
k`ggl*<k]akea[kmjn]qk[gn]jaf_)+0$1/,ce /-ZqhjanYl]k][lgj!Yf\+<kmjn]qk
covering 82,488 sq. km. of land. Furthermore, 1,310 exploratory wells are likely to be
drilled during the Twelfth Plan period53.
52 ?KHD*()*YffmYdj]hgjl3EalmdL`YccYj$É?mbYjYlKlYl]H]ljgf]lDl\ka_fkY_j]]e]fl^gjJk
-$(0([jgj]ÕfYf[]oal`[gfkgjlameg^),ZYfck$ÊThe Economic Times, 30 June 2012, via
Factiva, © 2012 The Times of India Group; “ Jagdishpur-Haldia pipeline work to begin next
October,” Financial Chronicle, 27 September 2011, via Factiva © 2011 Deccan Chronicle Holdings
Ltd.; “Bihar to sign MoU with GAIL for Jagdishpur-Haldia gas pipeline,” E]lak=f]j_qAfka\]j, 29
January 2013, via Factiva © 2013 Metis Business Solutions Pvt. Ltd.; “Kochi-Mangalore gas
pipeline turning into mirage,” E]lak=f]j_qAfka\]j, 29 March 2013, via Factiva © 2013 Metis
:mkaf]kkKgdmlagfkHnl&Dl\&3ÉGE;k$=ADoak`lgbgaf?9ADÌkKmjYl%G\ak`Yhah]daf]$ÊE]lak=f]j_q
Insider$)0EYj[`*()+$naY>Y[lanY¡*()+E]lak:mkaf]kkKgdmlagfkHnl&Dl\&3ÉHjgb][lkmf\]j
Implementation,” Indian Oil website$`llh2''ooo&ag[d&[ge'9Zgmlmk'Hjgb][lkmf\]jAehd]e]flYlagf&
aspx, accessed 15 October 2013; “IOC invites bids for construction of LNG import terminal,” The
Hindu Business Line website, 29 March 2013, via Factiva © 2013; “RIL gets licence to lay pipeline
to transport CBM gas from Shogapur,” The Hindu, 15 July 2013, via Factiva.
53 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission

Water supply and sanitation
L`]oYl]jkmhhdqkalmYlagfafAf\aYakeYjc]\ZqafY\]imYl][gn]jY_] .,g^l`]mjZYf
hghmdYlagfak[gn]j]\Zqaf\ana\mYd[gff][lagfkYf\klYf\hgklk!$afl]jeall]flkmhhdq fYlagfYd
average duration of water supply ranges from 1 hour to 6 hours, with per capita water supply
af[ala]kjYf_af_^jge+/dh[\lg*10dh[\^gjYdaeal]\\mjYlagf!$dgogmlhmlhj]kkmj]$Yf\hggj
k]jna[]imYdalq oYl]jd]YcY_]kYj]/($fgf%j]n]fm]oYl]j FJO!Y[[gmflk^gj-(gôYl]j
hjg\m[lagf!54.
Investments in water supply and sanitation (INR billion)

3,000
2,500
2,000
1,500
1,000
500
0
Till now, the services provided for by the private sector have been contractual in nature and
o]j][gfÕf]\lggf]gjlogk]_e]flkg^l`]k]jna[]\]dan]jqnYdm][`Yafk&
Total investment is estimated to be INR2,550 billion in the Twelfth FYP, approximately 111%
more than the actual amount invested in the Eleventh FYP. The construction intensity in water
supply and sanitation is around 66%, which is expected to result in construction opportunity
worth INR1,683 billion55.
Private sector participation is currently very low in these sectors. However, it is expected to
increase from 0.1% in the Eleventh FYP to 2.5% in the Twelfth FYP. The GoI has periodically
introduced various policies such as JNNURM to enable city-wide planning for water and waste
management and enhance private participation56.
website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j
*()+3É;;Afg\lg)+hgo]jhjgb][lk$*-gadZdg[ck$ÊThe Indian Express, 23 April 2013, via Factiva ©
*()+Af\aYf=phj]kkGfdaf]E]\aYHnl&Dl\&3)MK5AFJ,.&,/
54 “Report on urban infrastructure and services by the high powered expert committee,” National
Institute of Urban Affairs website$`llh2''ooo&famY&gj_'hjgb][lk'`h]['ÕfYdj]hgjl%`h][&h\^$Y[[]kk]\
29 October 2013
55 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website,
`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j
2013.
56 “Report on urban infrastructure and services by the high powered expert committee,” National
Institute of Urban Affairs website$`llh2''ooo&famY&gj_'hjgb][lk'`h]['ÕfYdj]hgjl%`h][&h\^$Y[[]kk]\
*1G[lgZ]j*()+3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$
accessed 25 October 2013

Timeline of government policies introduced/amended for water supply and sanitation
Municipal Solid Waste Rules JnNURM Programme E‐waste management and

Organizing house‐to‐house Reform linked to urban handling rules
collection infrastructure investment reuse and recover useful
Segregating recyclable material from e‐waste thereby
materials reducing hazardous wastes
2000 2005 2011
1991 2002 2009 2012
74th Constitutional National Water Policy National Water Mission Review of NWP – draft 2012
Amendment Act Increased private Framework to increase Water as an economic
Treat urban water as participation l`]]^Õ[a]f[qgôYl]j need
a state subject Priority given to supply of usage by 20% =^Õ[a]f[qg^mkY_]
drinking water Bureau of Water volumetric pricing
Privatization =^Õ[a]f[q^gje]\ establishment of water
regulation authorities
Focus towards funding of the urban infrastructure projects >g[mklgoYj\k]^Õ[a]f[qYf\[gklj][gn]jq
Source: Planning Commission, Ministry of Urban Development, JNNURM
BFFMJE%AoYkl`]ÕjkleYbgjafalaYlan]$oà[`]f[gmjY_]\HHHafl`]mjZYfk][lgj&Mf\]jl`]HHH^jYe]ogjc$,1hjgb][lk
afngdnaf_lglYdhjgb][l[gklg^Yjgmf\AFJ-&-Zaddagfo]j]afalaYl]\afk][lgjkkm[`Ykkgda\oYkl]$oYl]jkmhhdq$k]oY_]Yf\
urban transport in which private concessionaires brought in investment of INR1.1 billion. Private investment in the sector
Yj]]ph][l]\lg_jgooal`dYj_]mh[geaf_hjgb][lkkm[`YkHHH%ZYk]\$]oYkl]hjg[]kkaf_mfalafEmeZYaYf\l`]Af\aYÌkÕjkl
oYkl]j][q[daf_rgf]af?mbYjYllgZ]\]n]dgh]\bgafldqZql`]BYhYf<]n]dghe]flAfklalml] B<A!$Yf\l`]?gn]jfe]flg^
?mbYjYl57.
57 “India’s urban awakening,” Urban India website$`llh2''mjZYfaf\aY&fa[&af'hjg_jYee]'mokk'E?AWaf\aYWmjZYfarYlagfW^mddj]hgjl&h\^$

accessed 31 October 2013.

Buildings
Af\aYakoalf]kkaf_Yk`Yjh[`Yf_]afalk\]eg_jYhà[[gehgkalagf&L`]j]akYka_faÕ[Yfl_jgolàfmjZYfarYlagfd]n]dk\m]
to factors including rapid economic growth and migration of the rural population to urban areas. Both government and
af\]h]f\]flYfYdqk]k]klaeYl]ka_faÕ[YflmjZYfarYlagfÕ_mj]k^gjl`]f]pl\][Y\]&MjZYfarYlagfakYdkg]ph][l]\lgd]Y\lg
Ykljm[lmjYdkà^lafl`]Af\aYf][gfgeq&Af[j]Yk]\mjZYfarYlagfak]ph][l]\lgd]Y\lg]e]j_]f[]gêgj]e]_Y[ala]kYf\
af[j]Yk]\hghmdYlagf[dmkl]jk$oà[àkdac]dqlg`Yn]Yhgkalan]aehY[lgfl`]fmeZ]jg^=H;hjgb][lkZ]af_YoYj\]\&L`]lgh
*(Ç+([ala]kYj]hjgb][l]\lgYlljY[lYka_faÕ[Yflhgjlagfg^l`]jmjYdhghmdYlagf$o`gea_jYl]afk]Yj[`g^bgZghhgjlmfala]k58.
Urban population and urbanization projection up to 2050, in million
1000 60%
550 million additional population 55%
900
Urban population (million)
48% 50%
800
700 40%
Urbanization (%)
40%
600 34%
28% 30%
500 30%
400
300 20%
200 10%
100
0 0%
2000 2010 2020 2030 2040 2050
Source: United Nations Population Division, 2007, EY research
L`]mjZYfarYlagflj]f\kkm__]kll`YlYhhjgpaeYl]dq--(eaddagfh]ghd]oaddf]]\lgZ]Y[[geeg\Yl]\afmjZYf[]fl]jkgn]j
the next 40 years. It is estimated that by 2017, the urban population is expected to increase to more than 440 million and the
mjZYfÖggjkhY[]h]j[YhalYoaddaf[j]Yk]lg)*(&/ki&^l&$oàd]l`]jmjYdhghmdYlagfoaddaf[j]Yk]lgegj]l`Yf0/(eaddagfYf\
l`]jmjYdÖggjkhY[]h]j[YhalYoaddaf[j]Yk]lg)(/&*ki&^l&59
These areas are already facing severe infrastructure constraints and the situation will only get worse if remedial action is not
lYc]f&L`]lglYd`gmkaf_k`gjlY_]^gjl`]Lo]d^l`>QH *()*Ç)/!afl`]mjZYfYj]Y`YkZ]]f]klaeYl]\Yl)0&0eaddagfmfalk
and for rural areas at 43.7 million units.
58 ÉMjZYf9__dge]jYlagfk';ala]k`Ynaf_hghmdYlagf)dYc`Yf\YZgn]$ÊCensus India website$`llh2''ooo&[]fkmkaf\aY&_gn&af'*())%hjgn%

j]kmdlk'hYh]j*%ngd*'\YlYWÕd]k'Af\aY*'LYZd]W+WHJWM9W;ala]]kW)DYc`WYf\W9Zgn]&h\^$Y[[]kk]\*(Fgn]eZ]j$*()+
59 “Report on urban infrastructure and services by the high powered expert committee,” National Institute of Urban Affairs website,
`llh2''ooo&famY&gj_'hjgb][lk'`h]['ÕfYdj]hgjl%`h][&h\^$Y[[]kk]\*1G[lgZ]j*()+3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[
K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\
*-G[lgZ]j*()+3J]hgjlg^l`]L][`fa[Yd?jgmhgfHghmdYlagfHjgb][lagfk;gfklalml]\Zql`]FYlagfYd;geeakkagfgfHghmdYlagf$EYq
*((.3;]fkmkgÂf\aY*())$MjZYfY__dge]jYlagfk';ala]k`Ynaf_hghmdYlagf)dYc`Yf\YZgn]3FYlagfYdKYehd]Kmjn]qJ]hgjlFg&-+-2
Housing Condition and Amenities in India: July, 2008-June, 2009; EY research

Tier-wise* construction area requirement for residential, commercial and industrial buildings (billion sq. ft.)
100
90
80
70
60
50
,0
30
20
10
0
Tier 1 Tier 2 Tier 3 Tier ,
Urban Rural
Residential Commercial Industrial
2013 2015 2017
Source: NSS Report No. 535: Housing Condition and Amenities in India: July, 2008-June, 2009; United Nations; Department of Economic
and Social Affairs; "Report on Urban Infrastructure and Services," High Powered Expert Committee for estimating investment requirements
for urban infrastructure services, MoUD, March 2011; EY research
"La]jkYj]Yj]Yk\]Õf]\Y[[gj\af_lghghmdYlagf H!2La]j)2H6-eaddagf$La]j*2)eaddagf4H4-eaddagf$
La]j+2(&-eaddagf4H4)eaddagf$La]j,2H4(&-eaddagf
In 2017, it is expected that the total demand for residential, commercial and industrial stock will be more than 150 billion
ki&^l&$Ykkmeaf_[gee]j[aYdYf\af\mkljaYd[gfkljm[lagflg_jgohjghgjlagfYl]dqlgl`]j]ka\]flaYdk]_e]fl Ykkme]\lgZ]
jYf_af_^jge)(Ç*(g^l`]j]ka\]flaYd[gfkljm[lagf\]eYf\!&
The opportunity lies in the fact that the construction stock requirement for residential, commercial and industrial buildings
oaddaf[j]Yk]\m]lgjYha\af[j]Yk]afmjZYfhghmdYlagfYf\ea_jYlagfg^h]ghd]lgmhh]jla]j[ala]k l`Yfl`]gf]kl`]qdan]af!&
The commercial space will grow in future due to economic growth and favorable demographics of a large earning population.
The industrial growth will be boosted by the construction of industry-centred cities on the industrial corridors, including seven
f]o[ala]kYdgf_l`]<]dàEmeZYaAf\mkljaYd;gjja\gj <EA;!Yko]ddYkl`][ala]khdYff]\gfl`];`]ffYa%:]f_YdmjmYf\
Bengaluru-Mumbai industrial corridors60.


*&+=H;hdYq]jklgZ]l`]Za__]klZ]f]Õ[aYja]k
Opportunities for EPC players
HjanYl]k][lgjhYjla[ahYlagfafAf\aYfaf^jYkljm[lmj]hjgb][lkoYkYjgmf\**afl`]L]fl`>QH$oà[àf[j]Yk]\lg+/afl`]
Eleventh FYP and is expected to increase further to around 48% in the Twelfth FYP. This translates into an increase from
INR2.0 trillion in the Tenth FYP to INR27.1 trillion in the Twelfth FYP. With such rapidly growing opportunities, there has been
a substantial rise in the number of new entrants in the sector.
Investment in infrastructure, % private of total investment

Planned investment
60,000 INR56,316.9 billion
50,000
48%
40,000 Actual investment
INR23,859.8 billion
30,000
Actual investment
20,000 37%
INR9,161.8 billion
10,000 22%
0
10th Plan 11th Plan 12th Plan (P)
Private Public
Source: Twelfth FYP and Eleventh FYP, Planning Commission
Furthermore, the increasing number of private sector clients has resulted in negotiated contracts as compared to the
traditional competitive bidding format. The rise in number of such clients is expected to improve payment mechanisms and
the working capital cycles of EPC contractors61.
Model shift for private players

However, private sector participation, via the PPP mode, has been on the decline in some sectors, in spite of the GoI’s
]^^gjlkafhmkàf_HHHhjgb][lkafnYjagmkk][lgjk\m]lgaf[j]Yk]afl`]fmeZ]jg^dYj_]Yf\[gehd]phjgb][lk$oà[`[Ydd
^gjka_faÕ[Yflafn]kle]flk&DYj_]hjgb][lkYj]mkmYddqafn]kle]fl%afl]fkan]Yf\[jala[YdaffYlmj]$oàd]:GLhjgb][lkl]f\lg
be prone to time and cost overruns. Subsequently, with delays and liabilities, came increased risks, and the EPC companies
became debt-heavy in their pursuit to become BOT developers. This situation has forced private players to pull out of large
hjgb][lk&?jY\mYddq$l`]Za\\af_j]khgfk]lgf]ohjgb][lkZ][Ye]o]YcYf\eYfqhjanYl]hdYq]jkYffgmf[]\j]\m[lagfg^
l`]aj:GLhjgb][l]phgkmj]$Yf\^gddgoYfYkk]l%da_`lYhhjgY[`$hjaeYjadqlgj]\m[]l`]\]ZlZmj\]fgfÕfYf[aYdklYl]e]flk&


Modes of project award
Criteria EPC PPP
Government Government
EPC contract PPP contract

award award
EPC contractor Contract

EPC contractor
(owns asset) execution
EPC contract
award
SPV
Contract execution (operates and
maintains asset)
Ownership Government Private

Model Contract Concession
Lae]Yf\[gkl]^Õ[a]f[q Af]^Õ[a]flafj]\m[af_lae][gklgn]jjmf Accumulating interest costs, stringent contractual
– especially due to external risks such as penalties, delay in revenue generation force a private
land acquisition, regulatory approvals gh]jYlgjmf\]jYHHH[gfljY[llg[gehd]l]hjgb][l
development within schedule and budget.
=^Õ[a]f[qg^l`]^Y[adalq ;gfljY[lgjbgZklghkY^l]j[gfkljm[lagf HjanYl]hYjlq`Yklgjmfl`]^Y[adalqYf\af]^Õ[a]fl^Y[adalq
and handover of the facility may dent its revenue, hence the facility is made more
]^Õ[a]fl&
Returns :Yk]\gfhjgb][leYj_afk Returns on equity investments
Upsides None Hjgb][leYq\]dan]jmhka\]k
Hjgb][ljakc Only execution risk On the private player
Market risk Contractor’s revenue is dependent only The revenue of the private player is generally dependent
on the construction of the facility gfl`]keggl`jmffaf_g^l`]hjgb][l
Operation and Maintenance Contractor is only responsible for Private partner is responsible for operation and
constructing the facility maintenance of the facility
Source: EY research
>gjl`]ogjkl%Y^^][l]\jgY\k][lgj$l`]?gA\][a\]\lgj]na]ol`]^]YkaZadalqg^Yhjgb][llgZ]]p][ml]\gfYHHHZYkak$Yf\
Y\ghl]\l`]=H;eg\]^gjfYlagfYdà_òYqk$oà[`Yj]fglnaYZd]gfYHHHZYkak&L`]=H;eg\]oaddfglgfdqeafaear]
time and cost overruns but will also result in increased bidding by developers. The GoI released the draft of a model EPC
Y_j]]e]fl$oà[òadd[gflYaf\]lYad]\\]ka_fk$]klaeYl]kgîmYflala]k^gj\a^^]j]flal]ekgôgjc :addgÎmYflala]k!$kgmf\
contractual framework specifying the allocation of risks and rewards and the equity of obligations between the government
authorities and contractors62.
Kaf[]l`]Z]_affaf_g^>Q),$hjgb][lk`Yn]Z]_mflgYlljY[legj]Za\\]jkYf\j]_Yaf]\hY[]g^]p][mlagf&MhlgEYq*()+$
kapl]f\]jk`Yn]Z]]fj]d]Yk]\Zql`]F@9A$gmlgôà[`Õn]`Yn]Z]]fgfl`]=H;eg\]&L`]fmeZ]jg^Za\\]jk`YkjYf_]\
Z]lo]]f)(Yf\+(afYddg^l`]e&9jgmf\*($(((ceg^f]olog%dYf]fYlagfYdà_òYqhjgb][lk$lgZ]\]n]dgh]\mf\]j
NHDP Phase-IV, have been brought under the EPC mode.
Afgl`]jk][lgjk$o`]j]l`]HHHeg\]akkladd\geafYfl$hjgb][lgof]jkgj\]n]dgh]jkmdlaeYl]dqYoYj\ogjcYk=H; gj
gl`]jlqh]g^![gfljY[lklg]al`]jl`]ajgof[gfljY[laf_]flala]kgfYfYjek%d]f_l`ZYkakgjlglàj\%hYjlq[gfljY[lgjk&L`]
hjanYl]k][lgjak\janaf_làk_jgol`ghhgjlmfalqZqafn]klaf_]imalqafkm[`HHHaf^jYkljm[lmj]hjgb][lk&9f=H;[gfljY[lgjak
l`]j]^gj]$]ph][l]\lgZ]f]Õl]al`]jl`jgm_`[gfljY[lkYoYj\]\Zq_gn]jfe]fl[da]flkgjhjanYl]\]n]dgh]jk&
62 =H;2<janaf_?jgol`=^Õ[a]fldq, EY, 2011

Sectors with high EPC dependency
Sectors such as roads, railways, and irrigation have comparatively more construction opportunities, since these segments
have reached a relatively mature stage. On the other hand, sectors such as renewable power, water supply, waste
management, MRTS and storage are gradually gathering steam.
Client mix and models adopted by EPC-dependent sectors
EPC market dependency EPC market dependency Clientele base* Order of models adopted
sub-sector (government-private ratio) by Government
Infrastructure construction Roads 50:50 PPP->Annuity->EPC
Railways 80:20 EPC->PPP
Ports 50:50 PPP->EPC
Airports 50:50 EPC->PPP
Urban infrastructure 80:20 EPC->limited PPP
Building construction Building construction 20:80 Cash contracts->EPC
Oil & Gas EPC Oil & gas 80:20 EPC
Power EPC Power 20:80 EPC
Specialized EPC Marine 20:80 EPC
Hydro 80:20 EPC
Industrial 20:80 EPC
Source: EY research * assumed
However, apart from the maturity of a sector and level of investment in it, the construction opportunities are also affected by
l`]\]h]f\]f[qg^l`]k][lgjgfl`]afl]fkalqg^=H;afnYjagmkhjgb][lkafl`]k][lgj$l`]caf\g^hjgb][lkhdYff]\Yf\l`]aj
quantities. While roads, railways, MRTS, irrigation and water supply and sanitation have construction intensity of more than
50%, sectors such as power, oil and gas, storage and telecom have low construction intensities.
The EPC dependency of a sector is also affected by the prevailing scenario in the sector. The construction industry, which
has been earlier in a space dominated by large EPC players and a few infrastructure developers, is now witnessing multiple
participants, each set on carving out a piece of the EPC pie63.
63 =H;2<janaf_?jgol`=^Õ[a]fldq, EY, 2011

Prevailing conditions in various sectors
EPC Market Sub-sector Competition Complexity Government Entry Opportunity Foreign

role barriers size players
(facilitator) interest
Infrastructure Roads » X ± X » »
EPC
Railways X X » X X X
Ports ± » » » ± »
Airports X » ± » ± »
Urban
infrastructure
» » » » ± ±
Building EPC Building
» X X X » ±
Oil & Gas EPC Oil & Gas X » » ± ± »
Power EPC Power » ± X X » »
Kh][aYdar]\=H; Marine X » » ± ± ±
Hydro X » » ± ± ±
Industrial ± ± X X » ±
High Medium Low
» ± X
Source: EY research
Sectors such as roads, airport, power and urban

infrastructure have become very attractive
for both domestic and foreign investors. This
may be due to relatively low entry barriers in
l`]k]eYjc]lk$Ykljgf_hjgb][lhah]daf]Yf\
Y[gfka\]jYZd]ghhgjlmfalqkar]&Gfl`]gl`]j
hand, sectors such as the railways and buildings
are relatively low on the attractiveness scale —
the railways await unbundling and buildings the
recovery of the real estate sector. As a result,
the market as a whole has become a mixed bag of
opportunities in which different types of players
are participating.

3 Sector trends

3.1 Investment in niche areas on the rise
>an]Q]YjHdYfk >QHk!`Yn]oalf]kk]\ka_faÕ[Yfl[`Yf_]kafk[gh]gn]jlae]&>gjafklYf[]$Zm\_]lYddg[Ylagf^gjkge]
k][lgjk`Yn]\][daf]\ l`]k`Yj]gâjja_Ylagf$oYl]jkmhhdqYf\kYfalYlagf`Yk\][j]Yk]\^jge*(afl`]L]fl`>QHlg)+&-
afl`]Lo]d^l`>QH!&Gfl`]gl`]j`Yf\$kge]af^jYkljm[lmj]k]_e]flkkm[`Ykj]f]oYZd]]f]j_q$klgjY_]af^jYkljm[lmj]Yf\
transit-oriented development have come to the fore in the last decade, creating opportunities for EPC players64.
Renewable energy:Afn]kle]flafj]f]oYZd]]f]j_q J=!kgmj[]k`Ykaf[j]Yk]\^jgeAFJ01*Zaddagfafl`]=d]n]fl`>QH

))g^l`]lglYdhgo]jk][lgjafn]kle]fl!lgl`]hdYff]\AFJ+$)0.Zaddagfafl`]Lo]d^l`>QH )0g^l`]lglYdhgo]j
k][lgjafn]kle]fl!&Làkaf\a[Yl]kl`]?gAÌkaf[j]Yk]\^g[mkgf\]n]dghaf_Yf\mkaf_l`]YZmf\YflYf\mf\]j%lYhh]\J=
resources. The RE sector provides construction opportunity worth INR1.2 trillion in the Twelfth FYP. Approximately 88% of
the total investment in the Twelfth FYP is expected to come from private players. In addition, several government schemes
and initiatives facilitate the entry of large independent power producers and encourage FDI in the sector. As a result, the
sector provides a lucrative opportunity for EPC companies. The share of RE in the nation’s total installed power generation
[YhY[alqo]flmh^jge)Yll`]Z]_affaf_g^l`]L]fl`>QHlg)*Yll`]Z]_affaf_g^l`]Lo]d^l`>QH ]p[]]\af_=d]n]fl`
>QHlYj_]lk!&>mjl`]jegj]$l`]k`Yj]ak]klaeYl]\lgaf[j]Yk]lg)1Yll`]]f\g^l`]Lo]d^l`>QH&L`]Eafakljqg^F]o
Yf\J]f]oYZd]=f]j_q EFJ=!lYj_]lkYfY\\alagfg^+(?OJ=[YhY[alql`jgm_`kgdYj$oaf\$ZageYkk$keYdd`q\jgYf\
ZY_Ykk][g_]f]jYlagfhgo]jhdYflk&;YhalYd[gklk^gjJ=`Yn]j]\m[]\gn]jlae] kgdYjeg\md]hja[]k\][daf]\Zq0(oàd]
oaf\lmjZaf]hja[]k\][daf]\Zq*-kaf[]*((0!Ydgf_oalàf[j]Yk]af]^Õ[a]f[q&Làkak]ph][l]\lg\jan]afn]kle]flhdYfk
through the Twelfth FYP65.

hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
65 É?]f]jYlagf:Yk]\Af[]flan] ?:A!$ÊIndian Power Sector website$`llh2''af\aYfhgo]jk][lgj&[ge'`ge]'lY_'_Za'$Y[[]kk]\*Fgn]eZ]j
*()+$É@m_]hgl]flaYdlglYhj]f]oYZd]]f]j_q2G^Õ[aYd$ÊEconomic Times website$`llh2''Yjla[d]k&][gfgea[lae]k&af\aYlae]k&[ge'*()+%
(,%(+'f]ok'+0*,0.)0W)Wj]f]oYZd]%hgo]j%hgo]j%_]f]jYlagf%[YhY[alq%ZY_Ykk]%[g_]f]jYlagf$Y[[]kk]\.Fgn]eZ]j*()+$
“Generation Based Incentive Scheme,” Press Information Bureau website$`llh2''ooo&haZ&fa[&af'f]okal]']j]d]Yk]&Ykhp7j]da\5/00*1$
Y[[]kk]\.Fgn]eZ]j*()+3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+

Transit-oriented development: 9fgl`]j]e]j_af_Yj]Ygâfn]kle]flakljYfkal%gja]fl]\\]n]dghe]fl LG<!$km[`Yk
af\mkljaYd[gjja\gjk$lgofkàhkYf\[ala]k ZmadlYjgmf\eYbgj]phj]kkoYqk$jYad[gjja\gjk$Yajhgjlk$hgjlkYf\ljYfkal`mZk!&
L`]?gA`YkhdYff]\af\mkljaYd[gjja\gjk$af[dm\af_l`])$,0+%ce<]dàEmeZYaAf\mkljaYd[gjja\gj <EA;!Yf\l`]H]fafkmdYj
J]_agfAf\mkljaYd<]n]dghe]fl;gjja\gj HJA<]!oalàlklogeYbgjd]_kÈl`])$(((%ceEmeZYa%:Yf_Ydgj]Af\mkljaYd
;gjja\gj E:A;!Yf\l`];`]ffYa%:Yf_Ydgj]Af\mkljaYd;gjja\gj ;:A;!&L`]k]hjgb][lkYj]]ph][l]\lgZjaf_YZgmlj]Yd]klYl]
development and infrastructure across 150km to 200km on both sides of the alignment of the corridors, including integrated
industrial townships66. The INR6,200 billion DMIC comprises 24 nodes, 11 investment regions and 13 industrial areas in
<EA;$Yf\alk[gfkljm[lagfak]ph][l]\lgZ][gehd]l]\Zq*(*-&L`]?gA`YkYdkgZ]]fhmkàf_lg\]n]dghYajhgjl[ala]k YcY
Y]jgljghgdak!afDm\àYfY$EmeZYa$<]dà$@q\]jYZY\$:]f_YdmjmYf\Cg[à$khj]Y\Y[jgkkegj]l`Yf/$-((Y[j]k&
Railways: Afn]kle]flkafl`]Af\aYfJYadoYqk AJ!ak]ph][l]\lgaf[j]Yk]lgAFJ-&*ljaddagfafl`]Lo]d^l`>QH$oà[àk

YhhjgpaeYl]dqÕn]lae]kl`]afn]kle]flafl`]L]fl`>QH&Làkhjgna\]kY[gfkljm[lagfghhgjlmfalqg^YhhjgpaeYl]dqAFJ,&)
ljaddagf&Afgj\]jlgYlljY[lhjanYl]afn]kle]flafl`]k][lgj$l`]?gA`YkdaZ]jYdar]\alk><Ahgda[a]k^gjjYadoYqaf^jYkljm[lmj]
hjgb][lk$ZqZjaf_af_afl`]hYjla[ahYlgjqhgda[q^gj\ge]kla[Yf\_dgZYdhdYq]jklgafn]klafl`]hjgb][lk&Mf\]jlàkhgda[q$
)((><A`YkZ]]fh]jeall]\l`jgm_`l`]YhhjgnYd ^jgel`]>gj]a_fAfn]kle]flHjgeglagf:gYj\!jgml]^gjkh][aÕ[hjgb][lk
such as elevated rail corridors, high speed rail networks and dedicated freight corridors, using participative models in rail
[gff][lanalqYf\[YhY[alqYm_e]flYlagfhjgb][lk&Af[Yk]g^[gehgf]fleYfm^Y[lmjaf_$l`])((><AakYddgo]\mf\]jl`]
automatic route. In the Twelfth FYP, IR seeks to achieve investment of INR1.0 trillion through the PPP mode, including freight
terminals, port connectivity and redevelopment of stations. The GoI is expediting the INR630 billion hi-speed rail corridor
between Mumbai and Ahmedabad and has also approved an investment of INR200 billion for development of rail transport in
the North-East67.
Special Manufacturing Zones:L`]?gA`YkYhhjgn]\faf]FYlagfYdAfn]kle]flYf\EYfm^Y[lmjaf_Rgf]k FAERk!mf\]jl`]

National Manufacturing Policy 2011. The policy embodies single-window clearance and an easy exit policy for construction of
the NIMZs. The Government of Karnataka plans to set up an NIMZ at Tumkur, which includes an integrated industrial township
spread across 12,000 hectares at an estimated cost of INR300 billion, and has proposed two more NIMZs in the state.
Furthermore, there are plans to set up four NIMZs in Kerala and two in Andhra Pradesh at an estimated cost of INR488 billion
Yf\AFJ.((Zaddagf$j]kh][lan]dq&L`]k]eYfm^Y[lmjaf_rgf]kYj]]ph][l]\lgka_faÕ[Yfldqaf[j]Yk]\]eYf\^gjYddl`][gj]
real estate asset classes such as residential, commercial, hotel and infrastructure68.
66 “Two corridors will be a boon for Bangalore,” The Times of India - Bangalore Edition, 2 March 2013, via Factiva © 2013 Bennett,
;gd]eYf;g&$Dl\&3É;]flj]k]]ck[gf[]hlfgl]gfH]fafkmdYjhjgb][l$ÊThe Hindu, 24 July 2010, via Factiva © 2010 Kasturi & Sons
Ltd.; “Develop Chennai-Bangalore industrial corridor, says Karunanidhi,” The Hindu, 1 November 2007, via Factiva © 2007 Kasturi &
Sons Ltd.; “Chennai-Bangalore industrial corridor to boost growth,” Indo-Asian News Service, 2 November 2007, via Factiva © 2007
HT Media Limited.; “Blueprint for Mumbai-Bangalore industrial corridor to take a year,” The Times of India - Pune Edition, 25 June
2013, via Factiva © 2013 Bennett, Coleman & Co., Ltd.; “In-principle nod for study on Mumbai-Bangalore corridor,” The Statesman, 17
EYj[`*()+$naY>Y[lanY¡*()+L`]KlYl]keYfDl\&3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+3É+&*,Zf^gj
<EA;hjgb][lYhhjgn]\Zq_gnl$ÊHindustan Times websit3$`llh2''ooo&àf\mklYflae]k&[ge'Zmkaf]kk%f]ok'+%*,%Zf%^gj%\ea[%hjgb][l%
Yhhjgn]\%Zq%_gnl'Yjla[d])%)(-.00+&Ykhp$Y[[]kk]\*-G[lgZ]j*()+
67 ÉJYadoYqkk]]ck><Aafaf^jYhjgb][lk$Ê>afYf[aYd=phj]kk$,G[lgZ]j*()+$naY>Y[lanY¡*()+Af\aYf=phj]kkGfdaf]E]\aYHnl&Dl\&3
ÉJYadoYqkk]]ckJk)$(($(((%[jhjanYl]afn]kle]flafHHHhjgb][lk$Ê<geYaf%:$,G[lgZ]j*()+$naY>Y[lanY¡*()+L`]Af^gjeYlagf
Company Pvt. Ltd.; “Feasibility Study for Hi-speed Train,” NBM & CW, 25 October 2013, via Factiva © 2013 NBM Media.; “North-East
gets Rs. 20,000cr rail network,” NBM & CW, 3 November 2013, via Factiva © 2013 NBM Media.
68 ÉCYjfYlYcYlgk]lmh+eYfm^Y[lmjaf_rgf]k^gjf]oaf\mklja]k$ÊKYjcYjal]d$.Bmdq*()+$naY>Y[lanY¡*()+KYjcYjal]d3É*-$(((Y[j]k
^gjlogFAERhjgb][lk$ÊL`]@af\m$))EYq*()+$naY>Y[lanY¡*()+CYklmjaKgfkDl\&3ÉCYjfYlYcYkmZealkhdYf^gjaf\mkljaYdrgf]

Storage: Investment in storage infrastructure has increased by more than 10 times to INR584.4 billion in the Twelfth FYP
from the Tenth FYP, indicating improved investment focus in supply chain infrastructure to boost industrial growth. The
storage industry consists of warehousing, cold storage and other types of storage, including crude oil. The warehousing
k]_e]flak\geafYl]\ZqhmZda[k][lgjZg\a]kkm[`Yk;]fljYdOYj]`gmkaf_;gjhgjYlagf ;O;!$klYl]oYj]`gmkaf_
[gjhgjYlagfk KO;!Yf\>gg\;gjhgjYlagfgÂf\aY >;A!&OYj]`gmkaf_[YhY[alqg^Yjgmf\)(0&/-EELoYkYnYadYZd]afAf\aY
as of FY12. An additional 35 MMT is estimated to be required during the Twelfth FYP. Under the Private Entrepreneurs
?g\gof H=?!$*((0K[`]e]$l`]?gA`YkhdYff]\l`][j]Ylagfg^)-&+EELklgjY_][YhY[alqaf)1klYl]kl`jgm_`hjanYl]
k][lgjhYjla[ahYlagfYf\;O;'KO;k&L`][YhY[alqmladarYlagfg^;O;`YkZ]]faf[j]Yk]\^jge/+af*((0lg1(&,af*()*$
indicating considerable scope for capacity addition. The GoI is also creating strategic crude oil storage capacity for 15 days
afNak`Yc`YhYlfYe )&++EEL!$EYf_Ydgj] )&-(EEL!Yf\HY\mj *&-EEL!&9f]klaeYl]\Y\\alagfg^)*&-EEL`YkZ]]f
planned at other suitable locations during the Twelfth FYP69.
Specialized construction:Kh][aYdar]\=H;k]_e]flkYj]Ydkgoalf]kkaf__jgol`$km[`Ykl`]DF?Yf\k`Yd]_Yk]phdgjYlagf$
j]Õf]jq[gfkljm[lagfYf\hah]daf]ljYfkhgjlYlagf&Af\aYÌk\]h]f\]f[]gfaehgjl]\DF?akaf[j]Ykaf_ mh^jge0&*EELH9
af>Q(0lg)(&1EELH9af>Q)+!70&L`]j]^gj]$l`]?gA`YkhdYff]\lgaf[j]Yk]l`]DF?j]%_YkaÕ[Ylagf[YhY[alqlg
YhhjgpaeYl]dq-(EELH9af>Q)/$oal`_j]]fÕ]d\DF?l]jeafYdkhjghgk]\lgZ]k]lmhZqhjanYl]Yf\hmZda[k][lgj
companies71. The GoI had also approved the long-awaited shale gas and oil exploration policy in September 2013, which will
enable it to offer shale oil and gas blocks to other companies; however, the decision is pending cabinet approval72. In the
pipeline EPC segment, the GoI has planned an investment of INR1.5 trillion for the Twelfth FYP. It is estimated that a length of
15,928 km of pipeline will be added in the Twelfth FYP73&L`]j]Õfaf_[YhY[alqak]klaeYl]\lgaf[j]Yk]ZqYhhjgpaeYl]dq,/
to 314 MMTPA by the end of Twelfth FYP74&AG;DhdYfklgafn]klAFJ-((Zaddagflg]phYf\alkj]Õfaf_[YhY[alqYf\k]llaf_mh
Yf]oj]Õf]jqgfl`]o]kl[gYklgÂf\aY75.
near Bangalore,” Mint, 18 October 2012, via Factiva © 2012 HT Media Limited. “KERALA PLANS MEGA MANUFACTURING ZONES
OAL@Jk,0$0*-%;JGJ=GMLD9Q$ÊAf\aYf:mkaf]kkAfka_`l$1G[lgZ]j*()+naY>Y[lanY¡*()+Af^gjeYla[k Af\aY!Dl\&
69 “Report of Working Group on Warehousing Development and Regulation,” Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&
af'YZgmlmk'[geeall]]'ojc_jh)*'hh'o_WoYj]&h\^$Y[[]kk]\.Fgn]eZ]j*()+3É;YhY[alqYf\MladakYlagfgÔYj]`gmk]k Gof]\'@aj]\
;gn]j]\!mf\]j;]fljYdOYj]`gmkaf_;gjhgjYlagfafAf\aY )11/%)110lg*())%*()*!$ÊIndiaStat website$`llh2''ooo&af\aYklYl&[ge'
lYZd]'Y_ja[mdlmj]'*'[]fljYdoYj]`gmkaf_[gjhgjYlagfklYl]oYj]`gmkaf_[gjhgjYlagf'+*/*-'+1,..0'\YlY&Ykhp$Y[[]kk]\.Fgn]eZ]j
*()+3ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&
fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
70 “Import of LNG,” PPAC website$`llh2''hhY[&gj_&af'$Y[[]kk]\-G[lgZ]j*()+
71 É<jY^lJ]hgjlg^l`]Ogjcaf_?jgmhgfH]ljgd]meFYlmjYd?YkK][lgj^gjl`]PAAl`HdYf *()*%)/!$ÊAf^jYdaf]=f]j_q\YlYZYk]$ooo&
af^jYdaf]&[ge'$Y[[]kk]\-G[lgZ]j*()+
72 “Exploration and exploitation of Shale Gas and Oil by National Oil Companies under nomination regime,” Press information bureau
website$`llh2''haZ&fa[&af'f]okal]'HjaflJ]d]Yk]&Ykhp7j]da\511.+-$*,K]hl]eZ]j*()+3ÉAf\aY;d]YjkK`Yd]%?Yk$;gYd%:dg[c%9m[lagf
Policies,” The Wall Street Journal$`llh2''gfdaf]&okb&[ge'Yjla[d]'K:)(((),*,(-*/(*+(,*)+1(,-/1(1,++,*(1+-01.,&`led$*,
September 2013
73 “Vision 2030 Natural Gas Infrastructure in India,” H]ljgd]meFYlmjYd?YkJ]_mdYlgjq:gYj\o]Zkal]$`llh2''ooo&hf_jZ&_gn&af'f]okal]'
h\^'nakagf'nakagf%F?HN%*(+(%(.(1*()+&h\^$Y[[]kk]\*)Fgn]eZ]j*()+
hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
75 ÉAf\aYfGadlgafn]klJk-($((([jgj]afj]Õfaf_]phYfkagf$ÊBusiness Standard, 5 September 2012, via Factiva © 2012 Business
Standard Ltd.

+&*=fljqg^_dgZYdhdYq]jk'_dgZYdarYlagf
Several international EPC contractors have entered India to tap the considerable potential opportunities for investment
afaf^jYkljm[lmj]hjgb][lk&HdYq]jkkm[`YkKYekmf_g^Cgj]Y$D]a_`lgfg^9mkljYdaY$:][`l]dg^l`]MK$M=EYf\ABEg^
EYdYqkaY`Yn]Ydj]Y\q]klYZdak`]\l`]ajhj]k]f[]afAf\aYl`jgm_`kge]dYf\eYjchjgb][lk&
L`]Z]f]Õlkg^l`]hj]k]f[]g^_dgZYdhdYq]jkafl`]Af\aYfaf\mkljqYj]2
Access to latest technology and equipment

9[[]kklg_dgZYdhjgb][leYfY_]e]flYf\jakceYfY_]e]fl[YhYZadala]k
Elimination of outdated practices; improved quality and work practices due to increased competition
Opportunity for Indian players to diversify into new sectors by partnering with foreign players, who have relevant
sector expertise
Players have adopted different methods to enter and establish themselves in India. While a few global construction
giants from France, Germany, the Middle-East have chosen the acquisition route through 100% buy-outs of existing India
[gehYfa]k$kge]`Yn][gfka\]j]\^gjeaf_bgafln]flmj]kgfYk][lgj%kh][aÕ[gjhjgb][l%kh][aÕ[ZYkak&Afgj_Yfa[_jgol`
strategies such as acquisitions have been perceived to be successful in global markets and hence, have been replicated
in the Indian market as well. Acquisition of NAPC by a France-based group is a classic example in the Indian EPC sector76.
Moreover, the market witnessed a strategic acquisition of a minority stake by a Middle East-based Group in IL&FS
Engineering77.
>]ohjgb][l%kh][aÕ[bgafln]flmj]k`Yn]Z]]f^gje]\ZqEa\\d]%=Ykl[gehYfa]k$hYjla[mdYjdqafl`]Zmad\af_[gfkljm[lagf
k]_e]flafAf\aY&>gj]pYehd]$l`]hjgb][lfYe]\ÉOgjd\Gf]ÊafEmeZYa$Z]af_[gfkljm[l]\ZqKaehd]pAf^jYafBNoal`Y
Middle-East-based construction giant78.
Furthermore, there are a large number of global companies that have set up their own subsidiaries in India and are bidding
\aj][ldq^gjhjgb][lkafAf\aY&>]okm[`hdYq]jkYj]KYekmf_ Cgj]Y!$D]a_`lgf 9mkljYdaY!$:][`l]d;gjhgjYlagf MK!$M`\]
?]jeYfq!$L][faegfl] AlYdq!$EYjla?jgmh Koalr]jdYf\!$;=;A LYaoYf!&Gf]afl]j]klaf_hj][]\]flakD]a_`lgfAf\aYl`Yl
has not only grown and established business but also divested a strategic stake to Welspun Group79. This was an entry
strategy by a large Indian business group through association with a foreign entity having a pedigree presence in the
country.
Another remarkable trend witnessed in the sector is the expansion of Indian companies in overseas markets through
Y[imakalagfkYf\bgafln]flmj]k&Làk`Yk`]dh]\l`]Af\aYfhdYq]jkafk][mjaf_kh][aYdar]\e]_Yhjgb][lkYf\n]flmj]aflg
f]oYj]YkYf\k]_e]flk&L`][dYkka[]pYehd]ak9^[gfkAf^jYkljm[lmj]Dl\&$Yhj]ea]j=H;[gehYfqg^K`YhggjbaHYddgfba
?jgmh$`Yk]fl]j]\kljYl]_a[YddaYf[]k'hYjlf]jkàhkoal`nYjagmk_dgZYdhdYq]jkaf[dm\af_KljYZY_$:][`l]d$?mfYfmkYYf\
Ballast Nedam80.
76 “French company Vinci buys NAPC,” The Hindu, 12 January 2012, via Factiva, © 2012 Kasturi & Sons Ltd.
77 “Maytas Infra hopes for revival via Jeddah JV,” The Economic Times, 1 July 2010, via Factiva, © 2010 The Times of India Group.
78 ÉKaehd]pAf^jYBNlgZmad\lYdd]klj]ka\]flaYdZmad\af_$ÊHjgb][lEgfalgj$*,BYfmYjq*())$naY>Y[lanY¡*())=[gfgea[J]k]Yj[`
India Pvt. Ltd.
79 ÉO]dkhmfAf^jYHjgb][lkY[imaj]k+-klYc]afD]a_`lgf;gfljY[lgjk Af\aY!$Ê<YlYegfalgjÌk>afYf[aYd<]YdkLjY[c]j$*19hjad*())$
© 2011 Datamonitor Ltd.
80 “Partners in Success,” 9^[gfk[gehYfqo]Zkal]$`llh2''ooo&Y^[gfk&[ge'(++WhYjlf]jk&`led$Y[[]kk]\()<][]eZ]j*()+

+&+HjanYl]]imalq H=!afhmj]%hdYq=H;[gehYfa]k
9fYfYdqkakg^H=afn]kle]fl\]Ydk^jge*((,lgG[lgZ]j*()+af\a[Yl]kl`Yll`]j]`YkZ]]fYka_faÕ[Yflkdgo\gofafH=
activity in the sector during the recent years. The number of PE deals has declined from the 8-year high of 15 in 2007 to only
-af*()*&<]YdnYdm]`YkYdkg\][daf]\^jgeMK0/(eaddagfaf*((/lgMK.1eaddagfaf*()*&L`]Yn]jY_]\]Ydkar]`Yk
Ydkg\][daf]\ \]YdknYdm]\Ylegj]l`YfMK)((eaddagfj]\m[]\lgfadaf*()*^jge^gmjaf*((/!$l`gm_àf^jYkljm[lmj]
hjgb][lk`Yn]_jgofZa__]jafkar]Yf\egj][gehd]paffYlmj]&
Year-wise quantum of PE deals
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total
No. of deals 1 3 12 15 14 7 8 13 5 1 79
Value (US$ million) 16 51 272 870 407 143 191 407 69 16 2,441
Average deal size 16 17 23 58 29 20 24 31 14 16 31

(US$ million)
Kgmj[]2=Qj]k]Yj[`Yf\9kaYfN]flmj];YhalYdBgmjfYd 9N;B!
Year-wise quantum of PE deals

1,000 16
900
14
Total PE investment value, US$ million
800
12
700
10
600
No. of deals
500 8
400
6
300
4
200
2
100
0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
Total PE investments (US$ million) No. of deals
Source: EY research and Asian Venture Capital Journal (AVCJ)

*As of September 2013

PE transactions: key trends
Year Highlights
*((,Ç(-2Õjklegn]jkÈ^mf\k H=afn]kl]\afl`]dYj_]kl[gfkljm[lagf_jgmhkg^l`][gmfljq$ANJ;D$HmfbDdgq\Dl\&Yf\?Yeegf
chasing large players Af\aYDl\&3l`]eYbgjalqg^\]Ydko]j]afl`]fYlmj]g^hjanYl]hdY[]e]flk&Làkh]jag\eYjc]\l`]
beginning of euphoria in the sector.
2006–09: perfect competition ;gfka\]jYZd]H=Y[lanalqafea\%kar]\[gehYfa]k3^g[mk\an]jkaÕ]\^jgeaf^jYkljm[lmj][anad[gfljY[laf_

— high capital infusion into the lgfa[`]Yf\kh][aYdar]\k][lgjk&>]o]pYehd]kYj]K`jajYe=H;$?YqYljaHjgb][lk$9k`gcY:mad\[gf$
sector ;gYklYdHjgb][lkYf\JYecqAf^jY&
2010 onward: slowdown in PE Select deals, with investors focusing on PIPE deals as stocks began trading at reduced valuations.
activity =H;[gehYfa]kj]kgjl]\lg^gjeaf_af^jYkljm[lmj]'Ykk]l`gd\af_[gehYfa]klgk]]chdYl^gjed]n]d
^mf\af_ \]lYad]\aff]plk][lagf!&
3.4 Formation of infrastructure holding companies by EPC

players
EPC companies face the challenge of raising funds to meet equity commitments given the large funding requirements of
af^jYkljm[lmj]hjgb][lk&
@]f[]$l`][gehYfa]kZ]_Yflg[gfka\]jYdl]jfYl]eg\]kg^ÕfYf[af_afgj\]jlgj]klja[l]imalq\admlagfYll`]hYj]fld]n]d&
The concept involved bundling of infrastructure assets and transferring them to a wholly owned subsidiary of the parent EPC
company. Since the infrastructure assets are self-sustained in terms of long-term cash generation, the concept was accepted
well by the investor community, particularly infrastructure-focused funds. Such investments were primarily witnessed in
highway sectors that were quite prevalent until recent times.
L`]af\mkljqYdkgoalf]kk]\nYjagmkhjgb][l :GL!d]n]dafn]kle]flkd]Y\af_lg[Yk`_]f]jYlagf^gj=H;[gehYfa]k&
Fund raising at multiple levels
Parent company
Fund raising at
Holding company multiple levels
SPV1 SPV2 SPV3
However, several foreign investors are wary of investing in India given the recent volatility in exchange rates. Furthermore,
eYfqH=^mf\k`Yn]fglZ]]fYZd]lg]pall`]ajhgjl^gdagk\m]lgo]YcÕfYf[aYd[gf\alagfkYf\$`]f[]$^mf\k^gjf]o
investments may be limited in future. The exit challenges in current investments poses considerable challenge for future
investments.

Key PE investments in infrastructure holding companies formed by EPC players 81,82,83,84,85,86, 87,88,89
Target Year
81
Infrastructure holding company of L&T 2006
?YqYljaAf^jYN]flmj]k$kmZka\aYjqg^?YqYljaHjgb][lk82 2008
83
KY\Z`YnAf^jYkljm[lmj]Hjgb][l$kmZka\aYjqg^KY\Z`Yn=f_af]]jaf_ 2010
HCC Concessions Ltd., subsidiary of HCC Infrastructure Co Ltd.84 2011
KMC Infrastructure Ltd., subsidiary of KMC Construction85 2011

86
Highway holding company of Soma Enterprise Limited 2011
Highway holding company of Supreme Infrastructure87 2012

88
Highway holding company of Ashoka Buildcon 2012
FYnYqm_YJgY\Hjgb][lkHnl&Dl\&$kmZka\aYjqg^FYnYqm_Y=f_af]]jaf_;gehYfqDaeal]\89 2013
81 ÉN;$hjanYl]]imalqÕjekk]Yd\]Ydkogjl`)&.Zf$ÊThe Economic Times, 26 May 2006, via Factiva © The Times of India Group.
82 É?YqYljaHjgb][lkDaeal]\Ç@aklgjq$ÊEYjc]lDaf] Y<YlYegfalgj;gehYfq!$*-K]hl]eZ]j*()+$naY>Y[lanY¡*()+EYjc]lDaf]%Yf
Informa plc business.
83 “Rs 400 crore investment boost for Sadbhav Infra,” Realty Plus, 26 September 2010, via Factiva, © 2010 Adsert Web Solutions Pvt.
Ltd.
84 É@;;;gf[]kkagfk[gf[dm\]k]imalqljYfkY[lagfoal`L`]PYf\]j?jgmh$Ê@;;hj]kkj]d]Yk]$`llh2''ooo&`[[af\aY&[ge'`[[WY\eaf'
\YlYW[gfl]fl'h\^WÕd]k'*1l`K]hl]eZ]j))&h\^$*1K]hl]eZ]j*())&
85 “3i-KMC seals Rs. 500cr infra deal,” NBM & CW, 4 April 2011, via Factiva © 2011 NBM Media
86 “J.P. Morgan infuses $110 mln to buy minority stake in India’s Soma Enterprise,” India Investment News, 8 September 2011, via Factiva
© 2011 Contify.com.
87 “3i invests Rs 310 cr in Supreme Infra road portfolio,” Hindu Business Line, 30 January 2012, via Factiva.
88 “Ashoka Buildcon subsidiary raises $150m from SBI Macquarie Joint Venture,” The Times of India, 13 August 2012.
89 ÉFJHD?=LKJK--(;JGJ=>MF<AF?>JGEHAJ9E9D=FL=JHJAK=K naY\]Z]flmj]k!$ÊAf\aYf:mkaf]kkAfka_`l$),9hjad*()+$
naY>Y[lanY¡*()+Af^gjeYla[k Af\aY!Dl\&

Capital markets
=H;[gehYfa]k`Yn]lqha[YddqY[[]kk]\[YhalYdeYjc]lklgjYak]^mf\k^gjl`]ajhjgb][lkYf\lge]]ll`]ajogjcaf_[YhalYd
j]imaj]e]flk&L`]q]Yj*()(oalf]kk]\l`]eYpaemeY[lanalqafl`]k][lgj$oal`^mf\klgl`]lmf]gÂFJ-(&/ZaddagfÖgoaf_
into the sector90.
Funds raised through IPOs of construction companies
60
50.7
50
40
INR billion
30
20
10 6.7 6.0
5.2 4.2
1.0 1.8
0.6
0
2005 2006 2007 2008 2009 2010 2011 2012
Source: Dealogic
While there are many companies that would have considered an IPO to provide exit to PE investor, the current stock market
akfgl[gf\m[an]]fgm_`$oal`klg[cklYfcaf_lgYdd%lae]dgok&@]f[]$o]k]]Yka_faÕ[Yflkdgo\gofafl`]AHGY[lanalq\mjaf_
2011 and 2012 with no IPO till date in 2013.There would be a host of EPC companies listing on the stock market if the stock
markets have been favourable, since all the PE investments that took place during 2006–09 are due for an exit. Finally how
many of these will take the IPO route is yet to be witnessed.
90 Industry IPO data, via Dealogic

3.5 Evolution of the market landscape
>gjl`]hmjhgk]g^gmjYfYdqkak$o]`Yn][gfka\]j]\k]d][ldakl]\=H;[gehYfa]k$Y[[gj\af_lgl`][Yl]_gjarYlagfe]flagf]\
below:
DYj_]%kar]\[gehYfa]k2>Q)+j]n]fm]gêgj]l`YfAFJ,(&(Zaddagf
Ea\%kar]\[gehYfa]k2>Q)+j]n]fm]Z]lo]]fAFJ)(&(ZaddagfYf\AFJ,(&(Zaddagf&
KeYdd%kar]\[gehYfa]k2>Q)+j]n]fm]d]kkl`YfAFJ)(&(Zaddagf&
Category No of companies Total revenue FY13 (INR billion)
Large-sized companies 10 1,341
Medium-sized companies 21 444
Small-sized companies 22 127
Total 53 1,912
List of large-sized, mid-sized and small-sized (by revenue) companies
Large-sized players Mid-sized players Small-sized players

Larsen & Toubro Ltd. Ramky Infrastructure Ltd. Hindustan Dorr-Oliver Ltd.
HmfbDdgq\Dl\& National Building Construction Ltd. BCmeYjAf^jYhjgb][lkDl\&
Hindustan Construction Company Ltd. Jyoti Structures Ltd. A2Z Maintenance & Engineering Services Ltd.
Gammon India Ltd. McNally Bharat Engineering Company Ltd. EY\`m[gfHjgb][lkDl\&
NCC Ltd. BE;Hjgb][lk Af\aY!Dl\& 9JKKAf^jYkljm[lmj]Hjgb][lkDl\&
Kalpataru Power Transmission Ltd. Engineers India Ltd. KNR Constructions Ltd.
Simplex Infrastructure Ltd. Unity Infrastructures Ltd. Valecha Engineering Ltd.
Era Infra Engineering Ltd. Supreme Infrastructure India Limited Vascon Engineering Ltd.
IVRCL Ltd. IL&FS Engineering & Construction Company Ltd. Techno Electric & Engineering Company Ltd.
Patel Engineering Ltd. Sadbhav Engineering Ltd. Tantia Construction Ltd.
Consolidated Construction Consortium Ltd. BYaàf\Hjgb][lkDl\&
?YqYljaHjgb][lkDl\& UB Engineering Ltd.
Shriram EPC Ltd. Petron Engineering Construction Ltd.
Ashoka Buildcon Ltd. Kaehd]pHjgb][lkDl\&
Pratibha Industries Ltd. Man Infraconstruction Ltd.
ITD Cementation India Ltd. O]dkhmfHjgb][lkDl\&
B L Kashyap & Sons Ltd. PBA Infrastructure Ltd.
9`dmoYdaY;gfljY[lk Af\aY!Dl\& CYdaf\]]JYadFajeYf =f_af]]jk!Dl\&
MBL Infrastructures Ltd. Tarmat Ltd.
C&C Constructions Co. Ltd. Coromandel Engineering Company Ltd.
SPML Infra Ltd. Atlanta Ltd.
Marg Ltd.

Market evolution
30
27 27
26
25 24
22 22
21
Fgg^[gehYfa]k
20
20 18 18
15
10
10 9
8
7
6
5
0
FY09 FY10 FY11 FY12 FY13
Fg&g^dYj_]kar]\[gehYfa]k Fg&gê]\amekar]\[gehYfa]k Fg&g^keYddkar]\[gehYfa]k
Fgl]2L`]YZgn]_jYh`j]Ö][lkl`]kà^lafl`]j]n]fm]hjgÕd]g^[gehYfa]kgn]jl`]q]Yjk [gfka\]j]\^gjl`]hmjhgk]g^gmjYfYdqkak!
EYjc]lkar]Yf\hjgÔlYZadalq
Particulars FY 09 FY 10 FY 11 FY 12 FY 13
Revenue (INR billion)
Large-sized companies 835 922 1,054 1,243 1,341
Mid-sized companies 254 307 376 454 444
Small-sized companies 82 132 146 139 127
Total 1,172 1,360 1,576 1,836 1,913
PAT (INR billion)
Large-sized companies 40 45 50 45 36
Mid-sized companies 9 13 18 16 11
Small-sized companies 5 9 7 *! ,!
Total 54 68 75 59 43
Kgmj[]2;gehYfqYffmYdj]hgjlkYf\;YhalYdaf]$=Qj]k]Yj[`ZYk]\gf[gehYfa]ke]flagf]\afdaklg^dYj_]%kar]\$ea\%kar]\Yf\keYdd%kar]\
Zqj]n]fm]![gehYfa]k
Total revenues have grown at a CAGR of 13.0% during FY09–FY13; however, total PAT decreased at a CAGR of -5.4%. This
af\a[Yl]kl`Ylj]n]fm]k`Yn]emdlahda]\Yll`][gklg^mdlaeYl]hjgÕlYZadalq&EYfq[gehYfa]k`Yn]j]hgjl]\f]_Ylan]H9L
\mjaf_>Q)+$l`]j]Zq\aklgjlaf_eYjc]l][gfgea[k&Làklj]f\j]Ö][lkajjYlagfYdZa\\af_lgk][mj]gj\]jZggc$\]dYq'fgf%
recovery of receivables, leading to increased working capital. This will result in increase in debt requirements, as well as a
\]dYqafl`]]p][mlagfg^hjgb][lk$j]f\]jaf_l`]Za\hja[]afnYda\&

Market capitalization performance
300
250
200
150
100
50
0
FY08 FY09 FY10 FY11 FY12 FY13 FY14H1
Large Mid Small Sensex
Source: company annual reports & Capitaline, EY research based on companies mentioned in
list of large-sized, mid-sized and small-sized (by revenue) companies
<mjaf_>Q(0Ç>Q)*$egklg^l`]=H;klg[ck$hYjla[mdYjdql`]dYj_]%Yf\ea\%kar]\gf]k$egn]\aflYf\]eoal`l`]K]fk]p&
However, after FY12, the correlation reversed, and EPC stocks have been witnessing a negative trend since then. The stocks
have actually touched all-time lows during FY13–14.
While the Sensex has yielded a positive movement of around 17% during 1HFY14 from FY08, EPC companies’ market cap has
reduced by 25%–50%.
O]k]]l`]eYjc]l[YhalYdarYlagfg^keYdd%kar]\klg[ckjakaf_\mjaf_>Q))3làkak\m]lgl`]aehY[lg^^j]k`daklaf_g^keYdd[Yh
companies on the stock market.91
Debt/market capitalization91
8.00
7.00
6.00
Debt/market cap (x)
5.00
4.00
3.00
2.00
1.00
-
Large sized companies Mid sized companies Small sized companies

Source: company annual reports & Capitaline, EY research based on companies mentioned in
list of large-sized, mid-sized and small-sized (by revenue) companies
91 L`][Yd[mdYlagfakZYk]\gfl`]lglYd\]Zl'eYjc]l[YhjYlagYf\[gfka\]jke]\aYffmeZ]j^gjl`]hmjhgk]g^YfYdqkakYf\[gehYjakgf&
>gj]pYehd]$>Q(1fmeZ]jkYj][Yd[mdYl]\YklglYd\]ZlYkgf+)EYj[`*((1'Yn]jY_]eYjc]l[Yh\mjaf_>Q)(&

L`]YZgn]_jYh`$à_`da_`laf_l`]jYlagg^lglYd\]Zl'eYjc]l[YhalYdarYlagf$af\a[Yl]kl`]\]l]jagjYlaf_ÕfYf[aYd`]Ydl`g^
[gehYfa]k&<]Zlhj]kkmj]k`Yn]Z]]faf[j]Ykaf_$Y\n]jk]dqaehY[laf_[gehYfa]kÌhjgÕlYZadalq&Alakj]eYjcYZd]lgfgl]l`Yl
l`]\]Zl[gehgf]fl$oà[òYkbmklY^jY[lagfg^l`]eYjc]l[YhalYdarYlagf\mjaf_>Q(1$`YkfgoZ][ge]Yemdlahd]g^v.Ç/
lae]kl`]eYjc]l[YhalYdarYlagf&92
Market capitalization/revenue92
1.00
0.90
Market cap /revenue (x)
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00

Source: Company Annual Reports & Capitaline, EY research based on companies mentioned in list
of large-sized, mid-sized and small-sized (by revenue) companies
The trend as indicated in the graph above indicates the extent to which the trading market cap of the companies is
j]Ö][laf_l`]ajj]n]fm]k&O`]f[gehYj]\oal`>Q(1$o]k]]Y[d]Yjdq\][j]Ykaf_lj]f\&Làkak\m]lgl`]àlgfhjgÕlYZadalq
à_`da_`l]\aflYZd]gfeYjc]lkar]Yf\hjgÕlYZadalq!]n]fl`gm_`j]n]fm]k`Yn]af[j]Yk]\kmZklYflaYddq&
92 L`][Yd[mdYlagfakZYk]\gfEYjc]l;Yh'J]n]fm]jYlag&>gj]pYehd]$>Q(1fmeZ]jkYj][Yd[mdYl]\YkeYjc]l[Yh\mjaf_>Q)('J]n]fm]
as on 31 March 2009.

4 Key challenges

,&)Akl`]hjgb][lZa\naYZd]7
Hjgb][lk]d][lagfZ][ge]kl`]c]qlgeYaflYafaf_hjgÕlYZadalqo`]fghhgjlmfala]kYj]Yhd]flqYf\[geh]lalagfakka_faÕ[Yfl&
A^hjgb][lkYj]fglk]d][l]\bm\a[agmkdq$l`]qeYq\jYafj]kgmj[]koal`gmlhjgna\af_[gee]fkmjYl]j]lmjfk&L`]j]^gj]$fgl
gfdq\g]kaehjgh]jhjgb][lk]d][lagfY^^][ll`]ÕfYf[aYd`]Ydl`g^Y[gehYfq$ZmlalYdkgf]_Ylan]dqaehY[lkalk_gg\oadd&Oàd]
kge]\]dYqkYj]\m]lgj]_mdYlgjq`mj\d]k$gl`]jkYj][Ymk]\Zq^gj[]eYb]mj]^Y[lgjk&
9[Yj]^md]pYeafYlagfg^Yhjgb][l$hjagjlgZa\\af_$ak]kk]flaYdlgeala_Yl]Yfqmf]ph][l]\^mlmj]\]n]dghe]flk&EYfq
contractors faced the brunt of aggressive bidding when their companies incurred losses. It is therefore pertinent to take into
[gfka\]jYlagf_jgmf\j]Ydala]kYf\mf[]jlYafla]kkm[`Yk[mjj]f[q\]hj][aYlagfoàd][gklaf_^gjl`]hjgb][l&>Y[lgjkkm[`Yk
[mjj]f[qÖm[lmYlagfk`Yn]Y\n]jk]dqaehY[l]\l`][gfkljm[lagfk][lgjafl`]hYkl&<mjaf_BYfmYjq%G[lgZ]j*()+$[mjj]f[q
]p[`Yf_]jYl]j]Y[`]\Ykà_`YkAFJ-*&1'MKlgYkdgoYkAFJ./&//'MK&L`][gklgâehgjlg^]imahe]flaf[j]Yk]\
emdlahd]lae]k$hmllaf_afalaYd[gkl]klaeYl]kg^[gfljY[lgjkafb]ghYj\q&L`]aehY[loYkegj]k]n]j]gfk][lgjkkm[`Yk
power, where EPC contractors usually import boilers, turbine etc. Furthermore, foreign debt service obligations, in terms of
jmh]]$af[j]Yk]\ka_faÕ[Yfldq]jg\af_l`]Z]f]Õlg^dgoDA:GJ93.
9o]dd%af^gje]\hjgb][lk]d][lagfl]Yeoal`Y\]imYl]eYjc]lafl]dda_]f[]lgk[jmlafar]]n]jqhjgb][lZ]^gj]]ehdgqaf_
j]kgmj[]kgf\]lYad]\afn]kla_Ylagfkak[jm[aYd&Egj]gn]j$alakaehgjlYfl^gj[gehYfa]klg]fkmj]l`]imYdalqg^hjgb][lk$oàd]
focusing on creating healthy order books.
93 ÉJMH==>9DDHMK@=KHJGB=;L;GKLK:QMHLG)-$Ê;gfkljm[lagfKh`]j]$+)9m_mkl*()+$`llh2''ooo&[gfkljm[lagfkh`]j]&[ge'
af\]p&h`h'[gehgf]fl'c*'al]e'))+(%jmh]]%^Ydd%hmk`]k%hjgb][l%[gklk%Zq%mh%lg%)-$Y[[]kk]\gf)*G[lgZ]j*()+&3ÉAehY[lg^>gj]a_f
;mjj]f[qgfHjgb][l<]Zl$ÊAf\aYJYlaf_kJ]k]Yj[`$)*Bmf]*()+&

Stage of EPC contract
Pre-tender stage Post-tender stage Execution stage
Hgdala[YdklYZadalqg^l`][gmfljq3 Delay in approvals and land -

Political risks
[`Yf_]af_gn]jfe]flk acquisition
- Environmental approvals Unfavorable climatic condition and

Environmental risks
lghg_jYh`q
Afkm^Õ[a]flhj]daeafYjqj]k]Yj[`gf <]ka_f[`Yf_]k'afY\]imY[a]k3 Mf^YeadaYjalqoal`lghg_jYh`q'

scope, resource availability, resource availability; site conditions terrain; resettlement and
Technical risks l][`fgdg_qj]imaj]e]fld]Y\af_lg j]`YZadalYlagf3mladalqkà^laf_
inaccurate time and cost
estimations
;gkl]klaeYl]kYf\ÕfYf[af_ Daima\alqYf\[j]\alk`gjlY_] >gj]a_f]p[`Yf_]Yf\afl]j]kljYl]

Financial risks
assumptions Öm[lmYlagf
- Economic downturn Delay in payments from client;

Market risks
unavailability of resources
Mf^YeadaYjalqoal`l`]dg[YddYok Mf^YeadaYjalqoal`l`]dg[YddYokYf\ mf^YeadaYjalqoal`l`]dg[Yd

Contractual/ legal
Yf\j]_mdYlagfk j]_mdYlagfk3daeal]\kYqaf[gfljY[l dYok$lYpYf\j]_mdYlagfk
risks
f]_glaYlagfk
- - JakcYkkg[aYl]\oal`]pl]jfYd
`YrYj\k$af[dm\af_klgjek$Ögg\k$
Force majeure risks
]YjlìmYc]k$nYf\Ydake$kYZglY_]
and terrorism; civil unrest
4.2 Where is the cash?

=H;hjgb][lk`Yn]Z][ge]dYj_]$[gehd]pYf\YkYj]kmdl[gklafl]fkan]&L`]j]^gj]$afl`]ZY[c\jghgêYjc]llmjegad$^]Yjk
g^Ykdgo\gofYf\Y[j]\al[jmf[`$gf]g^l`]c]q[`Ydd]f_]k^gjl`]k][lgjakl`]YZadalqlgjYak]Y\]imYl]ÕfYf[af_j]imaj]\
lg^mf\l`]]p][mlagfg^]paklaf_gj\]jZggckYf\Y[à]n]kmklYafYZadalq^gj^mlmj]&;mjj]fldq$eYbgjalqg^=H;[gehYfa]k
Yj]d]n]jY_]\lgkm[`Yf]pl]fll`Yll`]aj[Yk`Ögok\gfglh]jealY\\alagfYdZgjjgoaf_kmhhgjl&AfY\\alagflglàk$hjgb][l
delays, cost overruns, delayed payment mechanisms and litigations add to an increased requirement for working capital. The
gfdqÕfYf[aYdj]khal]l`]q_]lakl`]egZadarYlagfY\nYf[]l`YlZja\_]kk`gjl%l]je`mj\d]k3`go]n]j$al]dgf_Yl]kl`]hjgZd]e
further in the long term.
Capital constraints
Promoters of large construction companies do not own stakes of more than 50%-60% in their companies, thereby restricting
their ability to raise further funds through equity dilution, without loss of control. In order to release their blocked capital and
l`]fj]\]hdgqal^gjf]ohjgb][lk$eYfq[gfkljm[lagf[gehYfa]k`Yn]j]kgjl]\lg]imalq\admlagfafhmZda[eYjc]lk$hjanYl]
equity and other global as well as domestic funds in the recent past.

EYbgjalqg^dYj_]%kar]\[gehYfa]k >Q)+j]n]fm]6AFJ,(Zaddagf!`Yn]Yhjgegl]jklYc]g^d]kkl`Yf-(&Gmlg^)(dYj_]
kar]\[gehYfa]k[gfka\]j]\^gjYfYdqkak$-[gehYfa]k`Yn]hjgegl]jklYc]kg^d]kkl`Yf-)&KaeadYjdq$^gjea\Yf\keYdd
kar]\[Yl]_gja]k l`Yl`Yn]Z]]f[gfka\]j]\^gjYfYdqkak!$egj]l`Yf`Yd^g^[gehYfa]kYj]]pàZalaf_km[`lj]f\&@]f[]$
there is no scope for fund raise through further equity dilution at the parent level.
4.3 Debt to equity equation has reversed. How will debt

be serviced?
Total debt to book equity ratio
2.50
2.00
Debt/equity (x)
1.50
1.00
0.50
-
DYj_]kar]\[gehYfa]k Ea\kar]\[gehYfa]k KeYddkar]\[gehYfa]k
Source: Company annual reports & Capitaline

Fgl]2L`]YZgn]_jYh`j]Ö][lke]\aYffmeZ]j^gjl`]hmjhgk]g^YfYdqkakYf\[gehYjakgf
The above analysis clearly indicates the burgeoning debt pressures on the books of the company. When compared with FY09,
l`]>Q)+\]Zllg]imalqjYlag`Ykaf[j]Yk]\ka_faÕ[Yfldq&L`]af[j]Yk]af\]Zl^gjdYj_]%kar]\[gehYfa]k[YfZ]YlljaZml]\\m]
to its exposure to BOT business.
Net debt/EBITDA
7.00
6.00
F]l\]Zl'=:AL<9 p!
5.00
4.00
3.00
2.00
1.00
0.00
DYj_]kar]\[gehYfa]k Ea\kar]\[gehYfa]k KeYddkar]\[gehYfa]k
Source: Company Annual Reports & Capitaline

Note: The above graph r]Ö][lke]\aYffmeZ]j^gjl`]hmjhgk]g^YfYdqkakYf\[gehYjakgf

L`]YZgn]_jYh`g^F]l<]Zl'=:AL<9af\a[Yl]kl`]Y\]imY[qg^=:AL<9$oà[àkl`]gh]jYlaf_[Yk`ÖgoYnYadYZd]^gj
servicing debt. If we observe the above trend, the multiple has been increasing consistently, highlighting the increase in debt
oal`gmlYfq[gjj]khgf\af_af[j]Yk]afhjgÕlYZadalqgjgh]jYlagfYd[Yk`Ögo&Làk[d]Yjdqj]Ö][lkl`]akkm]kl`Yll`]k][lgjak
currently facing.
The increasing interest rates have also posed a challenge for EPC players. The interest coverage ratio of many large
af^jYkljm[lmj][gfkljm[lagfhdYq]jk`Yk\][daf]\lgd]kkl`Yf)&0lae]k$oà[àf\a[Yl]kl`Yll`]qoaddÕf\al\a^Õ[mdllge]]l
afl]j]kl[gklkYf\k]jna[]\]Zl&>gjkeYdd%kar]\[gehYfa]k$làkjYlag`Yk^mjl`]j\][daf]\lg)&(&EYfq[gehYfa]k`Yn]
Z]_mflgg^ÖgY\Ykk]lk ]kh][aYddqfgf%[gj]Ykk]lk!$\]khal]l`]^Y[ll`YlYkk]lnYdmYlagfkYj]fglà_`&Làkak\gf]hmj]dqlg
restructure the capital and reduce the debt-burden off the balance sheets94.
L`]d]f\]jk`Yn]YdkgZ]]fc]]fgfÕfYf[af_af^jYkljm[lmj]hjgb][lk\]khal]l`]^Y[ll`YlFH9kYf\j]kljm[lmj]\Ykk]lk
in this space have increased quite substantially lately. The infrastructure has been a priority sector for the lenders, as the
commercial bank infrastructure lending increased from INR72.43 billion in FY00 to INR7860.45 billion in FY13. As of FY13,
infrastructure accounts for more than one-third of the total bank credit to the industrial sector. However, gross NPAs have
increased considerably, from INR16 billion in FY09 to INR114.1 billion in FY13. This has been largely on account of poor
hjgb][lYhhjYakYdl][`faim]k$dY[cg^Y[[gmflYZadalq$hgklÇ\akZmjkYdkmh]jnakagf$Yf\]pl]jfYd^Y[lgjkkm[`Yk[d]YjYf[]
delays95.
High erosion of book value96

Market capitalization to book equity96
3.00
Market cap/book equity (x)
2.50
2.00
1.50
1.00
0.50
0.00
Source: Company Annual Reports & Capitaline
The above analysis indicates that there is a clear deterioration in the valuation ascribed by the market. The stocks are trading
fgl]n]fYlZggcnYdm]g^]imalq$ZmlYlYjYl`]jka_faÕ[Yfl\ak[gmfllgZggcnYdm]&@go]n]j$af[gehYjakgf$\mjaf_>Q(1Ç
>Q)($l`]klg[cko]j]ljY\af_YlYhj]eamelgl`]ajZggc]imalq&AfhYjla[mdYj$dYj_]%kar]\[gehYfa]k[geeYf\]\ka_faÕ[Yfl
premium.
94 ÉAf^jYkljm[lmj]Õjekk]ddYkk]lklgj]\m[]\]Zl$ÊEafl9kaY$))G[lgZ]j*()+$naY>Y[lanY¡*()+@LE]\aYDl\&
95 “Infrastructure Financing By Banks In India: Myths and Realities,” RBI website$`llh2''ooo&jZa&gj_&af'k[jahlk':KWKh]][`]kNa]o&
Ykhp7A\50+)L)$Y[[]kk]\))Fgn]eZ]j*()+3ÉL`]m_dqklgjqgâf^jYkljm[lmj][gehYfa]k$ZYfck$af\ak[jaeafYl]d]f\af_Yf\[jahhdaf_
bad debts,” Fortune India, October 2013, vol. 4, issue 1, p. 70; “RBI relaxes prudential norms for infrastructure,” The Economic Times,
18 March 2013, via Factiva © 2013 The Times of India Group.
96 L`][Yd[mdYlagfakZYk]\gf9n]jY_]EYjc]l;Yh':ggc=imalqjYlag&>gj]pYehd]$>Q(1fmeZ]jkYj][Yd[mdYl]\Yk9n]jY_]EYjc]l;Yh
\mjaf_>Q)('LglYd:ggc=imalqYkgf+)EYj[`*((1&

Financial snapshot of EPC companies
Particulars FY 09 FY 10 FY 11 FY 12 FY 13
Large-sized companies
EBIDTA % 9.4% 11.2% 10.8% 8.6% 8.1%
PAT % 3.6% 3.5% 3.0% 1.1% 0.8%
Interest/Revenue 4.8% 4.7% 5.8% 9.0% 9.6%
Working Capital/Revenue 40.8% 41.1% 38.5% 34.2% 37.6%
Mid-sized companies
EBIDTA % 10.0% 9.8% 11.9% 9.8% 10.8%
PAT % 4.6% 4.0% 3.9% 2.3% 1.3%
Small-sized companies
EBIDTA % 9.9% 11.6% 9.9% 9.3% 12.2%
PAT % 4.5% 5.9% 4.3% 0.4% 0.1%
Note: The above table indicates the median number of the companies considered for analysis

4.4 How will PE investors exit?
Egklea\%kar]\mfdakl]\[gehYfa]k`Yn]hjanYl]]imalqafn]klgjko`g`Y\afn]kl]\[YhalYd\mjaf_*((.Ç*())&@go]n]j$\m]
lgYfY\n]jk][YhalYdeYjc]lkalmYlagf$[gehYfa]k`Yn]fglZ]]fYZd]lgj]kgjllgl`]]palkljYl]_q'AHGjgml]&
L`]k][lgj\a\oalf]kk^]okm[[]kk^md]palkàklgja[YddqafdYj_][gehYfa]k$km[`Yk?YeegfAf\aYDl\&$HmfbDdgq\Dl\&Yf\
Shriram EPC Ltd. However, the trend did not continue for an extended period.
PE investments and exits, 2006–2013

Exit deal value high, PE investments Exits value low, overall PE
overall PE investment and exits growing investments declining
1,000 declining 16
900 14
800
Total value, US$ million
12
700
No. of deals
600 10
500 8
400 6
300
4
200
100 2
0 0
2006 2007 2008 2009 2010 2011 2012 2013
Total PE investment (US$ million) Total PE exits (US$ million)

No. of investment deals No. of exit deals
Source: EY research
After 2011, the industry witnessed a decline in the number of exits. Stock markets crashed after 2010, and so did the
valuations. Although companies were keen to provide an exit option to such investors, existing capital markets have not been
[gf\m[an]^gjYfafalaYdhmZda[g^^]jaf_ AHG!&>]o[gehYfa]k\a\daklgfl`]klg[ceYjc]lkYlYlljY[lan]nYdmYlagfk\mjaf_*((/%
10 thus creating an exit opportunity for the investors. However, few investors chose not to exit with a view to realise higher
returns later. Unfortunately, the markets have assumed a continuously downward trend with no correction so far.

4.5 Attention to alleviating time and cost overruns
AlakYo]dd%]klYZdak`]\^Y[ll`Ylegkl[gfkljm[lagfhjgb][lk`Yn]lg^Y[]l`]jakcg^lae]Yf\[gklgn]jjmfkÈklYlakla[kj]%
]f^gj[]làk^Y[l&9kg^Bmdq*()+$gmlg^YlglYdg^.1,gf_gaf_af^jYkljm[lmj]hjgb][lkYoYj\]\Zq;]fljYd?gn]jfe]fl
Yml`gjala]k AFJ)&-ZaddagfYf\YZgn]!$*1(km[`hjgb][lko]j]\]dYq]\&
Status of infrastructure projects
Delayed
42%
58%
Projects on schedule/ahead of
k[`]\md]'fgÕp]\\Yl]g^
commissioning
Source: Flash report on central sector projects (INR150 crore and above), Ministry of Statistics and Programme Implementation, July 2013
OalàfÖYlagfYjqhj]kkmj]khdY_maf_l`]Af\aYf][gfgeq$km[`\]dYqkafhjgb][l[gehd]lagfkd]Y\lgYf]^^][lan][gkl
]k[YdYlagf&L`]*1(\]dYq]\hjgb][lk`Yn]Yfaf[j]e]flYd[gklgÂFJ)&.0ljaddagf$gjY)1[gkl]k[YdYlagf&L`]à_òYq
k][lgj`Ykk]]fl`]eYpaemefmeZ]jg^\]dYq]\hjgb][lk$hj]\geafYfldq\m]lgdYf\Y[imakalagfYf\Ja_`lgÔYqakkm]k&
Other key sectors plagued by cost overruns are power and the railways.
Cost overrun in various segments97
Sector Number of projects delayed Delay period (months) Cost overrun (INR billion)
Roads and transport 91 2–108 )1&, )&1!
Power 50 1–102 )0+&1 /&+!
Railways 35 3–240 )$(-+&1 0.&,!
Urban infrastructure 1 8 -*&/ ))&1!
Coal 28 12–72 +(&1 0&)!
Other 85 - ++-&/ )(&,!
97 É*1+\]dYq]\hjgb][lkd]\lg[gklgn]jjmfg^Jk.0C[jgj]$ÊJ]YdlqHdmk, 23 February 2011, via Factiva,

© 2011 Adsert Web Solutions Pvt. Ltd.

Some key issues and their impact of delay in time and cost overruns
Issue Impact on time Impact on cost
Land acquisition challenges <]dYqafhjgb][l[gehd]lagf =phgk]khjgb][llgafÖYlagfYjq[gkl

escalations
Ambiguity in design and engineering Delay in arrival of detailed drawings by W

kh][aÕ[Ylagfk consultant
Delay in procurement and delivery of Impacts several activities, depending on Gn]jYddaf[j]Yk]afhjgb][l[gkl\m]lg

critical equipment the need for equipment in the critical idle time of several resources
path
Shortage of construction materials Delay in dependent activities impacting Gn]jYddaf[j]Yk]afhjgb][l[gkl\m]lg

subsequent activities as well idle time of several resources
Change of scope AehY[lkgn]jYddhjgb][llae]daf]Yf\ Impacts cost and working capital cycles

j]kgmj[]mladarYlagf due to the extra work
Lack of coordination between various Idle time of several resources Extra cost incurred due to reduced
participants (vendors, sub-contractors, productivity and increased idleness
etc.)
Delay in regulatory clearance <]jYadhjgb][lkaf\]Õfal]dq =phgk]khjgb][llgafÖYlagfYjq[gkl

]k[YdYlagfkÈ]kh][aYddqÕp]\[gklkg^
equipment and labor
Af]^Õ[a]flhjgb][lZm\_]laf_Yf\dY[cg^ Delay due to arrangement of bridge ;gklg^hjgb][lka_faÕ[Yfldq\]naYl]k^jge

contingency funds ÕfYf[af_ budget
Rise in the cost of raw materials W Impacts margins as cost escalation clause
may only cover some of the costs
Delay in payments by the owner Dac]dqlg\]dYql`]hjgb][la^mfYZd]lgÕdd Contractor may have to raise funds
the gap created by the delay in payments through additional equity or debt to fund
working capital

5 Overcoming
challenges

-&)K][lgjYf\jgd]\an]jkaÕ[Ylagf
Traditionally, EPC players have developed skill sets in the core sub-sectors of transport, energy, buildings and urban
af^jYkljm[lmj]&:mad\af_Yfa[`]afYhYjla[mdYjkmZ%k][lgj[gmd\hgk][`Ydd]f_]klg_jgol`g^gj_YfarYlagfkaf^mlmj]Yk
competition in any particular segment is likely to increase, impacting margins. Therefore, it is equally necessary to have
competence in other sub-sectors.
DYj_]_dgZYd[gehYfa]k`Yn]\an]jkaÕ]\l`]ajgh]jYlagfkoal`j]^]j]f[]lgk][lgjkl`]qk]jn]Yko]ddYkl`]k]jna[]kl`]q
g^^]j&9dl`gm_Àf\aYf[gehYfa]k`Yn]klYjl]\egnaf_lgoYj\f]oYn]fm]k$l`]hY[]g^\an]jkaÕ[YlagfYf\l`][gn]jY_]
is still low as compared to their global peers, who cater to a wide choice of sectors. Although sub-sectors such as oil & gas,
eafaf_Yf\]f]j_q af[dm\af_j]f]oYZd]Yf\fm[d]Yj!`Yn]oalf]kk]\ka_faÕ[Yflafn]kle]flkj][]fldq$l`]j]Yj]kladdkge]
segments, which are less explored including steel and metals, communications, defense and aerospace.
Sector reference: size, complexity and competition

5
Railways Oil & Gas
4 Power Generation
Airports and Ports
3 Storage
Complexity
2 Roads
Renewables Water Buildings

1 Power T&D
0
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5
Competition
Source: EY research

<an]jkaÕ[Ylagfakd]_alaeYl]aâl\]%jakckl`]Zmkaf]kk$hjgna\]kkqf]j_qlg[mjj]flgh]jYlagfkYf\j]kmdlkafYhgkalan][gkl%
Z]f]ÕlYfYdqkak&=n]jqk][lgj`Ykalkgofakkm]k$afn]kle]flk$hjgÕleYj_afkYf\_]klYlagfh]jag\k&@go]n]j$Y[d]YjkljYl]_q
and effective implementation will help mitigate risks associated with a particular sector.
=H;[gehYfa]k`Yn]]phYf\]\l`]ajjgd]^jgeZ]af_YZYka[=H;[gfljY[lgjaflg[gfkmdlYflk ^gj\]ka_fYf\hjgb][l
eYfY_]e]fl!$\]n]dgh]jkYf\kmhhda]jk&@go]n]j$eYfq_dgZYd[gfkljm[lagfYf\]f_af]]jaf_hdYq]jkYdkghjgna\]
;gfkmdlYf[qafhj]%hjgb][lY[lanala]k$kmklYafYZadalq$]fnajgfe]flYdaehY[lYkk]kke]fl$kmhhdq%[`YafeYfY_]e]flYf\
operations and maintenance
>afYf[aYdYkkaklYf[]afl`]^gjeg^[j]\alkmhhgjl$jakcYddg[Ylagf$hjgb][lÕfYf[af_Yf\Ykk]leYfY_]e]fl
Kh][aYdar]\k]jna[]kkm[`Yko]Yl`]j^gj][Yklaf_$jY\aYlagf\]l][lagf$]e]j_]f[qeYfY_]e]flYf\h]jkgff]dljYafaf_Yl
various levels
The construction industry has witnessed many EPC players shifting into PPP
Inter-changing roles
hjgb][lkgn]jl`]dYkl\][Y\]&@go]n]j$dYl]dqnYjagmkhdYq]jk`Yn]Z]]f
selling stakes or completely exiting in their BOT assets to shed the debt
Developer off their balance sheets, especially in roads. Therefore, while diversifying
the offerings keeps the companies in pace with global players and makes
them eligible for large contracts, they have to be prudent in balancing their
service portfolio ahead of any debt-ridden situation where it may have to go
Financer Contractor
EPC for corporate debt-restructuring.
contractor’s
inter-changing Egkl_dgZYd=H;hdYq]jk_an]hjgb][leYfY_]e]flmlegklaehgjlYf[]
roles Yf\\]egfkljYl]l`]aj[YhYZadala]kl`jgm_`kmh]jagjhjgb][l\]ka_faf_Yf\
EPCM
]^^][lan]hjgb][leYfY_]e]fl&L`]j]kgmj[]k\]hdgq]\gfYhjgb][l[YfZ]
Project
Supplier gmlkgmj[]\$Zmllg`Yn]Yfgn]jYdd[gfljgdl`jgm_`Yf]ph]ja]f[]\hjgb][l
manager
management team is considered to be key to mitigating time and cost
Design overrun risks. While Indian companies have been traditionally outsourcing
consultant such services, many are now moving toward owning such capabilities in-
house.
Highlights
Irrigation companies are diversifying into other sectors as the GoI’s focus on irrigation has declined over the years.
There is considerable competition in the highway space leading to reluctance among the players to participate. Hence,
hdYq]jkYj][gfka\]jaf_\an]jkaÕ[Ylagfaflgf]ok][lgjkkm[`YkljYfkeakkagf]l[&
Few boiler manufacturing companies such as BGR Energy Systems Limited, and Cethar Ltd., have forayed into the power
EPC space.
Many civil contracting companies are entering sectors such as power transmission & distribution, oil & gas, industrial etc.,
and undertaking the civil component of these contracts.
Large construction companies and developers are moving along the value chain and creating in-house PMC and high value
engineering divisions.
New sectors such as renewable energy, solid waste management, water have emerged in urban infrastructure.

-&*?dgZYdarYlagf
L`]?gAÌkYhhjgnYd^gj)((><Aafn]kle]flafaf^jYkljm[lmj]hjgb][lkl`jgm_`l`]YmlgeYla[jgml]`Yk]f[gmjY_]\k]n]jYd
international players to establish their presence in India. These global giants provide the latest technology and quality to
\ge]kla[[gfljY[lgjkl`jgm_`kljYl]_a[YddaYf[]k$bgafln]flmj]kYf\hYjlf]jkàhk&
@go]n]j$l`]><AafÖgoafl`][gfkljm[lagfk][lgj lgofkàh$`gmkaf_Yf\af^jYkljm[lmj]!afAf\aYj]\m[]\Zqegj]l`Yf`Yd^
to US$1.3 billion98 in FY13 from US$3.1 billion in FY12, indicating that the global construction players are exercising caution
in entering the industry. Though, the holdings of foreign portfolio investors, or FIIs, have been rising consistently in Indian
companies and were at an all-time high in the beginning of FY14, on the back of a positive long-term outlook.
Strategic alliances and technical partnerships with global and domestic players in the EPC industry provide the following value
additions:
In case of Indian companies entering partnerships with global companies, it gives the domestic players access to
Latest global technology and equipment
?dgZYdhjgb][leYfY_]e]flYf\jakceYfY_]e]fl[YhYZadala]k
Elimination of out-dated practices and improved quality and work-practices due to increased competition
Companies planning to diversify into new sectors without any prior experience in them have the opportunity to move up
l`]nYdm][`YafZqhYjlf]jaf_oal`hjgb][l%kh][aÕ[gjÕ]d\%kh][aÕ[kh][aYdaklk&
9kY^mlmj]kljYl]_q$dYj_]kar]\hdYq]jkeYq]phdgj]f]oghhgjlmfala]kZqlYj_]laf_kaeadYjeYjc]lk]_e]flkgmlka\]Af\aY$
hYjla[mdYjdq]e]j_af_eYjc]lk&Ea\%kar]\hdYq]jkeYq[gflafm]lgk[Yd]mhafl`]\ge]kla[eYjc]lkZmleYq]phdgj]fa[`]Yf\
kh][aYdar]\k]_e]flkafea\\d]%]Ykl$;AAYf\K99J;[gmflja]k
Highlights:
Several Indian power sector players such as Larsen & Toubro, Bharat Forge Ltd., BGR Energy Systems Ltd. have formed
JVs with foreign players to bid for super critical plants with their own equipment.
Indian companies have also undertaken foreign acquisitions in the past and also continue to consider the inorganic
approach to foray abroad.
98 “FDI statistics,” DIPP website$`llh2''\ahh&fa[&af'=f_dak`'HmZda[Ylagfk'><AWKlYlakla[k'><AWKlYlakla[k&Ykhp$Y[[]kk]\gf),Fgn]eZ]j

2013; “FII holding in some infra companies at all-time highs while stocks at all-time lows,” The Economic Times, 19 April 2013, via
Factiva © 2013 The Times of India Group; “Foreign construction cos hit the highway to India,” The Times of India, 19 May 2005, via
Factiva © 2013 The Times of India Group.

Key acquisitions by Indian companies99, 100, 101
Acquirer Target Details
Gammon India >jYf[gLgkaE][[Yfa[Y /-&)!$KY\]dea -( In 2008, Gammon acquired a stake in three Italian
klYc]!Yf\KgÕfl]jk&h&Y `gd\af_[gehYfqg^ companies — Franco Tosi Meccanica for INR2.5 billion,
9fkYd\g;Yd\Ya]$-(klYc]! KY\]dea^gjAFJ(&-ZaddagfYf\KgÕfl]j^gjAFJ+&*-Zaddagf99.
Hindustan CYjdKl]af]j ..klYc]! Af*()($làkoYk@;;ÌkÕjklafl]jfYlagfYdY[imakalagfYkakaf

Construction line with HCC’s strategy to equip HCC with a “total solutions
Company capability” for a facility at a single source100.
Simplex 9keYddeafaf_[gehYfq )((klYc]! In 2012, Simplex Infrastructure Ltd. acquired a subsidiary

Infrastructure Ltd. of US-based Joy Global, Inc., engaged in the business of
underground coal mining services in India in 2012101.
11É?YeegfZmqk-(klYc]afAlYdaYf[gKgÕfl]j$ÊBusiness Line (The Hindu), 11 September 2008, via Factiva © 2008 The Hindu Business
Line.
100 “Steiner AG,” HCC website$`llh2''ooo&`[[af\aY&[ge'cYjdWkl]af]jY_&h`h$Y[[]kk]\*(Fgn]eZ]j*()+
101 “Simplex Infrastructures: Outcome of Board Meeting,” Indian Company News Bites – Stock Report, 15 May 2012, via Factiva, © 2012
News Bites Pty Ltd

Af\aYf[gehYfa]k`Yn]Ydkg^gjYq]\aflggn]jk]YkeYjc]lkYf\Yj]Za\\af_^gjhjgb][lkl`]j]&
Key recent overseas project bids by Indian companies 102, 103, 104, 105
Indian company Country/ Project EPC sector Project/ bid/ Details

region contract
amount (US$
million)
Larsen & Middle- Hydrocarbon Oil & Gas 3,000 Larsen & Toubro seeks to
Toubro102 East and increase its portfolio in overseas
Malaysia hjgb][lk\m]lgkdgo\gofafl`]
domestic infrastructure sector
and intense competition from
peers. It has set up a separate
subsidiary, L&T Hydrocarbon
Engineering, for its hydrocarbon
business.
Afcons Jordan 4-MTPA New Rock Ports 200 L`]hjgb][lhjgna\]kYhdYl^gje

Infrastructure phosphate terminal, for Afcons to further bid for port
Limited103 Aqaba hjgb][lkafYddl`]?md^[gmflja]k&
Essar Abu Dhabi 3.6 cubic metre per Industrial 80 =kkYjHjgb][lk`YkZa\^gj

Projects104 hour-Spent Caustic l`]k]hjgb][lkafdaf]oal`l`]aj
Treatment Plant, strategy to reinforce their
global footprint, especially in
Korea Carbon Black & Delayed key markets of the Middle East,
;gc]j ;:<;!Hjgb][l^gj South East Asia, India, Africa,
l`]JmoYakj]Õf]jq and the US.
Korea Loafafl]jj]Õf]jq
hah]daf]k AJH!
Shriram EPC105 Iraq Primary sanitary, storm Water 230 Shriram EPC forayed into
and trunk sewer systems supply and the Middle East through this
sanitation contract, and look for sustained
revenues from the region
for 3 years as well as further
opportunities in Iraq.
102ÉDYjk]fLgmZjglgZa\^gjgn]jk]Yk`q\jg[YjZgfhjgb][lkogjl`+Zaddagf$ÊThe Economic Times, 6 June 2013, via Factiva © 2013

The Times of India Group.
103É9>;GFKOAFK>AJKLHJGB=;LAFBGJ<9F l`]*((eaddagf[gfljY[lak^gjZmad\af_l`]f]ojg[ch`gkh`Yl]l]jeafYdYl9iYZY!$Ê
Af\aYf:mkaf]kkAfka_`l$).EYq*()($naY>Y[lanY$¡*()(Af^gjeYla[k Af\aY!Dl\&
104É=kkYjHjgb][lkZY_kMK<0(eaddagfogjl`[gfljY[lkaf9Zm<`YZa$ÊThe Economic Times, 23 May 2013, via Factiva © 2013 The Times
of India Group
105 “Shriram EPC bags $230 m Iraq order,” Business Line (The Hindu), 6 December 2012, via Factiva, © 2012 The Hindu Business Line

5.3 Thrust from the government in driving EPC sector,
infrastructure as a whole
9khYjlgâlkÕn]q]YjhdYfkYf\hgda[qj]^gjek$l`]?gA`YkZ]]f[gflafmgmkdqYll]ehlaf_lgkaehda^ql`]YhhjgnYdhjg[]kk]k$
klYf\Yj\araf_j]h]lalan]lYkck km[`Ykeg\]dY_j]]e]flk!lg]daeafYl]j]\mf\Yf[a]kaf]^^gjlkYf\]ph]\al]]p][mlagf$]Ykaf_
out credit generation for the infrastructure sector and setting up agencies to expedite growth through a planned release of
hjgb][lk&?gn]jfe]flYml`gjala]k`Yn]YdkgeY\][`Yf_]klgk][lgj%kh][aÕ[j]_mdYlagfk_gn]jfaf_nYjagmkaf^jYkljm[lmj]
hjgb][lkfglgfdqlghjgna\]Yd]n]d%hdYqaf_Õ]d\lg\ge]kla[hdYq]jkZmlYdkglg]f[gmjY_]_dgZYdÕjeklgafn]klafhjgb][lk&
The transformation in the road sector from PPP-dominated to EPC-centric model has been a key development in boosting the
EPC sector outlook. Around 2,500 km of roads to be awarded in FY14 may come under the EPC route, to enable the cash-
kljYhh]\jgY\k][lgje]]lalk[mjj]flq]YjYf\Õn]%q]YjhdYflYj_]lk106.
L`]?gA]klYZdak`]\l`]Af\aYAf^jYkljm[lmj]>afYf[];gehYfqDl\& AA>;D!af*((.lghjgna\]dgf_%l]jeÕfYf[]lgnaYZd]
af^jYkljm[lmj]hjgb][lk107&KmZk]im]fldq$l`]?gAhjghgk]\af^jYkljm[lmj]\]Zl^mf\k A<>k!lgZ]k]lmh]al`]jkljm[lmj]\YkY
Fgf%ZYfcaf_>afYf[aYd;gehYfq F:>;!gjYkYemlmYd^mf\&A<>k`Yn]Z]]f]fnakY_]\lgjYak]j]kgmj[]kYf\l`jgm_`lYc]%
gmlÕfYf[]$[j]\al]f`Yf[]e]flYf\gl`]jaffgnYlan]e]Yfk$hjgna\]dgf_%l]je$dgo%[gkl\]Zl^gjaf^jYkljm[lmj]hjgb][lk&
Làk`YklgZ]Y[à]n]\Zqmf\]jlYcaf_afn]kle]flaf\]Zlk][mjala]kgâf^jYkljm[lmj][gehYfa]k$af^jYkljm[lmj]ÕfYf[]
[gehYfa]k A>;k!gjaf^jYkljm[lmj]hjgb][lkYf\KHNk&
In addition to the above, restructuring the tariff framework for ports, seeking international cooperation from other countries
for technical support in renewable energy to meet the power generation targets, allowing 100% private sector stake in the
development of 17 airports in 11 states, MoUs between state governments and private players for setting up natural gas
infrastructure, and allowing FDI of up to 100% under the automatic route in townships, housing, built-up infrastructure and
[gfkljm[lagf\]n]dghe]flhjgb][lkYj]kge]g^l`]]pYehd]kg^l`]e]Ykmj]klYc]fZql`]?gAafl`]j][]flq]Yjk$oà[òadd
continue to boost the EPC industry108. Although these key measures and initiatives taken by the GoI in the recent past is quite
promising for the EPC market, it should consider taking some more measures looking at the headwinds faced by the sector.
?gn]jfe]flYml`gjala]kk`gmd\\]nak]egj]lYpZ]f]Õlk^gj=H;hdYq]jklgaf[j]Yk]l`]ajhYjla[ahYlagfafaf^jYkljm[lmj]
building.
Dgf_%l]jeaffgnYlan]n]à[d]kk`gmd\Z]dYmf[`]\lghjgna\]]YkqÕfYf[]lg=H;hdYq]jk&
<]Zlj]kljm[lmjaf_ZqZYfc]jklgl`]Yadaf_=H;hdYq]jklg[gflafm]mf\]jkh][aÕ[fgjekYf\_ma\]daf]k&
DYf\Y[imakalagfhjg[]\mj]kk`gmd\Z]kaehdaÕ]\lg]Yk]l`]]flaj]hjg[]kk&
Grievance redressal mechanism should be more active.
106 “Cash contracts may replace PPP model in road building,” Deccan Herald$))Fgn]eZ]j*()+$naY>Y[lanY¡*()+L`]Hjafl]jk Eqkgj]!
Private Ltd.
107 “HjgÕd]%AA>;D$Ê IIFCL website$`llh2''ooo&aa^[d&gj_';gfl]fl'hjgÕd]&Ykhp$Y[[]kk]\+(K]hl]eZ]j*()+&

-&,E]j_]jYf\Y[imakalagfk2[gfkgda\Ylagfakgfl`]`gjargf
Several pure-play infrastructure developers, who did not have a construction presence, are now seeking to secure their
hjgÕlYZadalqafl`][gfkljm[lagfZmkaf]kkafY\\alagflgl`]ajgofk]_e]flYf\`Yn]Z]]f]phdgjaf_hgkkaZadala]klg\]n]dgh
the necessary expertise either organically or inorganically. The sector has witnessed plethora of private equity transaction,
particularly during 2006–2011 when around 69 deals got consummated. However, similar track record for the PE exits is yet
to be seen.
Either the investor exits are held up with dipping stocks or investors chose not to exit at the time of IPO with a view to register
aehjgn]\j]lmjfkaf^mlmj]&@go]n]j$l`]eYjc]lk`Yn]fgllmjf]\mho]ddafl`]aj^Yngj&>mjl`]jegj]$l`]j]YdÕfYf[aYd
position of the companies has also deteriorated ain the recent past.
On this deadlock situation created due to deteriorating balance sheets, the sector is bound to witness “consolidation” and
foreign companies targeting Indian EPC companies as inbound transaction opportunities may emerge. Acquisitions will be on
the radar to enable exit to private equity players invested in the sector and relieve the cash stress situation of the companies.
Dipping valuations on stock markets will not help correct the situation in some time to come. In such circumstances, not many
promoters will have the ability to offer buy-back option to PE investors. On the contrary, such promoters holding minority
stakes due to multiple rounds of dilution may also consider exiting the business during these tough times, particularly in
situations where succession planning by the promoters as the owners of the companies is not yet clear.
The current scenario offers an opportunity to cash-rich industrial groups, both domestic and international, who will be keen
gfeYbgjalq'[gehd]l]ZmqgmlklgY[à]n]^mjl`]jk[Yd]g^]paklaf_gh]jYlagfkgjlg_Yaf]fljqaflgl`]k][lgj&LàkeYqYdkg
]fYZd]ljYfk^gjeaf_l`][mjj]flÉ^jY_e]fl]\ÊklYl]gâf\mkljqaflgYfÉgj_Yfar]\Êgf]&

6 Conclusion

The nation-building initiative of the GoI, the Twelfth FYP, promises a number of opportunities. The indication that 50% of
the investments during this period will be contributed by private sector players has further bolstered demand for work
to be executed by EPC contractors. However, along with opportunities, the initiative also brings also certain risk and
challenges are inevitable, as is evident from the current market situation. The wide range of risks that EPC contractors
^Y[]\mjaf_l`]\]n]dghe]flYdh`Yk]g^Yhjgb][l$gh]jYlagfYdjakckg^jYakaf_ÕfYf[]k$ogjcaf_[YhalYdeYfY_]e]fl$
Õ_`laf_l`]afÖYlagfYjqhj]kkmj]Yf\\]dYqkaf_]llaf_YhhjgnYdk^jgel`][gmfl]jhYjlq$a&]$l`]_gn]jfe]fl$Yj]^mjl`]j
l`j]Yl]faf_l`]]^Õ[a]f[qg^l`]k][gfljY[lgjkÌ[gfljY[leYfY_]e]fl[YhYZadala]k&
In such a scenario, EPC contractors need to focus on sustaining margins by executing quality orders. This would result in
YjgZmklZgllgedaf]Yf\ogmd\eYc]^gjegj]]^Õ[a]fl_jgol`kljYl]_q&Alakà_`lae]l`Yl=H;[gfljY[lgjklYc]YhYmk]
and design a growth strategy that has appropriate risk mitigation mechanisms in place to play a long haul in this highly
]f]j_ar]\af^jYkljm[lmj]k][lgj%d]\=H;eYjc]l&
=H;[gfljY[lgjkja\af_l`]oYn]g^[gfka\]jYZd]gj\]jZggckeYq`Yn]lgÕpY^]olàf_k&F]ohjgb][lkk`gmd\Z]
targeted as long-term commitments to counterparty for on-time delivery and well within the budgeted costs with minimal
escalations and claims. Competition can be beaten down by technical innovation, value engineering and, if required,
strategic tie ups. EPC contractors cannot limit themselves to the singular role of planning, executing and delivery. They
have to move from EPC to EPCM and engage in activities across the value chain.
JYlagfYdarYlagfafl`]Za\\af_hjg[]kk^gj=H;[gfljY[lkakYemkl^gj]Y[`g^l`][gmfl]jhYjla]kÈl`]_gn]jfe]fl
and the private sector. As a result of this deadlock situation, created due to deteriorating balance sheets, the sector is
witnessing “consolidation” and emergence of foreign companies interested in acquiring Indian EPC companies. This is
because inbound transaction opportunities may well be the way out, especially for businesses that may want to move on.
>gjkge]$làkeYq]n]fZ]Yfghhgjlmfalqlg[j]Yl]^mjl`]jkar]Yf\k[Yd]&E]j_]jkYf\Y[imakalagfkeYqYdkgljYfkdYl]
into exit opportunities for private equity players that are invested in the EPC sector and are seeking exit options.
To conclude, the sector needs to undergo a high level of transformation to ensure sustainability. The sector, strongly
upheld by the infrastructure story, has great potential to grow further, with the Twelfth FYP targeting infrastructure
kh]f\gÂFJ-.&+ljaddagf&@go]n]j$Éhjgb][lkÊYf\ÊhjgÕlkÊf]]\lgZ]eYfY_]\o]ddÈY[lmYd[Yk`j]YdarYlagf^jge
hjgb][lkaklgZ]j][cgf]\&

7 Supplemental

Know your tax
9[d]YjYf\]^Õ[a]fllYpYlagfj]_ae]akYemkl^gjYlljY[laf_^gj]a_fafn]kle]flkafl`][gmfljq&9dl`gm_`l`]?gA`YkZ]]f
trying to provide clarity, the issues seem far from being settled. Taxability of EPC contracts in India has always had an array
of tax issues.
In India, taxation of EPC contracts revolves around the nature of activities of each contract. Generally, the EPC contract is
Za^mj[Yl]\aflgkmhhdq$[gfkljm[lagf$]f_af]]jaf_k]jna[]k$afklYddYlagf'kmh]jnakgjqk]jna[]kYf\[geeakkagfaf_k]jna[]k&
Af[Yk]g^gn]jk]Yk=H;[gfljY[lgj$l`][gfljY[lakZjgc]f\goflgÈg^^k`gj]hgjlagf a&]&$g^^k`gj]kmhhdqYf\g^^k`gj]
k]jna[]k!Yf\gfk`gj]hgjlagf a&]&$gfk`gj]kmhhdqYf\gfk`gj]k]jna[]k!&
Direct-tax controversies under EPC contract are in the like of taxability of offshore supply, payments for engineering designs,
[gfkgjlamekn&9kkg[aYlagfg^H]jkgfk 9GH!$h]jeYf]fl]klYZdakè]flYf\oal``gd\af_lYpgZda_Ylagfk]l[&
Direct taxes
Taxing offshore supply (relevant in case of foreign EPC contractor)
Af=H;[gfljY[lk$l`]c]q[gehgf]floaddZ]hjg[mj]e]flg^]imahe]fl'eY[àf]jqlgZ]afklYdd]\afl`]hjgb][l&Hj]%
\geafYfldq$alakl`]^gj]a_fhYjlqg^l`][gfkgjlame$o`gogmd\Z]j]khgfkaZd]^gjkm[`hjg[mj]e]fl^jgegmlka\]Af\aY oal`
]p[]hlagfg^^]oeYbgjAf\aYfhdYq]jkkm[`Yk:@=D$DL]l[&!&Egj]gn]j$l`]g^^k`gj]kmhhdq[gehjak]kYeYbgj[gehgf]fl
of the total contract value. In the idealistic scenario, parties would want offshore supply being not taxed in India since the
same carry an increased margin as compared to other components of EPC contract. Usually, supply of such equipment will
not be taxable in India provided all the components of sale of such equipment take place outside India and the contract for
supply is on a principal-to-principal basis.
@go]n]j$]n]foal`YnYadYZadalqg^bm\a[aYdhj][]\]f[]^Yngjaf_l`]fgf%lYpYZadalqg^g^^k`gj]kmhhdq$l`]akkm]gâlklYpYZadalq
has been a matter of litigation for several companies. Accordingly, many foreign companies are applying to the Authority of
Advance Ruling for certainty and clarity on tax implication on offshore supply.

Offshore services and Royalty
L`]lYpYZadalqg^l`]g^^k`gj]k]jna[]k`YkZ]]fY\]ZYl]gfY[[gmflg^bm\a[aYdhjgfgmf[]e]fl\]fqaf_l`]hgkalagfY\ghl]\
Zql`]Af\aYfJ]n]fm]9ml`gjala]k AJ9!lglYpkm[àf[ge]afAf\aY&Oal`YfYe]f\e]flafl`]\ge]kla[dYo$l`]?gA`Yk
intended to clarify that the offshore services will be taxable in India.
As regards the provision of engineering designs and drawings there has been ambiguity with regard to whether the same
should be taxable as royalty should be regarded as service. Furthermore, by way of a recent amendment, the withholding tax
rate on payments for royalty and fees for technical services has been increased to 25%.
Having said so, one would need to evaluate the taxability of such services in light of the treaty protection available in the
relevant DTAA.
Permanent Establishment (PE)

Another dimension of the provision of services under the EPC contract would be providing supervisory and monitoring
k]jna[]k\mjaf_l`]afklYddYlagfYf\]j][lagfh`Yk]&Làkoadd\]Õfal]dqj]imaj]hj]k]f[]g^]ph]ja]f[]\Yf\kcadd]\]ehdgq]]k
of the foreign party in India. This could often result in continuous taxable presence in India, i.e., a permanent establishment
H=!&9[gfklalmlagfg^H=^gjY^gj]a_fhYjlqafAf\aYoaddl`]fgh]f`gklg^lYpakkm]kkm[`YkYlljaZmlagfgâf[ge]lgkm[`H=$
compliance requirements etc. Hence, it would be advisable to carefully evaluate the need for a presence in India keeping in
mind the availability of any treaty protection.
Taxing a consortium
Lqha[Yddq$^gj]a_f[gehYfa]kZa\^gj=H;[gfljY[lkafAf\aYZq^gjeaf_bgafln]flmj]gj[gfkgjlameoal`gl`]j^gj]a_fgjAf\aYf
companies. A lead member of the consortium is chosen who normally drives the awarded contract. However, the members
lgl`][gfkgjlameeYqgjeYqfglZ]bgafldqYf\k]n]jYddqdaYZd]&LàkZ]af_l`][gee]j[aYdmf\]jklYf\af_$afl]jk]l`]
[gfkgjlamehYjla]k$l`][`Ydd]f_][ge]koàd]afl]jhj]lYlagfg^l`]=H;[gfljY[lZ]lo]]f[gfkgjlameYf\l`]hjgb][lgof]j&
More often than not, the EPC contract contains ambiguous terms with regard to scope of work, responsibility and fees toward
]Y[`hYjlqg^l`][gfkgjlame&>mjl`]jegj]$l`]hjgb][lgof]jkogmd\dac]lgeYc]Yddl`]e]eZ]jkg^l`][gfkgjlamebgafldq
and severally liable for the performance under the EPC contract.
Afna]og^l`]kYe]$l`]lYpYZadalqg^l`]=H;[gfljY[l`YkZ]]fkmZb][leYll]jg^dala_Ylagf&Fme]jgmkjmdaf_k`Yn]k]lgml
various principles to determine the taxability of the consortium. However, after the Vodafone case, the Indian Revenue
9ml`gjala]k AJ9!`Yn]Z]]fafkaklaf_gfY\ghlaf_ÉdggcYlÊYhhjgY[`^gjl`]=H;[gfljY[ljYl`]jl`YfYÉdggc%l`jgm_`Ê
approach. It suggests that the consortium contract should be read as a whole and construe all the clauses set forth in the
[gfl]plg^l`]gZb][lYf\hmjhgk]kgm_`llgZ]Y[à]n]\Zql`][gfljY[l&
In absence of clear demarcation of responsibilities under the EPC contract, the consortium results in taxing the same as
an AOP, rather than taxing the members independently, for their restricted scope. As a consequence, the income of the
af\]h]f\]fle]eZ]j$]n]f^jgeg^^k`gj]hgjlagf$oà[`gl`]joak]k`gmd\fglZ][`Yj_]YZd]lglYp[gmd\Z]kmZb][l]\lglYp
in India.
Therefore, depending upon the commercial feasibility, the consortium members will have to strike a balance between
k]_j]_Ylaf_l`]k[gh]lgZ]mf\]jlYc]fZq]Y[è]eZ]jnak%%nakl`][ge^gjlj]imaj]\Zql`]hjgb][lgof]jnak%%nakbgafl
and several liabilities.

Indirect taxes
L`]=H;k][lgjakkmZb][llgemdlahd]af\aj][llYp]k$Zgl`Yll`];]fljYdYf\klYl]d]n]dk&L`][memdYlan]aehY[lg^Yddkm[`
levies comprises a substantial percentage of the total contract value and hence, it is important for companies executing EPC
[gfljY[llgkljm[lmj]l`]aj[gflY[lkafYlYp%]^Õ[a]fleYff]jafY\nYf[]&9_aklg^c]qAf\aj][llYp]kYhhda[YZd]lgl`]=H;
industry is as under:
Tax/duty Governing authority Nature of levy
Customs Duty Central Government <mlqgfaehgjlg^_gg\kaflgAf\aY _]f]jYd]^^][lan]jYl]*0&0-!
Excise Duty Central Government <mlqgfeYfm^Y[lmj]g^_gg\kafAf\aY _]f]jYd]^^][lan]jYl]

)*&+.!
Service Tax Central Government LYpgfhjgnakagfg^k]jna[]k _]f]jYd]^^][lan]jYl])*&+.!
;]fljYdKYd]kLYp ;KL! Central Government Tax on sale of goods between two states at concessional rate of 2%
kmZb][llgkh][aÕ]\[gf\alagfk!
NYdm]9\\]\LYp N9L! State Government LYpgfkYd]g^_gg\koalàfl`]kYe]Af\aYfklYl] jYl]kkh][aÕ[lg

klYl]Yf\[geeg\alq!2lqha[YddqN9LjYl]knYjq^jge-lg)-
=fljqlYp'G[ljga' KlYl]?gn]jfe]fl'Dg[Yd D]nqgf]fljqg^kh][aÕ]\_gg\kaflgYhYjla[mdYjklYl]gjdg[YdYj]Y

Local body tax municipal authorities jYl]knYjq^jgeklYl]lgklYl]!
Typical indirect tax implications in respect of various components of the EPC contract are outlined below:
Offshore equipment supply

Import or procurement of equipment from outside India attracts levy of customs duty, the rate of which depends on tariff
[dYkkaÕ[Ylagf&L`][gfljY[lgj[Yf]phdgj]ÉHjgb][lAehgjlK[`]e]Êo`]j]_gg\kYhhjgn]\^gjaehgjlYlagfaf[gff][lagf
oal`kh][aÕ]\hjgb][lk]da_aZd]^gj[gf[]kkagfYd:;<jYl]g^-$\m]lgoà[`]^^][lan][mklgek\mlqjYl][ge]k\goflg
**&0-Yk[gehYj]\lg$kYq$klYf\Yj\[mklgek\mlqjYl]g^*0&0-$j]kmdlaflgZ]f]Õlg^.&AlakY[lmYddqegj]Z]f]Õ[aYd
kaf[];=FN9L[j]\alg^:;<akfglYnYadYZd]&>mjl`]jegj]$aehgjlg^_gg\kYf\kmZk]im]flkYd]afAf\aYYlljY[lkN9L';KL&
Aehgjl]jkeYq]phdgj]hgkkaZadalqg^]^^][laf_à_`k]YkYd]kgjkYd]kaf[gmjk]gâehgjllgeala_Yl]N9L';KL]phgkmj]&
Offshore service
Provision of offshore services may attract levy of service tax in India under reverse charge mechanism as import of services
where liability to pay service tax is of the recipient of service. Generally, EPC contractors providing construction or works
contract services should be eligible to avail CENVAT credit of capital goods and input services used by them. However, the
]da_aZadalqg^hjgb][lgof]jklg[dYae[j]\alg^K]jna[]lYpd]na]\gf=H;[gfljY[lkf]]\klgZ]]nYdmYl]\gfY[Yk]%lg%[Yk]
basis since there are some restrictions based on the nature of activity or services undertaken by the EPC contractor.

Onshore equipment supply
Hjg[mj]e]flg^]imahe]fl'_gg\kafAf\aY^jgeeYfm^Y[lmj]jk[gmd\YlljY[ld]nqg^=p[ak]\mlq&Lqha[Yddq$[j]\alg^]p[ak]
\mlq[gmd\Z]hYkk]\gfZql`]=H;[gfljY[lgjklgl`]hjgb][lgof]ja^l`]_gg\kYj]\aj][ldq\]dan]j]\Zql`]eYfm^Y[lmj]j
lgZmq]jÌkkal]Yf\YhhjghjaYl]\g[me]flYlagfakhj]hYj]\'akkm]\&>mjl`]jegj]$kmhhdqg^dg[Yddqhjg[mj]\]imahe]fllgY
[mklge]joaddYlljY[lN9L';KL&=H;[gfljY[lgjkeYq]phdgj]l`]ghlagfg^]p][mlaf_YfÉafljYfkalkYd]Ê gfdqaf[Yk]gâfl]j%
klYl]hmj[`Yk]k!lgeala_Yl]N9L';KL[gklk&
;KLhYa\gfhmj[`Yk]koaddfglZ]YnYadYZd]Ykafhml[j]\alYf\Y[[gj\af_dq$làkakY[gkllgl`]hjgb][lgof]jk&
EgklklYl]kÌN9Ld]_akdYlagfkhjgna\]emdlahd]ghlagfk^gj\ak[`Yj_]g^N9Lgfogjck[gfljY[lk a&]&$Ydmehkme[gfljY[l
afngdnaf_kmhhdqg^Zgl`_gg\kYf\k]jna[]k!Zq=H;[gfljY[lgjkkm[`Yk_]f]jYdk[`]e]$Y\`g[\]\m[lagfk[`]e]Yf\
composition scheme; contractors should select the most appropriate option after undertaking an analysis of VAT costs under
the different options.
9[[gj\af_lgj]imaj]e]flkg^j]kh][lan]KlYl]N9Ld]_akdYlagfk$l`]hjgb][lgof]jkeYq\]\m[lN9LYlkgmj[] O;LL<K!
from payments made toward works contracts.
Onshore services
K]jna[]lYpoaddZ]d]na]\gfhjgnakagfg^kh][aÕ]\k]jna[]koalàfAf\aY&=H;[gfljY[lgjhjgna\af_[gfkljm[lagfgjogjck
contract service should typically be eligible to avail CENVAT credit of capital goods and input services, which could reduce the
af\aj][llYp[gklkg^l`]hjgb][l&
L`]f]_Ylan]dakl%ZYk]\lYpYlagfj]_ae]]^^][lan]^jge)Bmdq*()*hjgna\]k^gjK]jna[]lYp]p]ehlagflgkh][aÕ]\ogjck
contracts such as construction of ports, airports, dams, tunnels, railways including monorail or metro and such exemption
Ydkg]pl]f\klgkmZ%[gfljY[lgjk^gjkm[`hjgb][lk&>mjl`]jegj]$l`]nYdmYlagfjmd]kYf\[gehgkalagfk[`]e]k^gjogjck
contracts have been amended, according to which contractors have an option to pay Service tax at rates ranging from 4.94%
to 8.65%, depending on the nature of works contract, though pure services would continue to attract service tax at 12.36%.
L`]j]nak]\nYdmYlagfjmd]k`Yn]Ydkg[j]Yl]\YeZa_mala]kgfYkh][lkkm[`Yklj]Yle]flg^^j]]akkm]eYl]jaYdZqhjgb][l
owners.

Scoping of EPC contracts: some tax considerations
EPC contractors may enter into single consolidated contract for a lump sum price or may split this between civil works, supply
and services components.
9kaf_d][gfkgda\Yl]\=H;[gfljY[l^gjkmhhdqg^_gg\kYf\k]jna[]k[gmd\d]Y\lgnYjagmk\aj][lYf\af\aj][llYpaf]^Õ[a]f[a]k
and risks such as:
Lack of clear segregation of price between goods and services could lead to double taxation.
Where the contractor opts for discharging tax on value of contract, such as composition schemes under VAT and Service
lYp$l`]]flaj][gfljY[leYqZ][gfka\]j]\Ykgf]ogjck[gfljY[lYf\oaddYlljY[llYpgf^mdd[gfljY[lnYdm] af[dm\af_
g^^k`gj]Yf\gfk`gj]]imahe]fl!&
O;LL<KhjgnakagfkeYqZ][ge]Yhhda[YZd]gf^mdd[gflY[lnYdm]$oà[`[gmd\d]Y\lg[Yk`Ögoaf]^Õ[a]f[a]k^gj=H;
contractors.
L`][gfljY[lgjkeYqfglZ]h]jeall]\lgYhhdq^gj[]jlYafkh][aÕ]\k[`]e]kkm[`Yk[gehgkalagfk[`]e]mf\]jN9LYf\
K]jna[]lYpgfdqgfhYjlg^l`][gfljY[l$mfdac]Ykhdal[gfljY[l$afl`]YZk]f[]g^kh][aÕ[hja[]^gjl`Ylhgjlagfg^l`][gfljY[l&
Accordingly, it is necessary to identify appropriate nature of a contract, i.e., whether it is a split or consolidated contract to
evaluate the direct and indirect tax implications thereon, and appropriately structure the same in order to address current as
well as possible future tax risks.
Conclusion
Estimating the tax cost for EPC contract, therefore, involves understanding and analyses of complex tax laws of India
and has to be appropriately planned well in advance to avoid unexpected results in the form of adverse tax assessments.
The prolonged litigation process and uncertainty of taxation is likely to increase the implementation cost of infrastructure
hjgb][lk$oà[`[gmd\Y[lYkY\]l]jj]fllg^gj]a_f=H;[gfljY[lgjk&@go]n]j$lgaf[j]Yk]^gj]a_fhYjla[ahYlagf$Y\]_j]]g^
[]jlYaflqaflYpdYokYf\]^Õ[a]f[qafalkaehd]e]flYlagfakYZkgdml]dq]kk]flaYd&

8 Abbreviations

AAI Airport Authority of India JV Joint venture
BTG Boiler, turbine, generator JNNSM Jawaharlal Nehru National Solar Mission
BoP Balance of plant JNNURM Jawaharlal Nehru Urban Renewal Mission
BCM Billion cubic metres MMT Million metric tonnes
BRT Bus Rapid Transit MMTPA Million metric tonnes per annum
BOT Build-Operate-Transfer MRTS Mass Rapid Transit System
CAGR Compounded annual growth rate MoUD The Ministry of Urban Development
CWC Central Warehousing Corporation MW Megawatt
CST Central sales tax MBIC Mumbai-Bangalore Industrial Corridor
CBIC Chennai-Bangalore Industrial Corridor NHDP National Highway Development Programme
DMIC Delhi Mumbai Industrial Corridor NELP New Exploration Licensing Policy
EPC Engineering procurement and construction NBFC Fgf%ZYfcaf_ÕfYf[aYd[gehYfq
EPCM Engineering, procurement and construction PAT HjgÕlY^l]jlYp
management PPP Public-Private-Partnership
FCI Food Corporation of India QIP ImYdaÕ]\afklalmlagfYdhdY[]e]flk
FYP Five year plan RE Renewable Energy
FDI Foreign direct investment RVNL Rail Vikas Nigam Ltd
GoI Government of India SARDP-NE Special Accelerated Road Programme for
HSRC High Speed Rail Corporation of India Ltd. North East
IWT Inland water transport SWC State Warehousing Corporations
IIFCL India Infrastructure Finance Company Ltd. TDS Tax deducted at source
IRA Indian Revenue Authorities UMPP MdljY%e]_Yhgo]jhjgb][lk
IPO Initial public offering VAT Value added tax
IDFs Infrastructure debt funds

About EPC World Media Group
EPC World Media is a one stop knowledge information hub for Infrastructure, EPC, Construction and Realty
sector. It strives to promote, propagate and assist the decision and policy makers from government and
hjanYl]gj_YfarYlagfkYdgf_oal`l`]l][`fgdg_q\]n]dgh]jkYf\k]jna[]hjgna\]jklg]f`Yf[]Yf\\]n]dghl`]aj
capabilities. EPC World Media facilitates knowledge transfer to grassroots and strengthens their productivity and
eYfY_]e]fl[YhYZadala]k^gjl`]Z]f]Õlg^kg[a]lqYldYj_]l`jgm_àlk\an]jk]e]\aYhjgh]jla]kafhjafl$o]ZYf\
events space.
EPC World Media Group caters to the Indian sub-continent, the Middle East and South East Asia through its
\an]jk]e]\aYY[lanala]kYf\hjgna\]kaf^gjeYlagfl`jgm_`kh][aYdar]\Zmkaf]kkhmZda[Ylagfk$[gf^]j]f[]k$
industry recognition awards, industry portals and newsletters. Our B2B publications have partnered leading
Indian and International infrastructure events. EPC World is devoted to bringing infrastructure and construction
hjg^]kkagfYdkafl`]f]ok$YfYdqkak$Zmkaf]kk]fYZdaf_af^gjeYlagfYf\[gee]flkl`Yl`]dhl`]e\gl`]ajbgZk
most effectively. Our coverage ranges from business strategies to technical innovations to market intelligence.
AfYk`gjlkhYfg^lae]=H;Ogjd\Yf\Hjgb][lkOgjd\`YkZ]]f[gf^]jj]\l`]ÉZ]klf]okeY_Yraf]^gjl`]
infrastructure industry” in 2012 and the “best Construction newspaper” in 2013, respectively among other
fglYZd]YoYj\klggmj]\algjYf\bgmjfYdaklkZq;A<;&
@]Y\g^Õ[]
EPC World Media Pvt. Ltd.
303, Hilton Centre, Sector-11, CBD Belapur, Navi Mumbai-400614
Telefax: - +91 22 41610808 | E-mail:-marketing@epcworld.in
Website: - www.epcworld.in

EY Leadership Team (EPC Sector)
Amit Khandelwal CmdbalKaf_`
National Director & Partner, HYjlf]j@]Y\ Af^jY!$
Transaction Advisory Services Transaction Advisory Services
Sushi Shyamal Samir Kanabar

Partner, Transaction Advisory Services Partner, Tax and Regulatory Services
Authors
Sushi Shyamal
Partner, Transaction Advisory Services
Email: sushi.shyamal@in.ey.com
Sonam Sabikhi
Associate Vice President, Transaction Advisory Services
Email: sonam.sabikhi@in.ey.com

Connect with us
Our services
Assurance, Tax, Transactions, Advisory
A comprehensive range of high-quality services to
help you navigate your next phase of growth
Read more on ey.com/IN/en/Services
Sector focus
Centers of excellence for key sectors
Our sector practices helps ensure our work with
you is tuned in to the realities of your industry
Read about our sector knowledge at ey.com/IN/en/Industries
Stay connected
Easy access to our Webcasts and podcasts
knowledge publications. http://webcast.ey.com/thoughtcenter/
Any time.
www.ey.com/subscription-form
Follow us @EY_India Join the business network from EY
For more information, visit www.ey.com/in

Gmjg^Õ[]k
Ahmedabad Hyderabad NCR

2ndÖggj$KànYdacAk`YYf GnYdG^Õ[]$)0$aDYZk;]flj] Golf View Corporate Tower B
Near C.N. Vidhyalaya Hitech City, Madhapur Near DLF Golf Course
Ambawadi Hyderabad - 500081 Sector 42
Ahmedabad - 380 015 Tel: + 91 40 6736 2000 Gurgaon - 122002
Tel: + 91 79 6608 3800 Fax: + 91 40 6736 2200 Tel: + 91 124 464 4000
Fax: + 91 79 6608 3900 Fax: + 91 124 464 4050
Kochi
Bengaluru 9th Floor, ABAD Nucleus 6thÖggj$@L@gmk]
12th & 13thÖggj NH-49, Maradu PO 18-20 Kasturba Gandhi Marg
“UB City”, Canberra Block Kochi - 682304 New Delhi - 110 001
No.24 Vittal Mallya Road Tel: + 91 484 304 4000 Tel: + 91 11 4363 3000
Bengaluru - 560 001 Fax: + 91 484 270 5393 Fax: + 91 11 4363 3200
Tel: + 91 80 4027 5000
+ 91 80 6727 5000 Kolkata 4th & 5th Floor, Plot No 2B,
>Yp2#1)0(**)(.((( )*thÖggj! 22 Camac Street Tower 2, Sector 126,
>Yp2#1)0(***,(.1- )+thÖggj! 3rdÖggj$:dg[cË;Ì NOIDA 201 304
Kolkata - 700 016 Gautam Budh Nagar, U.P. India
1st Floor, Prestige Emerald Tel: + 91 33 6615 3400 Tel: + 91 120 671 7000
No. 4, Madras Bank Road Fax: + 91 33 2281 7750 Fax: + 91 120 671 7171
Lavelle Road Junction
Bengaluru - 560 001 Mumbai Pune
Tel: + 91 80 6727 5000 14th Floor, The Ruby C-401, 4thÖggj
Fax: + 91 80 2222 4112 29 Senapati Bapat Marg Panchshil Tech Park
<Y\Yj O!$EmeZYa%,(((*0 Yerwada
Chandigarh Tel: + 91 022 6192 0000 F]Yj<gf:gk[gK[`ggd!
1st Floor, SCO: 166-167 Fax: + 91 022 6192 1000 Pune - 411 006
Sector 9-C, Madhya Marg Tel: + 91 20 6603 6000
Chandigarh - 160 009 5th Floor, Block B-2 Fax: + 91 20 6601 5900
Tel: + 91 172 671 7800 Nirlon Knowledge Park
Fax: + 91 172 671 7888 Off. Western Express Highway
?gj]_Ygf =!
Chennai Mumbai - 400 063
Tidel Park, 6th & 7th Floor Tel: + 91 22 6192 0000
9:dg[c Eg\md].()$/()%/(*! Fax: + 91 22 6192 3000
Fg&,$JYban?Yf\àKYdYa$LYjYeYfa
Chennai - 600113
Tel: + 91 44 6654 8100
Fax: + 91 44 2254 0120

Ernst & Young LLP
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction
and advisory services. The insights and quality
services we deliver help build trust and confidence
in the capital markets and in economies the world
over. We develop outstanding leaders who team to
deliver on our promises to all of our stakeholders. In
so doing, we play a critical role in building a better
working world for our people, for our clients and for
our communities.
=Qj]^]jklgl`]_dgZYdgj_YfarYlagf$Yf\eYqj]^]j
to one or more, of the member firms of Ernst &
Young Global Limited, each of which is a separate
legal entity. Ernst & Young Global Limited, a UK
company limited by guarantee, does not provide
services to clients. For more information about our
gj_YfarYlagf$hd]Yk]nakal]q&[ge&
Ernst & Young LLP is one of the Indian client serving member firms of
=Q?EDaeal]\&>gjegj]af^gjeYlagfYZgmlgmjgj_YfarYlagf$hd]Yk]nakal
ooo&]q&[ge'af&
Ernst & Young LLP is a Limited Liability Partnership, registered under

the Limited Liability Partnership Act, 2008 in India, having its registered
office at 22 Camac Street, 3rd Floor, Block C, Kolkata - 700016
© 2013 Ernst & Young LLP. Published in India.

All Rights Reserved.
EYIN1312-100
ED 0114
This publication contains information in summary form and is therefore

intended for general guidance only.
It is not intended to be a substitute for detailed research or the exercise of
hjg^]kkagfYdbm\_e]fl&F]al`]j=jfklQgmf_DDHfgjYfqgl`]je]eZ]j
g^l`]_dgZYd=jfklQgmf_gj_YfarYlagf[YfY[[]hlYfqj]khgfkaZadalq
for loss occasioned to any person acting or refraining from action as a
result of any material in this publication. On any specific matter, reference
should be made to the appropriate advisor.
AGK
K[YflàkIJ;g\]^gjegj]gjnakalooo&]q&[ge'af
Avaiable on
To download your free QR code scanner,

visit your smartphone’s app-store

Engineering Procurement and Construction

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Engineering Procurement and Construction

Uploaded by

Copyright:

Available Formats

Engineering

EPC World media group

Mr. Tejasvi Sharma

Dear Reader, afn]klgjk$Zmll`]_dgZYd[gfkljm[lagfeYbgjkeY\]kljYl]_a[

Opportunities for EPC business in India 14

6 Engineering, Procurement and Construction (EPC): Braving the headwinds

Engineering, Procurement and Construction (EPC): Braving the headwinds 7

Turnkey contract vs. packaged-based contract

Criteria Turnkey contract Packaged-based contract

Price Guaranteed price for execution No guarantee on the price

Time Guaranteed timeline for completion No guarantee on the timeline

Engineering/design Responsibility of the contractor J]khgfkaZadalqg^l`]gof]j'\]n]dgh]j

Responsibility Contractor has complete responsibility ;gfljY[lgj`Yk\]Õf]\j]khgfkaZadalq

Level of Contractor is free to work with limited supervision Gof]j'\]n]dgh]jlgmf\]jlYc]Y\Yq%lg%\Yqkmh]jnakagf

Risk Ka_faÕ[YfljakckYj]ljYfk^]jj]\lgl`][gfljY[lgj Ka_faÕ[Yfljakckj]lYaf]\oal`l`]gof]j'\]n]dgh]j

8 Engineering, Procurement and Construction (EPC): Braving the headwinds

) ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'

Engineering, Procurement and Construction (EPC): Braving the headwinds 9

Segment Major domestic players Major foreign players Insight

Building DYjk]fLgmZjgDaeal]\$K`YhggjbaHYddgfba Arabian Construction KhY[]akmfgj_Yfar]\af

Oil & Gas EPC DYjk]fLgmZjgDl\&$HmfbDdgq\Dl\&$H]ljgf Aker Solutions, Leighton Ka_faÕ[Yfl[geh]lalagf

10 Engineering, Procurement and Construction (EPC): Braving the headwinds

Entry strategy of foreign EPC companies in India 2, 3, 4, 5, 6, 7

Modality :]f]Ôlklgl`]hdYq]j Precedence

Engineering, Procurement and Construction (EPC): Braving the headwinds 11

Tenth FYP (2002–07) Eleventh FYP (2007–12) Twelfth FYP (2012–17)

Planned investments 8.7 20.6 56.3

Actual Investments 9.2 23.9 NA

EPC opportunity 4.5 11.4 26.7

Sectoral mix Power: 30% Power: 33% Power: 32%

Roads: 17% Roads: 19% Roads: 17%

Telecom: 16% Telecom: 16% Telecom: 17%

Railways: 11% Railways: 8% Railways: 9%

Irrigation: 13% Irrigation: 10% Irrigation: 9%

Ports: 3% Ports: 3% Ports: 3%

Oil & Gas: 2% Oil & Gas: 2% Oil & Gas: 4%

Others: 8% Others: 9% Others: 9%

Source: Eleventh and Twelfth Five year plan, Planning Commission

12 Engineering, Procurement and Construction (EPC): Braving the headwinds

14 Engineering, Procurement and Construction (EPC): Braving the headwinds

2.1 Ghhgjlmfalqafl`]Lo]d^l`>an]Q]YjHdYf Lo]d^l`>QH!

Planned investments in infrastructure in the Twelfth FYP: INR56,316.9 billion

3% 2%2%1% Power Ports and Inland Water Transport

9% Water supply and Sanitation

Source: Twelfth Five Year Plan document, Planning Commission

0 ÉLo]d^l`>an]Q]YjHdYf*()*%*()/Ç>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$ÊPlanning Commission website$`llh2''

Engineering, Procurement and Construction (EPC): Braving the headwinds 15

Sector Total planned investment in Construction intensity10 Construction opportunity

Roads and bridges 9,694.1 65% 6,301.1

Railways 5,218.0 78% 4,070.0

Mass Rapid Transit System (MRTS) 1,241.6 78% 968.4

Ports and Inland Water Transport (IWT) 1,977.8 50% 988.9

Airports 877.1 42% 368.4

Water supply and sanitation 2,549.5 66% 1,682.7

Irrigation and watershed 5,043.7 75% 3,782.8

Power 18,202.4 38% 6,916.9

Telecommunications* 9,439.0 10% 943.9

Storage* 584.4 50% 292.2

Oil & Gas 1,489.3 25% 372.3

Total 56,316.9 26,687.7

Planned infrastructure investments

10 ÉJ]hgjlg^l`]ogjcaf__jgmhgf[gfkljm[lagf^gjl`]=d]n]fl`Õn]q]YjhdYf *((/%*()*!$ÊPlanning Commission website$`llh2''

16 Engineering, Procurement and Construction (EPC): Braving the headwinds

Comparison of segment-wise composition of infrastructure expenditure

) ÉLo]d^l`>an]Q]YjHdYf()%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'

Building DYjk]fLgmZjgDaeal]\$K`YhggjbaHYddgfba Arabian Construction KhY[]akmfgj_Yfar]\af

Oil & Gas EPC DYjk]fLgmZjgDl\&$HmfbDdgq\Dl\&$H]ljgf Aker Solutions, Leighton Ka_faÕ[Yfl[geh]lalagf

0 ÉLo]d^l`>an]Q]YjHdYf()%*()/Ç>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$ÊPlanning Commission website$`llh2''

10 ÉJ]hgjlg^l`]ogjcaf__jgmhgf[gfkljm[lagf^gjl`]=d]n]fl`Õn]q]YjhdYf ((/%()*!$ÊPlanning Commission website$`llh2''

21 ÉFYlagfYd@a_`oYq<]n]dghe]flHjgb][l F@<H!$ÊNHAI website$`llh2''ooo&f`Ya&gj_'O@9LALAK&Ykh$Y[[]kk]\(Fgn]eZ]j()+&

L`]Eafakljqg^JYadoYqk EgJ!Yf\l`]<]hYjle]flg^Af\mkljaYdHgda[qYf\Hjgeglagf <AHH!`Ykhjghgk]\)((><AafjYad

24 ÉLo]d^l`>an]Q]YjHdYf()%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'

44 ÉLo]d^l`>an]Q]YjHdYf()%*()/Ç=[gfgea[K][lgjk Ngdme]AA!$ÊPlanning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'