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, dont drum up
people to collect wood and dont assign
them tasks and work, but rather teach
them to long for the immensity of the sea.
We belong to and represent an industry
that is literally building a new 21st century
India driven by aspirations of tens of
millions who seek a better life, a better livelihood and more
opportunity to build on their dreams. Hidden in the string
of highways, factories, airports, ports, metro rail networks,
dams, commercial towers and nuclear power plants is the
potential for India to forge its most successful partnership
ever that between entrepreneurs and workers. As the EPC
industry moves toward more maturity and more established
norms and protocols, let us never forget the unique ability of
this industry to transform India. Even though we live in the
age of information and information technology, it is bricks
and mortar that will craft the second-largest economy of
the world and the largest middle class consumer base in the
world in a decade or two.
There is always the temptation to be swayed and spooked by
the present. To that extent, the present state of the Indian
economy does appear cloudy and depressing. After years of
a more than impressive surge, GDP growth rate has dipped
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of how investors and entrepreneurs are holding back when
it comes to letting their money talk with India. Problems
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hjglYZadalql`Yl[gf^jgfleYfqà_`hjgd]=H;hjgb][lkYj]
Mr. Tejasvi Sharma

Managing Director
testimony to the tyranny of the present. Yet, as famous poet

PB Shelley suggested more than two hundred years ago: If
winter comes, can spring be far behind?
Global rating and consulting institutions are unanimous
in saying that the longer-term prospects for the Indian
economy remain extremely bright. And let us not forget
one fact when the famous BRICS report released early
this century predicted that India will become the secondlargest economy of the world by 2050, it was based on
the assumption that GDP growth rates will average 5% to
6% a year. The fact is, India will build infrastructure across
the board and both domestic and foreign investors will
hYjla[ahYl]aflàkka_fa[Yfl]f\]Yngj$bmklYkl`]q`Yn]
done in China since the late 1980s. The sheer numbers are
too tempting for a smart investor to ignore. I do not want to
deluge you with statistics right here; so allow me to quote
bmklgf]fmeZ]j&AÂf\aYaklgmk]Yeg\]kl)(gâlk?<Hlg
invest in Infrastructure, we are talking of annual investment
in excess of US$200 billion a year. It has been estimated
that Indias GDP will touch US$10 trillion by 2020. That
translates into infrastructure investment of at least US$1
trillion a year. As India builds more to feed more dreams,
both GDP and infrastructure investment will keep growing.
G^[gmjk]$^gjl`]k]dgf_%l]je\j]YeklgZ]j]Ydar]\$hgda[q
makers will need to play a more proactive role to become
catalytic agents. As this intensively researched report will
show, almost all the bottlenecks faced by the EPC industry
can be swept away by more nuanced policies emerging
from Delhi and state capitals of the country. If that happens,
the EPC industry will not only build a swanky, modern and
forward-looking India, but also harness the skills of 10 million
youngsters who will enter the work force every year.
EY
Dear Reader,
The Government of Indias continued focus
on developing Indias infrastructure has
resulted in an ambitious target of INR56.3
trillion in the Twelfth Five Year Plan. Out
of this amount approximately 50% of the
investments are to be contributed by the
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in the infrastructure segment, the EPC sector is likely to
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consistent changes over the last few years with increased
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entry of several foreign players.
In the current market landscape, EPC contractors have a
healthy mix of both government and private sector clients,
as compared to their heavy dependence on government
clients until a few years ago. The concept of EPC has been
evolving over the last few years and has emerged as a
preferred form of contracting by clients along with PPP
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there is an EPC opportunity for market players. Currently,
clients prefer to go with a single point responsibility thereby,
reducing the interface and the overall duration. This has
been further strengthened by the fact that the highway
sector, after several years of operating in the PPP mode,
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industrial, and oil and gas continue to prefer awarding
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When the Tenth Five Year Plan called for inclusion of
Chapter on Construction in the National Plan, the success
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investments in some of the largest construction groups of
our country. The companies, with fresh capital infusion,
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l`]=d]n]fl`n]q]YjhdYfo`]fea\%kar]\[gehYfa]k
klYjl]\lgYlljY[lafn]klgjkafl]j]kl&Fglgfdql`]fYf[aYd
Sushi V. Shyamal
Partner, Transaction Advisory Services
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investments, further fuelling the growth story.
The increase in EPC activity is evident from increasing order
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players. However, the sector is currently facing headwinds
from several directions. We have observed that the growth in
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\m]lgka_fa[Yfl[gklgn]jjmfk$j]_mdYlgjqZglld]f][ck
and aggressive bidding positions taken by a few of market
players. With increasing working capital requirements and
the resultant increase in leverage, the EPC players are
left with limited opportunity to raise further capital to fuel
growth in the current scenario. PE funds too are cautious
with their new investments as there is limited opportunity of
exit due to unfavorable capital markets. Furthermore, the
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\]hj][aYlagf$`Ykaf[j]Yk]\l`]d]n]dg^mf[]jlYaflqafhjgb][l
]p][mlagf&L`]j]^gj]$l`]k][lgjakj]]daf_mf\]jka_fa[Yfl
liquidity constraints.
In this turbulent market situation, the contracting companies
have to realign their scaling strategies and focus on
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compared to order book and revenue growth. Only those
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the opportunity being provided in the Twelfth Five Year Plan.
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làkbmf[lmj]&HjglkYf\hjgb][lkf]]\lgZ]eYfY_]\
]^[a]fldq&;mjj]fldq$l`]eYjc]lakafY^jY_e]fl]\klYl]
and needs to undergo a high level of transformation if future
sustainability is to be assured. M&A activities in the market
place are expected to improve with consolidation on the
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provide exit options to a set of investors.
This report discusses the potential opportunity; recent
trends witnessed by the sector, challenges for re-enforcing
sustainability and possible ways to overcome the challenges.
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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
6
Introduction
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
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hjgb][leYfY_]e]fl`Ykkà^l]\^jgel`]gof]j'\]n]dgh]jlgl`][gfljY[lgj&L`]j]akYnakaZd]kà^l^jgegof]j%eYfY_]\
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responsibility of designing, procurement of material and construction. Although standard clauses and conditions prevailed,
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Làk^gjeg^[gfljY[l]n]fhjgl][lkl`]gof]j'\]n]dgh]j^jge[mjj]f[qYf\afl]j]kljYl]m[lmYlagfk&Mfdac]gl`]j[gfljY[lk
where procurement and design are considered separate processes, in EPC contracts they are done simultaneously, reducing
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hY[cY_]k&?jY\mYddql`]=H;[gfljY[lgjk\]n]dgh]\l][`fa[Yd]ph]jlak]Yf\Z][Ye]fYf[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
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commissioning. This has limited the role of engineering consultants and large EPC companies have transformed into solution
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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]^[a]fldqY[jgkk\a^^]j]fldg[Ylagfk&Al`YkZ]]fgZk]jn]\l`Ylkge]g^l`]
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How is EPC different from other models?

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contracts include the clients design requirements, while others place the onus of designing on the contractor. Such contracts,
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This form of contract is attractive for customers, since the liability for the end product, including design and construction, lies
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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
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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
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Responsibility
Contractor has complete responsibility
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Point of contact
Contractor is single point of contact for all matters for

l`]hjgb][l\]n]dgh]j
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participants along with the contractors
Level of
Involvement
Contractor is free to work with limited supervision

delivering according to agreed milestones and
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of most of the activities
Risk
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schedule. It is a professional services contract, which has a different risk allocation as well as different legal consequences.
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da]koal`l`]hjgb][lgof]j&Af=H;El`][gfljY[lgj\]ka_fk$hjg[mj]kYf\eYfY_]kl`][gfkljm[lagfhjg[]kkgfl`]gof]jk
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Contractual relationship of EPC and EPCM model

EPC model
EPCM model
Owner
Owner
EPC
contractor
Process
engineering
Vendors
EPCM
contractor
Contractors
Subcontractors
Site Services
Process
engineering
Vendors
Contractors
Subcontractors
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Infrastructure development1&L`]?gn]jfe]fl^mf\af_^gjYhdYfg^km[`Y[gfka\]jYZd]kar]oYkfglkm^[a]flYf\l`]j]^gj]$
it has relaxed policies and encouraged private parties to participate in Indias infrastructure development through the public
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asset as well as owns and operates it. The developer ultimately awards the contract to an EPC contractor and on completion,
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depend on the governments 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&
)
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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 /
General Contracting
Larsen & Toubro Limited, Hindustan

Construction Co. Ltd., Gammon India, IVRCL,
Kaehd]pAf^jYkljm[lmj]Dl\&$?YqYljaHjgb][lkDl\&$
Patel Engineering Ltd., Era Infra Engineering
Dl\&$KY\Z`Yn=f_af]]jaf_Daeal]\$FY_YjbmfY
Construction Company Ltd.
Isolux Corsan, ITD

Cementation India Limited,
ABE Af\aY!Af^jYkljm[lmj]
Limited, Leighton, ACS
Construction Group Ltd.,
Vinci Construction
Increasing opportunities in
the infrastructure sector
have attracted many new
domestic as well as new
entrants to this space.
Building
construction
Residential and
Commercial
Segments
DYjk]fLgmZjgDaeal]\$K`YhggjbaHYddgfba
;g&Dl\&$9`dmoYdaY;gfljY[lk Af\aY!Dl\&$:D
Kashyap & Sons Ltd, B. G. Shirke Construction
Technology Private Limited, B. E. Billimoria &
Co. Ltd., BSEL Infrastructure Realty Limited,
Consolidated Construction Consortium Ltd.,
Mackintosh Burn Ltd., Man Infraconstruction
Limited, Supreme Infrastructure India Ltd., Unity
Af^jYhjgb][lkDl\&$NYk[gf=f_af]]jkDl\&
Arabian Construction
Company, Leighton,
Samsung Engineering
KhY[]akmfgj_Yfar]\af
nature and is dominated
primarily by local
contractors.
Oil & Gas EPC
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=f_af]]jaf_;gfkljm[lagfDaeal]\$=kkYjHjgb][lk
Af\aY!Daeal]\$E[FYddq:`YjYl=f_af]]jaf_;g&
Ltd., Leighton, Engineers India Limited, Fabtech
Hjgb][lk=f_af]]jkDl\&$BYaàf\Hjgb][lkDl\&
Aker Solutions, Leighton

Welspun Contractors Pvt.
Ltd., Bechtel Corporation,
Linde Engineering India
Pvt. Ltd., Tecnimont ICB,
Samsung Engineering, Uhde
India Limited,
Ka_fa[Yfl[geh]lalagf
from foreign participants,
especially for offshore
contracts; business
eg\]d^g[mk]\gfhjgb][l
management rather than
direct execution
Power EPC
Power EPC
:@=D$DYjk]fLgmZjgDl\&$LYlYHjgb][lk
Ltd., BGR Energy Systems Ltd., Gammon India,
?YqYljaHjgb][lkDl\&$E[FYddq:`YjYl=f_af]]jaf_
Co. Ltd., Shriram EPC Ltd., Tecpro Systems Ltd.,
Cethar Ltd.
Doosan Power Systems,

Dongfang Electric
Corporation, Harbin Power
Engineering Co. Ltd.,
KEPCO, ThyssenKrupp
Industries India, Alstom T&D
Af\aY$9dklgeHjgb][lkAf\aY
Limited, Mitsubishi Heavy
Industries, Toshiba Thermal
and Hydro Power Systems
Company, Ansaldo STS,
Babcock & Wilcox
Market segmented into

niche areas; few players with
presence across both BTG
and BoP
ABB India Ltd., Uhde India

Ltd., Toyo Engineering
India Ltd., Continental
Engineering Corporation,
Marti India Private Ltd.,
AG Group, Samsung
Engineering, ITD
Cementation India Ltd.
Comprises niche players

in segments such as
hydel tunneling, marine
construction, or industrial
construction
General Power
EPC and Power
Transmission
Power Transmission
EMC Ltd., Jyoti Structures Ltd., Hythro Power
Corporation Ltd., GET Power Pvt. Ltd., KEC
International Ltd., Kalpataru Power Transmission
Daeal]\$BE;Hjgb][lk Af\aY!Dl\&$L][`fg
Electric & Engineering Company Ltd., Unitech
Transmission
Specialized EPC
Marine, Industrial,
Railways,
Tunneling, Mining
etc.
10
K`jajYe=H;Dl\&$;gYklYdHjgb][lkDl\&$
Navayuga Engineering Company Ltd., Hindustan
Construction Co. Ltd., Patel Engineering
Ltd., Afcons Infrastructure Ltd., Simplex
Infrastructure Ltd., McNally Bharat Engineering
Co. Ltd., Petron Engineering Construction Ltd.,
CYdaf\]]JYadFajeYf =f_af]]jk!Daeal]\$9EJ
Construction Ltd.
Dominated by equipment
manufacturers who have
forayed into EPC as forward
integration
Global players entered the
market in JV with Indian
players to enhance their
equipment business
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][a[k]_e]flkg^[gfkljm[lagf$kge]`Yn]j][]fldq]fl]j]\Af\aYYf\
some are considering entering amid stagnant markets in Europe and the US.
Although the EPC contract and its fundamentals are similar in India and abroad, the quality and strength of the players vary.
Large global players have in-house research centers and possess state-of-the-art technologies. They have, over the years,
transformed themselves into solution providers from being a contractor. It has been observed that global EPC players are
n]jqkljgf_af]f_af]]jaf_Yf\\]ka_foàd]l`]ajAf\aYf[gmfl]jhYjlkYj]eYafdq^g[mkk]\gf[gfkljm[lagf&9eYbgjalqg^dg[Yd
hdYq]jkafAf\aY`Yn]Ybgmjf]qlgeYc]^jge;lg=H;afl`]j]Ydk]fk]&
Foreign companies have entered India through different routes. Few have chosen to acquire Indian companies, while others
`Yn]]fl]j]\bgafln]flmj]k&Làk`Yk`]dh]\^gj]a_f[gehYfa]klg\aj][ldq_YafeYjc]lk`Yj]Yko]ddYk]paklaf_Ykk]lk
Yf\hjgb][lk&LàkakYoaf%oafkalmYlagf^gj\ge]kla[hdYq]jkYko]dd&Bgafln]flmj]k]fYZd]Af\aYf[gehYfa]klgimYda^q^gj
big ticket bids. There are several cases where domestic companies have tied up with foreign companies to bid for airport
hjgb][lk$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]lklgl`]hdYq]j
Precedence
Joint venture
with existing
players
Access to knowledge capital for

India entry
:]f]lg^ZjYf\]imalqg^l`]
existing player
In 2007, Shriram EPC formed a JV with a Belgium-based company.

The JV enabled it to tap the fast-growing wet cooling and air pollution
control market in India2.
Advantage of existing resource

base
Scale of operations achievable

through acquisitions
In December 2010, Leighton International Limited and Welspun

Group formed a strategic JV to pursue EPC opportunities. Welspun
`Y\Y[imaj]\Y+-klYc]afD]a_`lgf;gfljY[lgjk Af\aY!Hnl&Dl\&^gj
INR4.7 billion3.
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*()*$@g[`la]^]fl]j]\YfY_j]]e]floal`;gYklYdHjgb][lk
Daeal]\lgbgafldqZa\^gjhjgb][lkafAf\aY7.
Acquisition of
an Indian entity
L`]k][lgj$kljgf_dqmh`]d\Zql`]af^jYkljm[lmj]klgjq$`YkYkljgf_hgl]flaYdlg_jgo^mjl`]joal`l`]Lo]d^l`n]q]YjhdYf
>QH!lYj_]laf_af^jYkljm[lmj]kh]f\gÂFJ-.&+ljaddagf&=n]faf^mlmj]$af^jYkljm[lmj]\]n]dghe]flakdac]dqlgj]eYafl`]
focus area of the GoI.
*
3
4
-
6
/
K`jajYe=H;^gjekn]flmj]oal`:]d_aYf?jgmh$Af\aYf:mkaf]kkAfka_`l$)0>]ZjmYjq*((/$naY>Y[lanY*()*Af^gjeYla[k Af\aY!Dl\&
Welspun, Leighton forms JV for infra business, DNA - Daily News & Analysis, 25 December 2010, via Factiva, 2010. Diligent Media
Corporation Ltd.
SBG buys 20% stake in Maytas Infra, Mist News, 4 August 2010, via Factiva, 2010 Misr Information Serivices and Trading.
?]jeYf]f_af]]jaf_jeY[imaj]kKmjYl[gfkljm[lagf[gehYfq$L`]Lae]kgÂf\aY$,9hjad*()*$naY>Y[lanY*()*L`]Lae]kg^
India Group
French company Vinci buys NAPC, The Hindu, 12 January 2012, via Factiva, 2012 Kasturi & Sons Ltd.
@g[`la]^]fl]jkaflgY_j]]e]floal`;gYklYdHjgb][lk^gjl][`fgdg_qYkkaklYf[]$The Economic Times, 10 April 2012, via Factiva,
2012 The Times of India Group
11
Comparison of investments in FYPs

Tenth FYP (200207)
(INR trillion)
Eleventh FYP (200712)

(INR trillion)
Twelfth FYP (201217)

(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

roads above targeted
achievement in power sector
Power and roads consistently

amounting to ~50% of planned
expenditure added focus on
telecom
Increased thrust on
telecommunications increased
expenditure on ports, oil and
gas pipelines
Source: Eleventh and Twelfth Five year plan, Planning Commission
@go]n]j$l`]k[]fYjagafl`][gfkljm[lagfaf\mkljq`Yk[`Yf_]\afl`]dYkl^]oq]Yjk&L`]k][lgjak^Y[af_Yka_fa[Yfl
daima\alq[jmf[`$oà[àk^gj[af_d]Y\af_[gehYfa]klgoYalYf\oYl[`Z]^gj]lYcaf_mheYbgjogjc&L`]j][]flfYf[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$o]Yc]faf_fYf[aYdklj]f_l`g^Zgl`[gfljY[lgjkYf\\]n]dgh]jk$Ydgf_
oal`ngdYladalqafeYl]jaYdhja[]`YkeY\]hjgb][l]p][mlagf\a^[mdl&<m]lgmfj]Ydakla[Za\kZqf]o]fljYflkafl`]af\mkljqYf\
YdkgZql`]]klYZdak`]\hdYq]jk\m]lgafl]fk][geh]lalagf$k]n]jYdhjgb][lkYj]klm[cafZ]lo]]f&
L`]=H;[gehYfa]k`Yn]lgj]khgf\dggcaf_Yll`]YZgn][`Ydd]f_]k$hjgb][lkYf\hjglkf]]\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&
12
13
2
14
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_fa[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_fa[Yflafn]kle]flkafaf^jYkljm[lmj]hjgb][lk$Ydgf_oal`l`]j]nanYdafl`]j]Yd]klYl]k][lgjYf\_jgolàf
industrial capex are likely to boost the construction industry and act as catalyst for growth of EPC companies in India9.
Oàd]=H;[gfljY[lgjk[gflafm]lgZ]l`]mdlaeYl]Z]f][aYja]kgâf^jYkljm[lmj]afn]kle]flk$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%
3% 2%2%1%
5%
32%
9%
Power
Ports and Inland Water Transport
Roads & Bridges
Oil & Gas
Telecommunications
Mass Rapid Transit System
Railways
Airports
Irrigation and Watershed
Storage
Water supply and Sanitation
9%
17%
17%
Source: Twelfth Five Year Plan document, Planning Commission

0
1
Lo]d^l`>an]Q]YjHdYf*()*%*()/>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$Planning Commission website$`llh2''

hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW)&h\^$Y[[]kk]\*-G[lgZ]j*()+&
J]hgjlg^l`]ogjcaf__jgmhgf[gfkljm[lagf^gjl`]=d]n]fl`n]q]YjhdYf *((/%*()*!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'YZgmlmk'[geeall]]'ojc_jh))'o_))W[gfkljf&h\^$Y[[]kk]\gf(,Fgn]eZ]j*()+&
15
Construction opportunity in the Twelfth FYP 10

Total planned investment in
Twelfth FYP (INR billion)
Construction intensity10
Construction opportunity
(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
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
18,202.4
38%
6,916.9
9,439.0
10%
943.9
Storage*
584.4
50%
292.2
Oil & Gas
1,489.3
25%
372.3
Sector
Airports
Power
Telecommunications*
Total
56,316.9
26,687.7
Source: Twelfth Five Year Plan document, Planning Commission, EY research, Engineering, Procurement and Construction (EPC): Driving
_jgol`]^[a]fldq$ EY, 2011;
*Construction intensity is assumed with comparison to buildings as per data available in the Planning Commissions report. In the case of
telecom, construction intensity of 10% has been assumed.
L`][gfkljm[lagfafl]fkalq$oà[`nYja]kka_fa[YfldqY[jgkkaf^jYkljm[lmj]k][lgjk$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 countrys GDP from 5.2% during the Tenth Five Year
HdYf*((*(/ L]fl`>QH!lg/&.\mjaf_l`]=d]n]fl`>an]Q]YjHdYf*((/)* =d]n]fl`>QH!&Làkaf^jYkljm[lmj]kh]f\ak
expected to increase to more than 9% of the GDP during the Twelfth FYP 20121712.
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$
10 J]hgjlg^l`]ogjcaf__jgmhgf[gfkljm[lagf^gjl`]=d]n]fl`n]q]YjhdYf *((/%*()*!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'YZgmlmk'[geeall]]'ojc_jh))'o_))W[gfkljf&h\^$Y[[]kk]\gf(,Fgn]eZ]j*()+&
11 J]hgjlg^l`]ogjcaf__jgmhgf[gfkljm[lagf^gjl`]=d]n]fl`n]q]YjhdYf *((/%*()*!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'YZgmlmk'[geeall]]'ojc_jh))'o_))W[gfkljf&h\^$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.293295; Column: Target 9% growth. Riders aplenty, Financial Express, 9 September 2011, via Factiva, 2013
Indian Express Online Media Pvt. Ltd.
16
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\]fla]\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.
35%
30.0%
32.7%
32.3%
Comparison of segment-wise composition of infrastructure expenditure
0.8%
1.5%
1.6%
0.6%
0.8%
1.0%
Airports
Storage
0.3%
1.7%
2.2%
2.6%
2.6%
2.6%
5%
2.4%
1.9%
3.5%
10%
6.6%
5.1%
4.5%
15%
13.3%
10.2%
9.0%
20%
11.0%
8.4%
9.3%
25%
15.8%
16.1%
16.8%
16.7%
19.0%
17.2%
30%
10th FYP [INR9.2 billion]
11th FYP [INR23.9 billion]
Mass Rapid
Transit System
Oil & Gas
Ports and Inland

Water Transport
Water supply
and Sanitation
Irrigation
and Watershed
Railways
Telecommunications
Roads & Bridges
Power
0%
12th FYP (P) [INR56.3 billion]
Source: Twelfth Five Year Plan and Eleventh Five Year Plan, Planning Commission
H!hdYff]\_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 GoIs 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 HYf]dlg^Ykl%ljY[ce]_Yhjgb][lk_]lk?gnlkfg\$Hgdala[YdYf\:mkaf]kk<Yadq$)+<][]eZ]j*()*$naY>Y[lanY*()*hZ\&af3Kl]]d
aehgjlfgjek]Yk]\^gje]_Yhjgb][lk$Business Standard, 9 August 2013, via Factiva 2013 via Factiva 2013 Business Standard
Ltd.
14 ,0l`>dYk`J]hgjlgfE]_YHjgb][lk$Eafakljqg^KlYlakla[kYf\Hjg_jYee]Aehd]e]flYlagf$EYq*()+$`llh2''ooo&[khe&_gn&af'
]f_dak`'eh'EHWE9QW*()+&h\^$Y[[]kk]\*-G[lgZ]j*()+&
15 Lo]d^l`>an]Q]YjHdYf*()*%*()/>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW)&h\^$Y[[]kk]\*-G[lgZ]j*()+&
16 Lo]d^l`>an]Q]YjHdYf*()*%*()/>Ykl]j$Egj]Af[dmkan]Yf\KmklYafYZd]?jgol` Ngdme]A!$Planning Commission; Eleventh Five
Year Plan 2007-2012, Planning Commission.
17 =Qj]k]Yj[`3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
17
2.2 Key infrastructure sectors: investment scenario

Roads and bridges
Indias 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^[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
Private
States
11th FYP
12th FYP (P)
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)*)-$af[dm\af_0$0((ceaf>Q)+ Y[lmYdYoYj\]\*(gj)$/.(ce!Yf\1$(((ceaf>Q),20.
18 Eafakljqg^JgY\LjYfkhgjlYf\@a_òYqk EGJL@!*()+YffmYdj]hgjl3Af\aYJgY\F]logjc$NHAI website$`llh2''ooo&f`Ya&gj_'

jgY\f]logjc&`le$Y[[]kk]\*(Fgn]eZ]j*()+3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
19 Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'
hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
20 JgY\eafakljqp]k1$(((CefYlagfYdà_òYqlYj_]l^gjlàkk[Yd$The Economic Times, 17 April 2013, via Factiva 2013 The
Lae]kgÂf\aY?jgmh3=H;2<janaf__jgol`]^[a]fldq$=Q$*())
18
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
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
21
22
659
702
374
382
20,145
12,162
15,377
47,684
Phase VII
Port connectivity
Total
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\k^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
10th FYP
11th FYP
12th FYP (P)
Centre
21 FYlagfYd@a_òYq<]n]dghe]flHjgb][l F@<H!$NHAI website$`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\&3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`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*()+
19
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)
920
2,000
2,205
Gauge conversion
4,289
10,000
5,290
Doubling
1,300
6,000
2,756
JYadoYq]d][lja[Ylagf
1,810
3,500
4,501
New lines
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\]fla]\**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\^$Y[[]kk]\*-G[lgZ]j*()+3JYadoYqEafakljqoYflk[`Yf_]kaf<AHHk><AhdYf$L`]=[gfgea[
Times, 18 October 2013, via Factiva 2013 The Times of India Group.
25 <AHHhjghgk]k)((><AafjYadoYqhjgb][lk$The Economic Times, 26 September 2013, via Factiva 2013 The Times of India Group;
JYadoYqkk]]ck><AafjYadaf^jYkljm[lmj]hjgb][lk$L`]=[gfgea[Lae]k$+G[lgZ]j*()+$naY>Y[lanY*()+L`]Lae]kgÂf\aY?jgmh&
26 =H;2<janaf_?jgol`=^[a]fldq$=Q$*())3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission
website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
27 JYadoYqEafakl]jDYmf[`]k@a_`Kh]]\JYad;gjhgjYlagfgÂf\aYDaeal]\ @KJ;!$Press 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\^$Y[[]kk]\*1G[lgZ]j*()+3:JLhjgb][lkafAf\aYf[ala]kYkaf[dmkan]ljYfkhgjlkqkl]ek7$Mnited 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\^$Y[[]kk]\*1G[lgZ]j*()+3Lo]d^l`>an]
Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'
Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
29 Eg\]d?ma\]daf]k^gjMjZYfDYf\Hgda[q$Eafakljqg^MjZYf<]n]dghe]flo]Zkal]$`llh2''l[hgem\&_gn&af'<anakagfk'EMLH'EG<=DW
?MA<=DAF=KW>GJWMJ:9FWD9F<WHGDA;Q&h\^$Y[[]kk]\*1G[lgZ]j*()+3><Aafj]lYadlglgm[`gfdq)+&+g^hghmdYlagf$The Times
of India - Mumbai Edition, 23 February 2013, via Factiva 2013 The Times of India Group.
20
Investments in MRTS (INR billion)

1,400
1,200
1,000
800
600
400
200
0
10th FYP
Private
States
11th FYP
12th FYP (P)
Centre
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$HHHhjgb][lk`Yn]Z]]fàlZqegj]jgY\Zdg[ckYf\\]dYqk&Af\aYkjklHHH%ZYk]\jYha\
metro rail in Gurgaon has been delayed by more than 10 months31.
30 Report on urban infrastructure and services by the high powered expert committee, National Institute of Urban Affairs website$`llh2''
ooo&famY&gj_'hjgb][lk'`h]['fYdj]hgjl%`h][&h\^$Y[[]kk]\*1G[lgZ]j*()+3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk
Ngdme]AA!$Planning 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$The Economic Times, 3 September 2013, via Factiva 2013 The Times of India Group
21
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`][gmfljqkj]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
10th FYP
Private
States
11th FYP
12th FYP (P)
Centre
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\^$Y[[]kk]\*-G[lgZ]j*()+&
22
L`][Yj_gljY^[`Yf\d]\YleYbgjYf\eafgjhgjlkaf[j]Yk]\YlY;9?Jg^-&*\mjaf_>Q(0>Q)+lg1+,eaddagfe]lja[
lgff]k EEL!$oàd]l`][Yj_gljY^[`Yf\d]\afl`]fYlagfYdoYl]joYqk\gmZd]\\mjaf_>Q(0>Q)*lg/&)EEL&Alak
]ph][l]\l`Yll`][YhY[alqYf\ljY^[Yll`]hgjlkoaddaf[j]Yk]lg+$)+(EELYf\*$,1-EEL$j]kh][lan]dqZq*(*(34.
Development projects for major ports, Maritime Agenda 20102020
Category
No. of projects
Internal funding
(INR billion)
Private sector funding

(INR billion)
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
352
355.6
728.8
Construction/reconstruction of berths and jetties
Total
Source: Maritime Agenda 2010-2020
9lglYdg^+-*hjgb][lk`Yn]Z]]fa\]fla]\^gjaehd]e]flYlagfYleYbgjhgjlkmf\]jl`]EYjalae]9_]f\Y*()(*(*(&
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$Yko]ddYkAOLhjgb][lkogjlÀFJ)(-Zaddagf36.
34 Mh\Yl]gfAf\aYfhgjlk][lgj +)&(+&*()+!$LjYfkhgjlJ]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 Mh\Yl]gfAf\aYfhgjlk][lgj +)&(+&*()+!$LjYfkhgjlJ]k]Yj[Òaf_$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 Af\aYlgk]lmhlogegj]eYbgjhgjlk$FYlagfYdLmjc$-9m_mkl*()+$`llh2''ooo&fYlagfYdlmjc&[ge']f'af\aY%lg%k]l%mh%log%egj]%
eYbgj%hgjlk%,)*.03?gnl]phdgjaf_oYqklgaf[j]Yk]afdYf\oYl]joYqk$ The Economic Times, 15 February 2013, via Factiva 2013
L`]Lae]kgÂf\aY?jgmh3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
23
Airports
L`]9ajhgjl9ml`gjalqgÂf\aY 99A!eYfY_]k)*-Yajhgjlk$af[dm\af_))afl]jfYlagfYd$0)
domestic, 8 customs airports and 27 civil enclaves. During FY08FY13, total passenger and
[Yj_gljY^[l`jgm_Àf\aYfYajhgjlkaf[j]Yk]\YlY;9?Jg^.&,Yf\-lg)-1&+eaddagfYf\
2.2 MMT, respectively37&L`]hYkk]f_]jljY^[ak]ph][l]\lglgm[`+((eaddagfZq*(*(38.
Investments in airports (INR billion)
1,000
900
800
700
600
500
400
300
200
100
0
10th FYP
Private
States
11th FYP
12th FYP (P)
Centre
LglYdafn]kle]flak]klaeYl]\lgZ]AFJ0//Zaddagfafl`]Lo]d^l`>QH 0(Zql`]hjanYl]k][lgj!&;gfkljm[lagfafl]fkalqaf
airports is around 42%, which is expected to result in construction opportunity worth INR368 billion.
The GoI has proposed to build 17 new airports in 11 states, including under-penetrated states such as Arunachal Pradesh,
B`Yjc`Yf\Yf\JYbYkl`Yf$Yko]ddYk)((YajhgjlkafkeYdd]j[ala]k39&L`]Eafakljqg^;anad9naYlagf Eg;9!`YkYhhjgn]\f]o
_j]]f]d\YajhgjlkYlYlglYdafn]kle]flgÂFJ+*(Zaddagf40. The passenger terminal capacity in all airports put together is
expected to be 370 million by 2017 from 230240 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\]\afloghYjlkhgo]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]\[anadogjck&9eYbgjalqgÂf\aYf:L?eYfm^Y[lmj]jk`Yn]^gjYq]\aflgl`]=H;k]_e]flYkY^gjoYj\afl]_jYlagfg^
their capabilities, particularly in the boilers segment. Most Indian BoP players have evolved from general civil contractors,
leveraging their expertise in civil works. Foreign players, especially Chinese and Korean, have adopted the JV route to bid for
super critical boilers in the Indian power EPC market42.
37 Gj_YfarYlagf$9ajhgjl9ml`gjalqgÂf\aYo]Zkal]$`llh2''ooo&YYa&Y]jg'hmZda[Wfgla[]k'YYakal]Wl]kl'gja_f&bkh$Y[[]kk]\*1G[lgZ]j
*()+3LjY^[kmeeYjq$9ajhgjl9ml`gjalqgÂf\aYo]Zkal]$`llh2''ooo&YYa&Y]jg'ljY^[Wf]ok'eYj*c0Yff]p)&h\^$Y[[]kk]\*1
G[lgZ]j*()+3LjY^[kmeeYjq$9ajhgjl9ml`gjalqgÂf\aYo]Zkal]$`llh2''ooo&YYa&Y]jg'ljY^[Wf]ok'eYj*c)+Yff]p)&h\^$Y[[]kk]\
29 October 2013
38 Govt unveils 100 airports in smaller cities, NBM & CW, 24 September 2013, via Factiva 2013 NBM Media.
40 Government proposes to build 17 new airports in 11 states, The Times of India, 8 August 2013, via Factiva 2013 The Times of India
Group.
41 Govt open to offering 100 % stake to private parties at six airports, The Hindu, 30 August 2013, via Factiva.
42 Indian EPC Market: consolidation on horizon$=Q$*()*3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning
24
Indias total installed power generation capacity stood at 228.7 GW as of September 2013. Robust economic growth and
]f`Yf[]\af\mkljaYdY[lanalq`Ykka_fa[Yfldqaf[j]Yk]\l`]\]eYf\^gjhgo]jafl`][gmfljq$d]Y\af_lgYkem[`Yk)*h]Yc
hour power shortages. This makes a compelling case for further large scale investments in the sector43.
Investments in power (INR billion)
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Non-renewable
Renewable
10th FYP
Private
States
Non-renewable
Renewable
11th FYP
Non-renewable
Renewable
12th FYP (P)
Centre
Note: investments by the centre, states and private sectors for renewable energy segment are not given separately in the Tenth plan.
During the period, the total expenditure incurred by the public sector in renewable energy was INR40 billion.
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
43 Egfl`dq9ddAf\aYafklYdd]\_]f]jYlagf[YhY[alqj]hgjl$;]fljYd=d][lja[alq9ml`gjalq$`llh2''[]Y&fa[&af'j]hgjlk'egfl`dq'afklW[YhY[alq'
sep13.pdf, accessed 17 October 2013; Sector focus: power, Indian Infrastructure, August 2011; Twelfth Five Year Plan 2012-2017
=[gfgea[K][lgjk Ngdme]AA!$Planning 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`]^[a]fldq$=Q$*())
25
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 GoIs 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
achieved
Central
State
Private
Total
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
880
26%
5,300
5,300
15,220
16,732
23,012
54,964
70%
26,182
15,530
46,825
88,537
Hydro
Total
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`]^[a]fldq, EY, 2011.
26
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]flkmhklj]Ye ]phdgjYlagfYf\
hjg\m[lagf =H!!$ea\klj]Ye ljYfkhgjlYlagf$Zqhah]daf]$jYadgjljm[c$Yf\klgjY_]!
Yf\\gofklj]Ye j]faf_Yf\hjg[]kkaf_!&Af\aYkGad?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
10th FYP
Private
States
11th FYP
12th FYP (P)
Centre
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$LYeadFY\m$L`]=[gfgea[Lae]k$1G[lgZ]j*()+$naY>Y[lanY*()+
L`]Lae]kgÂf\aY?jgmh3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$
Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'
ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+&
51 Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission
website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\
25 October 2013.
27
;jm\]gadYf\_Ykhjg\m[lagf\mjaf_=d]n]fl`>QHYf\Lo]d^l`>QH$Yf\j]faf_
capacity at the end of Eleventh FYP and Twelfth FYP
Type
Eleventh FYP actual
Twelfth FYP target
ONGC
OIL
Private
Total
% of target
achieved
ONGC
OIL
Private
Total
Crude oil
production
EEL!
124
18
35
177
86%
133
20
63
216
Gas
production
:;E!
114
12
86
213
83%
144
20
177
341
213
88%
314
J]faf_
capacity
EELH9!
EYbgj\gofklj]Yehjgb][lkafl`]gadYf\_Ykk]_e]flaf[dm\]Y1eaddagfe]lja[lgff]kh]j
Yffme EELH9!j]f]jqZq@af\mklYfH]ljgd]me;gjhgjYlagfDaeal]\ @H;D!afJYbYkl`Yf
ogjlÀFJ+/+Zaddagf$Y)-EELH9j]f]jqZ]af_k]lmhZql`]Af\aYfGad;gjhgjYlagf
Daeal]\ AG;D!afGjakkYogjlÀFJ*10Zaddagf$Yf\Y)*EELH9j]f]jqZqFY_YjbmfY
Gad;gjhgjYlagfDaeal]\ FG;D!ogjlÀFJ*-(Zaddagf&Ea\%klj]Yehjgb][lkaf[dm\]DF?
j]_Yka[Ylagfhjgb][lkoal`YlglYd[YhY[alqg^-*EELH9Yf\]klaeYl]\[gklgÂFJ,/(
ZaddagfYf\hah]daf]%dYqaf_hjgb][lkg^YhhjgpaeYl]dq)($(((ceogjlÀFJ+0.Zaddagf52.
In the upstream segment, the GoI cleared 25 exploration and production blocks out of the
31 blocks where work had been stalled on account of security restrictions imposed by the
Ministry of Defence. This was worth approximately INR250 billion investments. The New
=phdgjYlagfDa[]fkaf_Hgda[q F=DH!akYfgl`]jeYbgjafalaYlan]Yae]\YlYlljY[laf_hjanYl]
investment into oil and natural gas. There have been nine rounds of bidding, entailing a
total investment of IN722 billion, made by various operators in E&P till FY11. Out of 235
hjg\m[lagfk`Yjaf_[gfljY[lk HK;k!$/+o]j]ka_f]\\mjaf_l`]=d]n]fl`>QH&GadHKMk
GND$GAD$?9AD$AG;D$:H;DYf\@H;D!`Y\afn]kl]\AFJ-1)Zaddagfladd>Q))&Gn]jk]Yk
oil and gas blocks account for approximately 10% of Indias domestic production. There
Yj]faf]eYbgjhjg\m[lagfYkk]lkafJmkkaY$Km\Yf$:jYrad$KqjaY$Na]lfYe$N]f]rm]dYYf\
;gdgeZaY&<mjaf_l`]Lo]d^l`>QH$GF?;$GADYf\hjanYl]'BN[gehYfa]kYj]]ph][l]\lg
k`ggl*<k]akea[kmjn]qk[gn]jaf_)+0$1/,ce /-ZqhjanYl]k][lgj!Yf\+<kmjn]qk
covering 82,488 sq. km. of land. Furthermore, 1,310 exploratory wells are likely to be
drilled during the Twelfth Plan period53.
52 ?KHD*()*YffmYdj]hgjl3EalmdL`YccYj$?mbYjYlKlYl]H]ljgf]lDl\ka_fkY_j]]e]fl^gjJk
-$(0([jgj]fYf[]oal`[gfkgjlameg^),ZYfck$The Economic Times, 30 June 2012, via
Factiva, 2012 The Times of India Group; Jagdishpur-Haldia pipeline work to begin next
October, Financial Chronicle, 27 September 2011, via Factiva 2011 Deccan Chronicle Holdings
Ltd.; Bihar to sign MoU with GAIL for Jagdishpur-Haldia gas pipeline, E]lak=f]j_qAfka\]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\&3GE;k$=ADoak`lgbgaf?9ADkKmjYl%G\ak`Yhah]daf]$E]lak=f]j_q
Insider$)0EYj[`*()+$naY>Y[lanY*()+E]lak:mkaf]kkKgdmlagfkHnl&Dl\&3Hjgb][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 Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission
28
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
10th FYP
Private
States
11th FYP
12th FYP (P)
Centre
Till now, the services provided for by the private sector have been contractual in nature and
o]j][gff]\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
*()+3;;Afg\lg)+hgo]jhjgb][lk$*-gadZdg[ck$The 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$`llh2''ooo&famY&gj_'hjgb][lk'`h]['fYdj]hgjl%`h][&h\^$Y[[]kk]\
29 October 2013
55 Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website,
`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d'Lo]d^l`hdYf'h\^'ngdW*&h\^$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$`llh2''ooo&famY&gj_'hjgb][lk'`h]['fYdj]hgjl%`h][&h\^$Y[[]kk]\
*1G[lgZ]j*()+3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$
accessed 25 October 2013
29
Timeline of government policies introduced/amended for water supply and sanitation

Municipal Solid Waste Rules
Organizing housetohouse
collection
Segregating recyclable
materials
JnNURM Programme
Reform linked to urban
infrastructure investment
2000
1991
74th Constitutional
Amendment Act
Treat urban water as
a state subject
Ewaste management and

handling rules
reuse and recover useful
material from ewaste thereby
reducing hazardous wastes
2005
2011
2002
National Water Policy
Increased private
participation
Priority given to supply of
drinking water
Privatization
2009
National Water Mission
Framework to increase
l`]]^[a]f[qgôYl]j
usage by 20%
Bureau of Water
=^[a]f[q^gje]\
Focus towards funding of the urban infrastructure projects
2012
Review of NWP draft 2012
Water as an economic
need
=^[a]f[qg^mkY_]
volumetric pricing
establishment of water
regulation authorities
>g[mklgoYj\k]^[a]f[qYf\[gklj][gn]jq
Source: Planning Commission, Ministry of Urban Development, JNNURM
BFFMJE%AoYkl`]jkleYbgjafalaYlan]$oà[`]f[gmjY_]\HHHafl`]mjZYfk][lgj&Mf\]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\aYkjkl
oYkl]j][q[daf_rgf]af?mbYjYllgZ]\]n]dgh]\bgafldqZql`]BYhYf<]n]dghe]flAfklalml] B<A!$Yf\l`]?gn]jfe]flg^
?mbYjYl57.
57 Indias urban awakening, Urban India website$`llh2''mjZYfaf\aY&fa[&af'hjg_jYee]'mokk'E?AWaf\aYWmjZYfarYlagfW^mddj]hgjl&h\^$

accessed 31 October 2013.
30
Buildings
Af\aYakoalf]kkaf_Yk`Yjh[`Yf_]afalk\]eg_jYhà[[gehgkalagf&L`]j]akYka_fa[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_fa[YflmjZYfarYlagf_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
*(+([ala]kYj]hjgb][l]\lgYlljY[lYka_fa[Yflhgjlagfg^l`]jmjYdhghmdYlagf$o`gea_jYl]afk]Yj[`g^bgZghhgjlmfala]k58.
1000
900
800
700
600
500
400
300
200
100
0
550 million additional population

48%
55%
50%
40%
28%
30%
60%
40%
34%
30%
20%
Urbanization (%)
Urban population (million)
Urban population and urbanization projection up to 2050, in million
10%
2000
2010
2020
2030
2040
2050
0%
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
mjZYfggjkhY[]h]j[YhalYoaddaf[j]Yk]lg)*(&/ki&^l&$oàd]l`]jmjYdhghmdYlagfoaddaf[j]Yk]lgegj]l`Yf0/(eaddagfYf\
l`]jmjYdggjkhY[]h]j[YhalYoaddaf[j]Yk]lg)(/&*ki&^l&59
These areas are already facing severe infrastructure constraints and the situation will only get worse if remedial action is not
lYc]f&L`]lglYd`gmkaf_k`gjlY_]^gjl`]Lo]d^l`>QH *()*)/!afl`]mjZYfYj]Y`YkZ]]f]klaeYl]\Yl)0&0eaddagfmfalk
and for rural areas at 43.7 million units.
58 MjZYf9__dge]jYlagfk';ala]k`Ynaf_hghmdYlagf)dYc`Yf\YZgn]$Census India website$`llh2''ooo&[]fkmkaf\aY&_gn&af'*())%hjgn%
j]kmdlk'hYh]j*%ngd*'\YlYWd]k'Af\aY*'LYZd]W+WHJWM9W;ala]]kW)DYc`WYf\W9Zgn]&h\^$Y[[]kk]\*(Fgn]eZ]j$*()+
59 Report on urban infrastructure and services by the high powered expert committee, National Institute of Urban Affairs website,
`llh2''ooo&famY&gj_'hjgb][lk'`h]['fYdj]hgjl%`h][&h\^$Y[[]kk]\*1G[lgZ]j*()+3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[
K][lgjk Ngdme]AA!$Planning Commission website$`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
31
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
2013
2015
Commercial
Industrial
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\]f]\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)(*(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.

32
*&+=H;hdYq]jklgZ]l`]Za__]klZ]f][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
INR56,316.9 billion
60,000
50,000
Actual investment
INR23,859.8 billion
40,000
30,000
20,000
10,000
0
Private
Actual investment
INR9,161.8 billion
48%
37%
22%
10th Plan
11th Plan
12th Plan (P)
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 GoIs
]^^gjlkafhmkàf_HHHhjgb][lkafnYjagmkk][lgjk\m]lgaf[j]Yk]afl`]fmeZ]jg^dYj_]Yf\[gehd]phjgb][lk$oà[`[Ydd
^gjka_fa[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\]fgffYf[aYdklYl]e]flk&

33
Modes of project award

Criteria
EPC
PPP
Government
Government
EPC contract
award
PPP contract
award
EPC contractor
(owns asset)
EPC contractor
Contract
execution
EPC contract
award
SPV
(operates and
maintains asset)
Contract execution
Ownership
Government
Private
Model
Contract
Concession
Lae]Yf\[gkl]^[a]f[q
Af]^[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.
=^[a]f[qg^l`]^Y[adalq
;gfljY[lgjbgZklghkY^l]j[gfkljm[lagf
and handover of the facility
HjanYl]hYjlq`Yklgjmfl`]^Y[adalqYf\af]^[a]fl^Y[adalq
may dent its revenue, hence the facility is made more
]^[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
Contractors revenue is dependent only

on the construction of the facility
The revenue of the private player is generally dependent

gfl`]keggl`jmffaf_g^l`]hjgb][l
Operation and Maintenance
Contractor is only responsible for

constructing the facility
Private partner is responsible for operation and

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[`n]`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]l]al`]jl`jgm_`[gfljY[lkYoYj\]\Zq_gn]jfe]fl[da]flkgjhjanYl]\]n]dgh]jk&
62 =H;2<janaf_?jgol`=^[a]fldq, EY, 2011
34
35
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

sub-sector
Clientele base*
(government-private ratio)
Order of models adopted

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`=^[a]fldq, EY, 2011
36
Prevailing conditions in various sectors

EPC Market
Sub-sector
Competition
Complexity
Government
role
(facilitator)
Infrastructure
EPC
Roads
Railways
Ports
Airports
Urban
infrastructure
Building EPC
Building
Oil & Gas EPC
Oil & Gas
Power EPC
Power
Kh][aYdar]\=H;
Marine
Hydro
Industrial
High
Medium
Low
Entry
barriers
Opportunity
size
Foreign
players
interest
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.
37
3
38
Sector trends
3.1 Investment in niche areas on the rise

>an]Q]YjHdYfk >QHk!`Yn]oalf]kk]\ka_fa[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`]?gAkaf[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 nations 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]^[a]f[q&Làkak]ph][l]\lg\jan]afn]kle]flhdYfk
through the Twelfth FYP65.

hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
65 ?]f]jYlagf:Yk]\Af[]flan] ?:A!$Indian Power Sector website$`llh2''af\aYfhgo]jk][lgj&[ge'`ge]'lY_'_Za'$Y[[]kk]\*Fgn]eZ]j
*()+$@m_]hgl]flaYdlglYhj]f]oYZd]]f]j_q2G^[aYd$Economic 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*()+3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''
hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
39
Transit-oriented development: 9fgl`]j]e]j_af_Yj]Ygâfn]kle]flakljYfkal%gja]fl]\\]n]dghe]fl LG<!$km[`Yk

af\mkljaYd[gjja\gjk$lgofkàhkYf\[ala]k ZmadlYjgmf\eYbgj]phj]kkoYqk$jYad[gjja\gjk$Yajhgjlk$hgjlkYf\ljYfkal`mZk!&
L`]?gA`YkhdYff]\af\mkljaYd[gjja\gjk$af[dm\af_l`])$,0+%ce<]dàEmeZYaAf\mkljaYd[gjja\gj <EA;!Yf\l`]H]fafkmdYj
J]_agfAf\mkljaYd<]n]dghe]fl;gjja\gj HJA<]!oalàlklogeYbgjd]_kl`])$(((%ceEmeZYa%:Yf_Ydgj]Af\mkljaYd
;gjja\gj E:A;!Yf\l`];`]ffYa%:Yf_Ydgj]Af\mkljaYd;gjja\gj ;:A;!&L`]k]hjgb][lkYj]]ph][l]\lgZjaf_YZgmlj]Yd]klYl]
development and infrastructure across 150km to 200km on both sides of the alignment of the corridors, including integrated
industrial townships66. The INR6,200 billion DMIC comprises 24 nodes, 11 investment regions and 13 industrial areas in
<EA;$Yf\alk[gfkljm[lagfak]ph][l]\lgZ][gehd]l]\Zq*(*-&L`]?gA`YkYdkgZ]]fhmkàf_lg\]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]dqn]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][a[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_fa[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&$Dl\&3;]flj]k]]ck[gf[]hlfgl]gfH]fafkmdYjhjgb][l$The 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[`*()+$naY>Y[lanY*()+L`]KlYl]keYfDl\&3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning
Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+3+&*,Zf^gj
<EA;hjgb][lYhhjgn]\Zq_gnl$Hindustan Times websit3$`llh2''ooo&àf\mklYflae]k&[ge'Zmkaf]kk%f]ok'+%*,%Zf%^gj%\ea[%hjgb][l%
Yhhjgn]\%Zq%_gnl'Yjla[d])%)(-.00+&Ykhp$Y[[]kk]\*-G[lgZ]j*()+
67 JYadoYqkk]]ck><Aafaf^jYhjgb][lk$>afYf[aYd=phj]kk$,G[lgZ]j*()+$naY>Y[lanY*()+Af\aYf=phj]kkGfdaf]E]\aYHnl&Dl\&3
JYadoYqkk]]ckJk)$(($(((%[jhjanYl]afn]kle]flafHHHhjgb][lk$<geYaf%:$,G[lgZ]j*()+$naY>Y[lanY*()+L`]Af^gjeYlagf
Company Pvt. Ltd.; Feasibility Study for Hi-speed Train, NBM & CW, 25 October 2013, via Factiva 2013 NBM Media.; North-East
gets Rs. 20,000cr rail network, NBM & CW, 3 November 2013, via Factiva 2013 NBM Media.
68 CYjfYlYcYlgk]lmh+eYfm^Y[lmjaf_rgf]k^gjf]oaf\mklja]k$KYjcYjal]d$.Bmdq*()+$naY>Y[lanY*()+KYjcYjal]d3*-$(((Y[j]k
^gjlogFAERhjgb][lk$L`]@af\m$))EYq*()+$naY>Y[lanY*()+CYklmjaKgfkDl\&3CYjfYlYcYkmZealkhdYf^gjaf\mkljaYdrgf]
40
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]f]jq[gfkljm[lagfYf\hah]daf]ljYfkhgjlYlagf&Af\aYk\]h]f\]f[]gfaehgjl]\DF?akaf[j]Ykaf_ mh^jge0&*EELH9
af>Q(0lg)(&1EELH9af>Q)+!70&L`]j]^gj]$l`]?gA`YkhdYff]\lgaf[j]Yk]l`]DF?j]%_Yka[Ylagf[YhY[alqlg
YhhjgpaeYl]dq-(EELH9af>Q)/$oal`_j]]f]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]faf_[YhY[alqak]klaeYl]\lgaf[j]Yk]ZqYhhjgpaeYl]dq,/
to 314 MMTPA by the end of Twelfth FYP74&AG;DhdYfklgafn]klAFJ-((Zaddagflg]phYf\alkj]faf_[YhY[alqYf\k]llaf_mh
Yf]oj]f]jqgfl`]o]kl[gYklgÂf\aY75.
69
70
71
72
73
74
75
near Bangalore, Mint, 18 October 2012, via Factiva 2012 HT Media Limited. KERALA PLANS MEGA MANUFACTURING ZONES
OAL@Jk,0$0*-%;JGJ=GMLD9Q$Af\aYf:mkaf]kkAfka_`l$1G[lgZ]j*()+naY>Y[lanY*()+Af^gjeYla[k Af\aY!Dl\&
Report of Working Group on Warehousing Development and Regulation, Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&
af'YZgmlmk'[geeall]]'ojc_jh)*'hh'o_WoYj]&h\^$Y[[]kk]\.Fgn]eZ]j*()+3;YhY[alqYf\MladakYlagfgÔYj]`gmk]k Gof]\'@aj]\
;gn]j]\!mf\]j;]fljYdOYj]`gmkaf_;gjhgjYlagfafAf\aY )11/%)110lg*())%*()*!$IndiaStat website$`llh2''ooo&af\aYklYl&[ge'
lYZd]'Y_ja[mdlmj]'*'[]fljYdoYj]`gmkaf_[gjhgjYlagfklYl]oYj]`gmkaf_[gjhgjYlagf'+*/*-'+1,..0'\YlY&Ykhp$Y[[]kk]\.Fgn]eZ]j
*()+3Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''hdYffaf_[geeakkagf&
fa[&af'hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
Import of LNG, PPAC website$`llh2''hhY[&gj_&af'$Y[[]kk]\-G[lgZ]j*()+
<jY^lJ]hgjlg^l`]Ogjcaf_?jgmhgfH]ljgd]meFYlmjYd?YkK][lgj^gjl`]PAAl`HdYf *()*%)/!$Af^jYdaf]=f]j_q\YlYZYk]$ooo&
af^jYdaf]&[ge'$Y[[]kk]\-G[lgZ]j*()+
Exploration and exploitation of Shale Gas and Oil by National Oil Companies under nomination regime, Press information bureau
website$`llh2''haZ&fa[&af'f]okal]'HjaflJ]d]Yk]&Ykhp7j]da\511.+-$*,K]hl]eZ]j*()+3Af\aY;d]YjkK`Yd]%?Yk$;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
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*()+
Lo]d^l`>an]Q]YjHdYf*()*%*()/=[gfgea[K][lgjk Ngdme]AA!$Planning Commission website$`llh2''hdYffaf_[geeakkagf&fa[&af'
hdYfk'hdYfj]d')*l`hdYf'h\^'ngdW*&h\^$Y[[]kk]\*-G[lgZ]j*()+
Af\aYfGadlgafn]klJk-($((([jgj]afj]faf_]phYfkagf$Business Standard, 5 September 2012, via Factiva 2012 Business
Standard Ltd.
41
+&*=fljqg^_dgZYdhdYq]jk'_dgZYdarYlagf
Several international EPC contractors have entered India to tap the considerable potential opportunities for investment
afaf^jYkljm[lmj]hjgb][lk&HdYq]jkkm[`YkKYekmf_g^Cgj]Y$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]lkg^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][a[gjhjgb][l%kh][a[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][a[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]\Ogjd\Gf]afEmeZYa$Z]af_[gfkljm[l]\ZqKaehd]pAf^jYafBNoal`Y
Middle-East-based construction giant78.
Furthermore, there are a large number of global companies that have set up their own subsidiaries in India and are bidding
\aj][ldq^gjhjgb][lkafAf\aY&>]okm[`hdYq]jkYj]KYekmf_ Cgj]Y!$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 Kaehd]pAf^jYBNlgZmad\lYdd]klj]ka\]flaYdZmad\af_$Hjgb][lEgfalgj$*,BYfmYjq*())$naY>Y[lanY*())=[gfgea[J]k]Yj[`
India Pvt. Ltd.
79 O]dkhmfAf^jYHjgb][lkY[imaj]k+-klYc]afD]a_`lgf;gfljY[lgjk Af\aY!$<YlYegfalgjk>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*()+
42
+&+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_fa[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*((/!$l`gm_àf^jYkljm[lmj]
hjgb][lk`Yn]_jgofZa__]jafkar]Yf\egj][gehd]paffYlmj]&
Year-wise quantum of PE deals
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total
12
15
14
13
79
Value (US$ million)
16
51
272
870
407
143
191
407
69
16
2,441
Average deal size

(US$ million)
16
17
23
58
29
20
24
31
14
16
31
No. of deals
Kgmj[]2=Qj]k]Yj[`Yf\9kaYfN]flmj];YhalYdBgmjfYd 9N;B!
Year-wise quantum of PE deals

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

*As of September 2013
43
PE transactions: key trends

Year
Highlights
*((,(-2jklegn]jk^mf\k
chasing large players
H=afn]kl]\afl`]dYj_]kl[gfkljm[lagf_jgmhkg^l`][gmfljq$ANJ;D$HmfbDdgq\Dl\&Yf\?Yeegf
Af\aYDl\&3l`]eYbgjalqg^\]Ydko]j]afl`]fYlmj]g^hjanYl]hdY[]e]flk&Làkh]jag\eYjc]\l`]
beginning of euphoria in the sector.
200609: perfect competition

high capital infusion into the
sector
;gfka\]jYZd]H=Y[lanalqafea\%kar]\[gehYfa]k3^g[mk\an]jka]\^jgeaf^jYkljm[lmj][anad[gfljY[laf_
lgfa[`]Yf\kh][aYdar]\k][lgjk&>]o]pYehd]kYj]K`jajYe=H;$?YqYljaHjgb][lk$9k`gcY:mad\[gf$
;gYklYdHjgb][lkYf\JYecqAf^jY&
2010 onward: slowdown in PE

activity
Select deals, with investors focusing on PIPE deals as stocks began trading at reduced valuations.
=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^fYf[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
multiple levels
Holding company
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]YcfYf[aYd[gf\alagfkYf\$`]f[]$^mf\k^gjf]o
investments may be limited in future. The exit challenges in current investments poses considerable challenge for future
investments.
44
Key PE investments in infrastructure holding companies formed by EPC players 81,82,83,84,85,86, 87,88,89
Target
Year
81
Infrastructure holding company of L&T
2006
?YqYljaAf^jYN]flmj]k$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 N;$hjanYl]]imalqjekk]Yd\]Ydkogjl`)&.Zf$The Economic Times, 26 May 2006, via Factiva The Times of India Group.
82 ?YqYljaHjgb][lkDaeal]\@aklgjq$EYjc]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 @;;;gf[]kkagfk[gf[dm\]k]imalqljYfkY[lagfoal`L`]PYf\]j?jgmh$@;;hj]kkj]d]Yk]$`llh2''ooo&`[[af\aY&[ge'`[[WY\eaf'
\YlYW[gfl]fl'h\^Wd]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 Indias 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 FJHD?=LKJK--(;JGJ=>MF<AF?>JGEHAJ9E9D=FL=JHJAK=K naY\]Z]flmj]k!$Af\aYf:mkaf]kkAfka_`l$),9hjad*()+$
naY>Y[lanY*()+Af^gjeYla[k Af\aY!Dl\&
45
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$oal`^mf\klgl`]lmf]gÂFJ-(&/Zaddagfgoaf_
into the sector90.
Funds raised through IPOs of construction companies
60
50.7
50
INR billion
40
30
20
10
6.7
5.2
6.0
4.2
1.0
0.6
1.8
0
2005
2006
2007
2008
2009
2010
2011
2012
Source: Dealogic
While there are many companies that would have considered an IPO to provide exit to PE investor, the current stock market
akfgl[gf\m[an]]fgm_`$oal`klg[cklYfcaf_lgYdd%lae]dgok&@]f[]$o]k]]Yka_fa[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 200609 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
46
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.
47
Market evolution
30
27
27
24
Fgg^[gehYfa]k
25
20
20
26
22
21
18
22
18
15
10
5
10
0
FY09
Fg&g^dYj_]kar]\[gehYfa]k
FY10
FY11
Fg&gê]\amekar]\[gehYfa]k
FY12
FY13
Fg&g^keYddkar]\[gehYfa]k
Fgl]2L`]YZgn]_jYh`j]][lkl`]kà^lafl`]j]n]fm]hjgd]g^[gehYfa]kgn]jl`]q]Yjk [gfka\]j]\^gjl`]hmjhgk]g^gmjYfYdqkak!
EYjc]lkar]Yf\hjglYZadalq
Particulars
FY 09
FY 10
FY 11
FY 12
FY 13
835
922
1,054
1,243
1,341
Mid-sized companies
254
307
376
454
444
82
132
146
139
127
1,172
1,360
1,576
1,836
1,913
40
45
50
45
36
Mid-sized companies
13
18
16
11
*!
,!
54
68
75
59
43
Revenue (INR billion)
Total
PAT (INR billion)
Total
Kgmj[]2;gehYfqYffmYdj]hgjlkYf\;YhalYdaf]$=Qj]k]Yj[`ZYk]\gf[gehYfa]ke]flagf]\afdaklg^dYj_]%kar]\$ea\%kar]\Yf\keYdd%kar]\
Zqj]n]fm]![gehYfa]k
Total revenues have grown at a CAGR of 13.0% during FY09FY13; however, total PAT decreased at a CAGR of -5.4%. This
af\a[Yl]kl`Ylj]n]fm]k`Yn]emdlahda]\Yll`][gklg^mdlaeYl]hjglYZadalq&EYfq[gehYfa]k`Yn]j]hgjl]\f]_Ylan]H9L
\mjaf_>Q)+$l`]j]Zq\aklgjlaf_eYjc]l][gfgea[k&Làklj]f\j]][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\&
48
Market capitalization performance

300
250
200
150
100
50
0
FY08
FY09
Large
FY10
Mid
FY11
Small
FY12
FY13
FY14H1
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(0>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 FY1314.
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
Debt/market cap (x)
7.00
6.00
5.00
4.00
3.00
2.00
1.00
FY09
Large sized companies
FY10
FY11
Mid sized companies
FY12
FY13
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)(&
49
L`]YZgn]_jYh`$à_`da_`laf_l`]jYlagg^lglYd\]Zl'eYjc]l[YhalYdarYlagf$af\a[Yl]kl`]\]l]jagjYlaf_fYf[aYd`]Ydl`g^
[gehYfa]k&<]Zlhj]kkmj]k`Yn]Z]]faf[j]Ykaf_$Y\n]jk]dqaehY[laf_[gehYfa]khjglYZadalq&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./
lae]kl`]eYjc]l[YhalYdarYlagf&92
Market capitalization/revenue92
Market cap /revenue (x)
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
FY09
FY10
FY11
Mid sized companies
FY12
FY13
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]][laf_l`]ajj]n]fm]k&O`]f[gehYj]\oal`>Q(1$o]k]]Y[d]Yjdq\][j]Ykaf_lj]f\&Làkak\m]lgl`]àlgfhjglYZadalq
à_`da_`l]\aflYZd]gfeYjc]lkar]Yf\hjglYZadalq!]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.
50
51
4
52
Key challenges
,&)Akl`]hjgb][lZa\naYZd]7
Hjgb][lk]d][lagfZ][ge]kl`]c]qlgeYaflYafaf_hjglYZadalqo`]fghhgjlmfala]kYj]Yhd]flqYf\[geh]lalagfakka_fa[Yfl&
A^hjgb][lkYj]fglk]d][l]\bm\a[agmkdq$l`]qeYq\jYafj]kgmj[]koal`gmlhjgna\af_[gee]fkmjYl]j]lmjfk&L`]j]^gj]$fgl
gfdq\g]kaehjgh]jhjgb][lk]d][lagfY^^][ll`]fYf[aYd`]Ydl`g^Y[gehYfq$ZmlalYdkgf]_Ylan]dqaehY[lkalk_gg\oadd&Oàd]
kge]\]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[qm[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_fa[Yfldq]jg\af_l`]Z]f]lg^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 JMH==>9DDHMK@=KHJGB=;L;GKLK:QMHLG)-$;gfkljm[lagfKh`]j]$+)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%)-$Y[[]kk]\gf)*G[lgZ]j*()+&3AehY[lg^>gj]a_f
;mjj]f[qgfHjgb][l<]Zl$Af\aYJYlaf_kJ]k]Yj[`$)*Bmf]*()+&
53
Stage of EPC contract

Pre-tender stage
Political risks
Environmental risks
Post-tender stage
Execution stage
Hgdala[YdklYZadalqg^l`][gmfljq3
[`Yf_]af_gn]jfe]flk
Delay in approvals and land

acquisition
Environmental approvals
Unfavorable climatic condition and

lghg_jYh`q
Technical risks
Afkm^[a]flhj]daeafYjqj]k]Yj[`gf <]ka_f[`Yf_]k'afY\]imY[a]k3
scope, resource availability,
resource availability; site conditions
l][`fgdg_qj]imaj]e]fld]Y\af_lg
inaccurate time and cost
estimations
Mf^YeadaYjalqoal`lghg_jYh`q'
terrain; resettlement and
j]`YZadalYlagf3mladalqkà^laf_
Financial risks
;gkl]klaeYl]kYf\fYf[af_
assumptions
Daima\alqYf\[j]\alk`gjlY_]
>gj]a_f]p[`Yf_]Yf\afl]j]kljYl]
m[lmYlagf
Economic downturn
Delay in payments from client;

unavailability of resources
Mf^YeadaYjalqoal`l`]dg[YddYok
Yf\j]_mdYlagfk
Mf^YeadaYjalqoal`l`]dg[YddYokYf\
j]_mdYlagfk3daeal]\kYqaf[gfljY[l
f]_glaYlagfk
mf^YeadaYjalqoal`l`]dg[Yd
dYok$lYpYf\j]_mdYlagfk
JakcYkkg[aYl]\oal`]pl]jfYd
`YrYj\k$af[dm\af_klgjek$gg\k$
]YjlìmYc]k$nYf\Ydake$kYZglY_]
and terrorism; civil unrest
Market risks
Contractual/ legal
risks
Force majeure risks
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]fYf[af_j]imaj]\
lg^mf\l`]]p][mlagfg^]paklaf_gj\]jZggckYf\Y[à]n]kmklYafYZadalq^gj^mlmj]&;mjj]fldq$eYbgjalqg^=H;[gehYfa]k
Yj]d]n]jY_]\lgkm[`Yf]pl]fll`Yll`]aj[Yk`gok\gfglh]jealY\\alagfYdZgjjgoaf_kmhhgjl&AfY\\alagflglàk$hjgb][l
delays, cost overruns, delayed payment mechanisms and litigations add to an increased requirement for working capital. The
gfdqfYf[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.
54
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
Debt/equity (x)
2.00
1.50
1.00
0.50
FY09
DYj_]kar]\[gehYfa]k
FY10
FY11
Ea\kar]\[gehYfa]k
FY12
FY13
KeYddkar]\[gehYfa]k
Source: Company annual reports & Capitaline

Fgl]2L`]YZgn]_jYh`j]][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_fa[Yfldq&L`]af[j]Yk]af\]Zl^gjdYj_]%kar]\[gehYfa]k[YfZ]YlljaZml]\\m]
to its exposure to BOT business.
Net debt/EBITDA
F]l\]Zl'=:AL<9 p!
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
FY09
DYj_]kar]\[gehYfa]k
FY10
FY11
Ea\kar]\[gehYfa]k
FY12
FY13
KeYddkar]\[gehYfa]k
Source: Company Annual Reports & Capitaline

Note: The above graph r]][lke]\aYffmeZ]j^gjl`]hmjhgk]g^YfYdqkakYf\[gehYjakgf
55
L`]YZgn]_jYh`g^F]l<]Zl'=:AL<9af\a[Yl]kl`]Y\]imY[qg^=:AL<9$oà[àkl`]gh]jYlaf_[Yk`goYnYadYZd]^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]afhjglYZadalqgjgh]jYlagfYd[Yk`go&Làk[d]Yjdqj]][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`]qoaddf\al\a^[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^gY\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]]fgffYf[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$dY[cg^Y[[gmflYZadalq$hgkl\akZmjkYdkmh]jnakagf$Yf\]pl]jfYd^Y[lgjkkm[`Yk[d]YjYf[]
delays95.
High erosion of book value96

Market capitalization to book equity96
Market cap/book equity (x)
3.00
2.50
2.00
1.50
1.00
0.50
0.00
FY09
FY10
FY11
Mid sized companies
FY12
FY13
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$ZmlYlYjYl`]jka_fa[Yfl\ak[gmfllgZggcnYdm]&@go]n]j$af[gehYjakgf$\mjaf_>Q(1
>Q)($l`]klg[cko]j]ljY\af_YlYhj]eamelgl`]ajZggc]imalq&AfhYjla[mdYj$dYj_]%kar]\[gehYfa]k[geeYf\]\ka_fa[Yfl
premium.
94 Af^jYkljm[lmj]jekk]ddYkk]lklgj]\m[]\]Zl$Eafl9kaY$))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*()+3L`]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&
56
Financial snapshot of EPC companies

Particulars
FY 09
FY 10
FY 11
FY 12
FY 13
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%
40.8%
41.1%
38.5%
34.2%
37.6%
10.0%
9.8%
11.9%
9.8%
10.8%
PAT %
4.6%
4.0%
3.9%
2.3%
1.3%
Interest/Revenue
4.2%
4.1%
4.5%
5.4%
7.5%
29.5%
40.3%
35.4%
39.0%
45.0%
EBIDTA %
9.9%
11.6%
9.9%
9.3%
12.2%
PAT %
4.5%
5.9%
4.3%
0.4%
0.1%
Interest/Revenue
4.2%
3.6%
4.4%
6.5%
8.6%
33.0%
30.3%
28.6%
47.6%
42.7%
Working Capital/Revenue
Mid-sized companies
EBIDTA %
Note: The above table indicates the median number of the companies considered for analysis
57
4.4 How will PE investors exit?

Egklea\%kar]\mfdakl]\[gehYfa]k`Yn]hjanYl]]imalqafn]klgjko`g`Y\afn]kl]\[YhalYd\mjaf_*((.*())&@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, 20062013
Exit deal value high,
overall PE investment
declining
1,000
PE investments
and exits growing
Exits value low, overall PE

investments declining
16
14
800
12
700
600
10
500
400
300
200
100
0
No. of deals
Total value, US$ million
900
2006
2007
Total PE investment (US$ million)

No. of investment deals
2008
2009
2010
2011
2012
2013
Total PE exits (US$ million)

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.
58
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\[gklgn]jjmfkklYlakla[kj]%
]f^gj[]làk^Y[l&9kg^Bmdq*()+$gmlg^YlglYdg^.1,gf_gaf_af^jYkljm[lmj]hjgb][lkYoYj\]\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]'fgp]\\Yl]g^
commissioning
Source: Flash report on central sector projects (INR150 crore and above), Ministry of Statistics and Programme Implementation, July 2013
OalàfYlagfYjqhj]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$hj]\geafYfldq\m]lgdYf\Y[imakalagfYf\Ja_`lgÔYqakkm]k&
Other key sectors plagued by cost overruns are power and the railways.
Cost overrun in various segments97
Sector
Number of projects delayed
Delay period (months)
Cost overrun (INR billion)
Roads and transport
91
2108
)1&, )&1!
Power
50
1102
)0+&1 /&+!
Railways
35
3240
)$(-+&1 0.&,!
-*&/ ))&1!
Coal
28
1272
+(&1 0&)!
Other
85
++-&/ )(&,!
Urban infrastructure
97 *1+\]dYq]\hjgb][lkd]\lg[gklgn]jjmfg^Jk.0C[jgj]$J]YdlqHdmk, 23 February 2011, via Factiva,

2011 Adsert Web Solutions Pvt. Ltd.
59
Some key issues and their impact of delay in time and cost overruns
60
Issue
Impact on time
Impact on cost
Land acquisition challenges
<]dYqafhjgb][l[gehd]lagf
=phgk]khjgb][llgafYlagfYjq[gkl
escalations
Ambiguity in design and engineering

kh][a[Ylagfk
Delay in arrival of detailed drawings by

consultant
Delay in procurement and delivery of

critical equipment
Impacts several activities, depending on

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

subsequent activities as well
Gn]jYddaf[j]Yk]afhjgb][l[gkl\m]lg
idle time of several resources
Change of scope
AehY[lkgn]jYddhjgb][llae]daf]Yf\
j]kgmj[]mladarYlagf
Impacts cost and working capital cycles

due to the extra work
Lack of coordination between various

participants (vendors, sub-contractors,
etc.)
Idle time of several resources
Extra cost incurred due to reduced

productivity and increased idleness
Delay in regulatory clearance
<]jYadhjgb][lkaf\]fal]dq
=phgk]khjgb][llgafYlagfYjq[gkl
]k[YdYlagfk]kh][aYddqp]\[gklkg^
equipment and labor
Af]^[a]flhjgb][lZm\_]laf_Yf\dY[cg^
contingency funds
Delay due to arrangement of bridge

fYf[af_
;gklg^hjgb][lka_fa[Yfldq\]naYl]k^jge
budget
Rise in the cost of raw materials
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]lgdd
the gap created by the delay in payments
Contractor may have to raise funds

through additional equity or debt to fund
working capital
61
5
62
Overcoming
challenges
-&)K][lgjYf\jgd]\an]jka[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]jka]\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]jka[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_fa[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
Oil & Gas
Railways
Complexity
Power Generation
Airports and Ports

Storage
Roads
2
Renewables
Water
Buildings
Power T&D
0
0
0.5
1.5
2.5
3.5
4.5
5.5
Competition
Source: EY research
63
<an]jka[Ylagfakd]_alaeYl]aâl\]%jakckl`]Zmkaf]kk$hjgna\]kkqf]j_qlg[mjj]flgh]jYlagfkYf\j]kmdlkafYhgkalan][gkl%
Z]f]lYfYdqkak&=n]jqk][lgj`Ykalkgofakkm]k$afn]kle]flk$hjgleYj_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$hjgb][lfYf[af_Yf\Ykk]leYfY_]e]fl
Kh][aYdar]\k]jna[]kkm[`Yko]Yl`]j^gj][Yklaf_$jY\aYlagf\]l][lagf$]e]j_]f[qeYfY_]e]flYf\h]jkgff]dljYafaf_Yl
various levels
Inter-changing roles
Developer
Financer
EPC
contractors
inter-changing
roles
EPCM
Project
manager
Contractor
Supplier
Design
consultant
The construction industry has witnessed many EPC players shifting into PPP
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
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
for corporate debt-restructuring.
Egkl_dgZYd=H;hdYq]jk_an]hjgb][leYfY_]e]flmlegklaehgjlYf[]
Yf\\]egfkljYl]l`]aj[YhYZadala]kl`jgm_`kmh]jagjhjgb][l\]ka_faf_Yf\
]^^][lan]hjgb][leYfY_]e]fl&L`]j]kgmj[]k\]hdgq]\gfYhjgb][l[YfZ]
gmlkgmj[]\$Zmllg`Yn]Yfgn]jYdd[gfljgdl`jgm_`Yf]ph]ja]f[]\hjgb][l
management team is considered to be key to mitigating time and cost
overrun risks. While Indian companies have been traditionally outsourcing
such services, many are now moving toward owning such capabilities inhouse.
Highlights
Irrigation companies are diversifying into other sectors as the GoIs 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]jka[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.
64
-&*?dgZYdarYlagf
L`]?gAkYhhjgnYd^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`]><Aafgoafl`][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$3.1 billion in FY12, indicating that the global construction players are exercising caution
in entering the industry. Though, the holdings of foreign portfolio investors, or FIIs, have been rising consistently in Indian
companies and were at an all-time high in the beginning of FY14, on the back of a positive long-term outlook.
Strategic alliances and technical partnerships with global and domestic players in the EPC industry provide the following value
additions:
In case of Indian companies entering partnerships with global companies, it gives the domestic players access to
Latest global technology and equipment
?dgZYdhjgb][leYfY_]e]flYf\jakceYfY_]e]fl[YhYZadala]k
Elimination of out-dated practices and improved quality and work-practices due to increased competition
Companies planning to diversify into new sectors without any prior experience in them have the opportunity to move up
l`]nYdm][`YafZqhYjlf]jaf_oal`hjgb][l%kh][a[gj]d\%kh][a[kh][aYdaklk&
9kY^mlmj]kljYl]_q$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.
65
Key acquisitions by Indian companies99, 100, 101

Acquirer
Target
Details
Gammon India
>jYf[gLgkaE][[Yfa[Y /-&)!$KY\]dea -(

klYc]!Yf\Kgfl]jk&h&Y `gd\af_[gehYfqg^
9fkYd\g;Yd\Ya]$-(klYc]!
In 2008, Gammon acquired a stake in three Italian

companies Franco Tosi Meccanica for INR2.5 billion,
KY\]dea^gjAFJ(&-ZaddagfYf\Kgfl]j^gjAFJ+&*-Zaddagf99.
Hindustan
Construction
Company
CYjdKl]af]j ..klYc]!
Af*()($làkoYk@;;kjklafl]jfYlagfYdY[imakalagfYkakaf
line with HCCs strategy to equip HCC with a total solutions
capability for a facility at a single source100.
Simplex
Infrastructure Ltd.
9keYddeafaf_[gehYfq )((klYc]!
In 2012, Simplex Infrastructure Ltd. acquired a subsidiary

of US-based Joy Global, Inc., engaged in the business of
underground coal mining services in India in 2012101.
11?YeegfZmqk-(klYc]afAlYdaYf[gKgfl]j$Business Line (The Hindu), 11 September 2008, via Factiva 2008 The Hindu Business
Line.
100 Steiner AG, HCC website$`llh2''ooo&`[[af\aY&[ge'cYjdWkl]af]jY_&h`h$Y[[]kk]\*(Fgn]eZ]j*()+
101 Simplex Infrastructures: Outcome of Board Meeting, Indian Company News Bites Stock Report, 15 May 2012, via Factiva, 2012
News Bites Pty Ltd
66
Af\aYf[gehYfa]k`Yn]Ydkg^gjYq]\aflggn]jk]YkeYjc]lkYf\Yj]Za\\af_^gjhjgb][lkl`]j]&
Key recent overseas project bids by Indian companies 102, 103, 104, 105
Indian company
Country/
region
Project
EPC sector
Project/ bid/
contract
amount (US$
million)
Details
Larsen &
Toubro102
MiddleEast and
Malaysia
Hydrocarbon
Oil & Gas
3,000
Larsen & Toubro seeks to

increase its portfolio in overseas
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
Infrastructure
Limited103
Jordan
4-MTPA New Rock

phosphate terminal,
Aqaba
Ports
200
L`]hjgb][lhjgna\]kYhdYl^gje
for Afcons to further bid for port
hjgb][lkafYddl`]?md^[gmflja]k&
Essar
Projects104
Abu Dhabi
3.6 cubic metre per

hour-Spent Caustic
Treatment Plant,
Industrial
80
Korea
Carbon Black & Delayed

;gc]j ;:<;!Hjgb][l^gj
l`]JmoYakj]f]jq
=kkYjHjgb][lk`YkZa\^gj
l`]k]hjgb][lkafdaf]oal`l`]aj
strategy to reinforce their
global footprint, especially in
key markets of the Middle East,
South East Asia, India, Africa,
and the US.
Korea
Loafafl]jj]f]jq
hah]daf]k AJH!
Iraq
Primary sanitary, storm

and trunk sewer systems
Water
supply and
sanitation
230
Shriram EPC forayed into

the Middle East through this
contract, and look for sustained
revenues from the region
for 3 years as well as further
opportunities in Iraq.
Shriram EPC105
102DYjk]fLgmZjglgZa\^gjgn]jk]Yk`q\jg[YjZgfhjgb][lkogjl`+Zaddagf$The Economic Times, 6 June 2013, via Factiva 2013

The Times of India Group.
1039>;GFKOAFK>AJKLHJGB=;LAFBGJ<9F l`]*((eaddagf[gfljY[lak^gjZmad\af_l`]f]ojg[ch`gkh`Yl]l]jeafYdYl9iYZY!$
Af\aYf:mkaf]kkAfka_`l$).EYq*()($naY>Y[lanY$*()(Af^gjeYla[k Af\aY!Dl\&
104=kkYjHjgb][lkZY_kMK<0(eaddagfogjl`[gfljY[lkaf9Zm<`YZa$The 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
67
5.3 Thrust from the government in driving EPC sector,

infrastructure as a whole
9khYjlgâlkn]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][a[j]_mdYlagfk_gn]jfaf_nYjagmkaf^jYkljm[lmj]
hjgb][lkfglgfdqlghjgna\]Yd]n]d%hdYqaf_]d\lg\ge]kla[hdYq]jkZmlYdkglg]f[gmjY_]_dgZYdjeklgafn]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 cashkljYhh]\jgY\k][lgje]]lalk[mjj]flq]YjYf\n]%q]YjhdYflYj_]lk106.
L`]?gA]klYZdak`]\l`]Af\aYAf^jYkljm[lmj]>afYf[];gehYfqDl\& AA>;D!af*((.lghjgna\]dgf_%l]jefYf[]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]%
gmlfYf[]$[j]\al]f`Yf[]e]flYf\gl`]jaffgnYlan]e]Yfk$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]fYf[]
[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]lk^gj=H;hdYq]jklgaf[j]Yk]l`]ajhYjla[ahYlagfafaf^jYkljm[lmj]
building.
Dgf_%l]jeaffgnYlan]n]à[d]kk`gmd\Z]dYmf[`]\lghjgna\]]YkqfYf[]lg=H;hdYq]jk&
<]Zlj]kljm[lmjaf_ZqZYfc]jklgl`]Yadaf_=H;hdYq]jklg[gflafm]mf\]jkh][a[fgjekYf\_ma\]daf]k&
DYf\Y[imakalagfhjg[]\mj]kk`gmd\Z]kaehda]\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 Hjgd]%AA>;D$ IIFCL website$`llh2''ooo&aa^[d&gj_';gfl]fl'hjgd]&Ykhp$Y[[]kk]\+(K]hl]eZ]j*()+&
68
-&,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
hjglYZadalqafl`][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 20062011 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]YdfYf[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]fl^jY_e]fl]\klYl]gâf\mkljqaflgYfgj_Yfar]\gf]&
69
6
70
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$gh]jYlagfYdjakckg^jYakaf_fYf[]k$ogjcaf_[YhalYdeYfY_]e]fl$
_`laf_l`]afYlagfYjqhj]kkmj]Yf\\]dYqkaf_]llaf_YhhjgnYdk^jgel`][gmfl]jhYjlq$a&]$l`]_gn]jfe]fl$Yj]^mjl`]j
l`j]Yl]faf_l`]]^[a]f[qg^l`]k][gfljY[lgjk[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]]^[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]lgpY^]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]kl`]_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]$làkeYq]n]fZ]Yfghhgjlmfalqlg[j]Yl]^mjl`]jkar]Yf\k[Yd]&E]j_]jkYf\Y[imakalagfkeYqYdkgljYfkdYl]
into exit opportunities for private equity players that are invested in the EPC sector and are seeking exit options.
To conclude, the sector needs to undergo a high level of transformation to ensure sustainability. The sector, strongly
upheld by the infrastructure story, has great potential to grow further, with the Twelfth FYP targeting infrastructure
kh]f\gÂFJ-.&+ljaddagf&@go]n]j$hjgb][lkYf\hjglkf]]\lgZ]eYfY_]\o]ddY[lmYd[Yk`j]YdarYlagf^jge
hjgb][lkaklgZ]j][cgf]\&
71
7
72
Supplemental
Know your tax

9[d]YjYf\]^[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\[geeakkagfaf_k]jna[]k&
Af[Yk]g^gn]jk]Yk=H;[gfljY[lgj$l`][gfljY[lakZjgc]f\goflgg^^k`gj]hgjlagf a&]&$g^^k`gj]kmhhdqYf\g^^k`gj]
k]jna[]k!Yf\gfk`gj]hgjlagf a&]&$gfk`gj]kmhhdqYf\gfk`gj]k]jna[]k!&
Direct-tax controversies under EPC contract are in the like of taxability of offshore supply, payments for engineering designs,
[gfkgjlamekn&9kkg[aYlagfg^H]jkgfk 9GH!$h]jeYf]fl]klYZdakè]flYf\oal``gd\af_lYpgZda_Ylagfk]l[&
Direct taxes
Taxing offshore supply (relevant in case of foreign EPC contractor)
Af=H;[gfljY[lk$l`]c]q[gehgf]floaddZ]hjg[mj]e]flg^]imahe]fl'eY[àf]jqlgZ]afklYdd]\afl`]hjgb][l&Hj]%
\geafYfldq$alakl`]^gj]a_fhYjlqg^l`][gfkgjlame$o`gogmd\Z]j]khgfkaZd]^gjkm[`hjg[mj]e]fl^jgegmlka\]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.
73
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\]fal]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_dggcYlYhhjgY[`^gjl`]=H;[gfljY[ljYl`]jl`YfYdggc%l`jgm_`
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.
74
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%]^[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][a]\[gf\alagfk!
NYdm]9\\]\LYp N9L!
State Government
LYpgfkYd]g^_gg\koalàfl`]kYe]Af\aYfklYl] jYl]kkh][a[lg
klYl]Yf\[geeg\alq!2lqha[YddqN9LjYl]knYjq^jge-lg)-
=fljqlYp'G[ljga'
Local body tax
KlYl]?gn]jfe]fl'Dg[Yd
municipal authorities
D]nqgf]fljqg^kh][a]\_gg\kaflgYhYjla[mdYjklYl]gjdg[YdYj]Y
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
[dYkka[Ylagf&L`][gfljY[lgj[Yf]phdgj]Hjgb][lAehgjlK[`]e]o`]j]_gg\kYhhjgn]\^gjaehgjlYlagfaf[gff][lagf
oal`kh][a]\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-$j]kmdlaflgZ]f]lg^.&AlakY[lmYddqegj]Z]f][aYd
kaf[];=FN9L[j]\alg^:;<akfglYnYadYZd]&>mjl`]jegj]$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.
75
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]jkkal]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_YfafljYfkalkYd] 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]kN9Ld]_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][a]\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][a]\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.
76
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]^[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`goaf]^[a]f[a]k^gj=H;
contractors.
L`][gfljY[lgjkeYqfglZ]h]jeall]\lgYhhdq^gj[]jlYafkh][a]\k[`]e]kkm[`Yk[gehgkalagfk[`]e]mf\]jN9LYf\
K]jna[]lYpgfdqgfhYjlg^l`][gfljY[l$mfdac]Ykhdal[gfljY[l$afl`]YZk]f[]g^kh][a[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\]^[a]f[qafalkaehd]e]flYlagfakYZkgdml]dq]kk]flaYd&
77
8
78
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_fYf[aYd[gehYfq
EPCM
Engineering, procurement and construction

management
PAT
HjglY^l]jlYp
PPP
Public-Private-Partnership
FCI
Food Corporation of India
QIP
ImYda]\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
HSRC
High Speed Rail Corporation of India Ltd.
Special Accelerated Road Programme for

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
79
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]lg^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`]Z]klf]okeY_Yraf]^gjl`]
infrastructure industry in 2012 and the best Construction newspaper in 2013, respectively among other
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@]Y\g^[]
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
80
EY Leadership Team (EPC Sector)

Amit Khandelwal
CmdbalKaf_`
National Director & Partner,

Transaction Advisory Services
HYjlf]j@]Y\ Af^jY!$
Transaction Advisory Services
Sushi Shyamal
Samir Kanabar
Partner, Tax and Regulatory Services
Authors
Sushi Shyamal
Email: sushi.shyamal@in.ey.com
Sonam Sabikhi
Associate Vice President, Transaction Advisory Services
Email: sonam.sabikhi@in.ey.com
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Engineering

Mr. Tejasvi Sharma

testimony to the tyranny of the present. Yet, as famous poet

Opportunities for EPC business in India

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

1.1 Understanding EPC

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

How is EPC different from other models?

Guaranteed price for execution

No guarantee on the price

Guaranteed timeline for completion

No guarantee on the timeline

Undertaken solely by the contractor

According to agreement between the two parties

Responsibility of the contractor

Contractor has complete responsibility

Contractor is single point of contact for all matters for

Contractor is free to work with limited supervision

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

Contractual relationship of EPC and EPCM model

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

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

1.2 EPC players in India

Major domestic players

Major foreign players

Larsen & Toubro Limited, Hindustan

Isolux Corsan, ITD

Oil & Gas EPC

Aker Solutions, Leighton

Doosan Power Systems,

Market segmented into

ABB India Ltd., Uhde India

Comprises niche players

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

Access to knowledge capital for

In 2007, Shriram EPC formed a JV with a Belgium-based company.

Advantage of existing resource

Scale of operations achievable

In December 2010, Leighton International Limited and Welspun

In November 2011, a Germany-based company acquired a small Oil &

In January 2012, Vinci entered the Indian market by buying a 100%

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

Comparison of investments in FYPs

Eleventh FYP (200712)

Twelfth FYP (201217)

Oil & Gas: 2%

Oil & Gas: 2%

Oil & Gas: 4%

~50% spend on power and

Power and roads consistently

Source: Eleventh and Twelfth Five year plan, Planning Commission

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

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

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

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

Ports and Inland Water Transport

Roads & Bridges

Oil & Gas

Mass Rapid Transit System

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

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

21 FYlagfYd@a_`oYq<]n]dghe]flHjgb][l F@<H!$NHAI website$`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