Construction and Architecture Magazine 11 may june 2011

COVER STORY: TOP CONSTRUCTION COMPANIES

The pioneers of the
construction industry
Larsen & Toubro Limited - an
engineering and construction
major - is among the largest
and most reputed companies
in India.

L

arsen & Toubro is a USD 9.8 billion
technology, engineering and
construction group, with global
operations. A strong, customer-focused
approach and the constant quest for topclass quality have enabled L&T to attain
and sustain leadership in its major lines of
business over seven decades. The
construction division of Larsen & Toubro
Limited - is India's largest construction
organisation.
Their contribution in the construction
industry
L&T bags new orders worth
Rs 1,181crore
To begin with on January 06, 2011,
( L & T ) B u i l d i n g s & Fa c t o r i e s
Independent Company - part of its
construction division secured new orders
aggregating to Rs 1,181 crore during the
third quarter for the construction of
residential buildings, factories including a
specialized support facility building. L&T
has secured new orders aggregating to
Rs`558 crore for the construction of
residential buildings in major cities from
leading developers. In yet other
development, new orders worth
Rs 298 crore has been secured for the
construction of factories from esteemed
clients. A turnkey project has been secured
from a major client worth Rs 325 crore for
the design and construction of a
specialised support building facility. These
orders further enhance the order book of
the company it has already secured for
major design and build contracts in
022

airports, IT parks, commercial and
residential space.
L&T bags Rs 1,164 crore orders from
metallurgical and water sectors.
Larsen & Toubro's (L&T) metallurgical,
material handling and water operating
company has secured orders aggregating
Rs 1,164 crore from various customers.
L&T's Minerals and Metals Business Unit
has secured a major order worth Rs 523
crore from Tata Steel Limited for a
60,0000 TPY Continuous Annealing &
Processing Line (CAPL). This project will
be implemented through a JV of Tata Steel
and a technology partner for producing
high grade cold rolled steel sheet for
automotive application, including skin
panels and high tensile steel. Nippon Steel
Engineering will provide the technology

» May - June 2011 » Construction And Architecture Magazine

and imported line equipment. L&T's
scope encompasses technical and project
management services, design and
engineering, supply of plant and
equipment, utilities, civil and structural
works and complete erection of the plant.
The project is scheduled to be completed
in 30 months.
Water Sector: L&T's Water & Effluent
Treatment Business Unit has secured
orders worth
Rs 530.84 crore
from Tamil Nadu Water Supply and
Drainage Board for water supply schemes
in Hogenakkal. The scope includes
supply and laying of 83 km MS pipelines,
948 km DI pipelines and 3488 km
HDPE pipelines. The project, funded by
Japan International Cooperation Agency,
has a contract execution period of 24
months. The scope also includes
operation and maintenance of the scheme
for 60 months.
In another development, the company
received orders worth Rs 110.60 crore
from Punjab Water Supply & Sewerage
Division for the development of a
sewerage network and construction of

L&T bags new orders worth Rs 1030
crore in buildings and factories segment:
On November 25, 2010: Larsen &
Toubro's (L&T) buildings and factories
operating Company - part of its
Construction Division – has secured
orders aggregating Rs 1,030 crore for
the construction of commercial and
residential buildings including metro
depot facilities and add on orders from
various ongoing projects. L&T has
secured new orders worth Rs 385crore
for the construction of residential

024



Sewage Treatment Plant in Hoshiarpur
and Jalandhar. The scope includes supply
and laying of 356 km of RCC, SW & DI
pipes. The contract period is 12 months.
L&T Infrastructure Operating Company,
part of its Construction Division, has
made a major breakthrough in the
international
infrastructure segment by bagging an
AED 592 million (approx. `.716 crore)
contract from the Department of
Tr a n s p o r t , Ab u Dh a b i f o r t h e
construction of “Sheikh Khalifa
Interchange”. The site is located at a
distance of 75 km from Abu Dhabi on the
Sheikh Rashid road leading to Dubai and
gains significance as it intersects with the
Abu Dhabi – Dubai main road linking the
two emirates. To be completed in 24
months, the project involves construction
of 4 bridges with multi-spans and multicells (from 2 to 8 in-situ box girders); one
62m long, 20m wide tunnel with single
cell voided slab and 12 km of 4 to 6 lane
roads with connector / distributor
networks
including associated electrical, water and
drainage networks as well as landscaping
and irrigation.

buildings from leading developers. It has
further secured orders worth Rs 645
crore from esteemed clients for
construction of commercial buildings
including design and construction of
metro depot facilities. These orders
further enhance the order book o f t he
company it has already secured for
major design and build contracts in
airports, IT parks, commercial and
residential space.
L&T led Consortium bags first overseas
airport EPC Order in Oman:
On November 15, 2010: Larsen &
Toubro's (L&T) Buildings & Factories
Operating Company - secured its largest
overseas EPC order for the design and
development of the New Salalah
International Airport in the Sultanate of


Oman. The order has a total value of RO
294,109,999 (USD 764 Million). L&T's
scope of works will be approx US$ 500
million (Apprx Rs 2,200 crore) to be
completed in 30 months. L&T's scope of
works involves complete design including
airside and landside works and
construction of the 6.6 lakh sq ft.
Passenger Terminal Building, Air Traffic
Control Tower, ancillary buildings
including MEP Systems and airport wide
system networks. L&T has a significant
presence in Oman through L&T Oman
LLC a JV company of L&T and Zubair
Corporation. Upon completion the
airport will have a capacity to handle 2
million passengers per annum. L&T is
currently executing the brownfield
d e ve l op me n t o f t h e Mumbai
International Airport.

Larsen & Toubro Limited - an
engineering and construction
major - is among the largest
and most reputed companies
in India's private sector.

Impressive portfolio of
infrastructure growth

AFCONS started in the year 1959 is in
its existence for over 50 years in the st
Infrastructure construction. From 1
April 2000 it is a Shapoorji Pallonji
Group company. The company has to its
credit an impressive portfolio of
infrastructure construction in India and
abroad. AFCONS has completed (a) Over 171 marine works,
(b) Over 117 bridges,
(c) 2700 lane Km of roads,
(d) 4 LNG Tanks,
(e) 24 kilometers of elevated metro rail
(f ) 9 tunnels and hydro works.
Projects undertaken:
Significantly, AFCONS is recognised for
its commitment, quality with strong
innovations in executions. It is a delivery
focused company with strong execution
culture and almost all the projects have
been completed on or ahead of schedule.
AFCONS has won several awards for
quality and safety. AFCONS is the only
construction company in India to have
won World quality commitment award
from BID, Business Initiative Directions,
Paris, 2009. The completion of Grade
026

Separator at Mukarba Chowk, Delhi had
won the best constructed flyover in the
year 2009-10 amongst all the PWD jobs in
India. Recently, AFCONS has completed
5 million man-hours of safe working
without any `lost time accident' in Kochi
for Two LNG storage tanks projects for
IHI Japan and Petronet India and won a
special commendation trophy. There have
been several commendation letters for
good quality, timely execution, modern
use of equipment and construction
practices from organizations like Shell;
RTA, Dubai; SNC Lavalin INC, Canada;
DMRC (Delhi Metro Rail Corporation);
KRCL (Konkan Railway Corporation Ltd
India), World Bank etc.
Business:
AFCONS closed at US $ 515 million
turnover in 2009-10 and the current year it
is expected to cross US $ 600 million
turnover. In terms of its technology and
innovative strength, it is considered
amongst the top five construction
companies in India. In 2009-10 AFCONS
achieved 25% of its turnover from overseas
markets especially in Middle East and
Africa and this trend has been growing
consistently in past years. The portfolio of
completed projects is in the countries like
Mauritius, Madagascar, Dubai, Oman,
Yemen, Abu Dhabi, Qatar etc. Currently


AFCONS is working in Oman, Liberia &
Jordan and some of the prestigious projects
currently in execution are:Projects:
1. Rohtang Pass – 8.8 Km highway tunnel
at 13,300 sq.ft above sea level in the
Himalaya Region in joint venture with
Strabag, Austria – Value US $ 350
million.
2. Offshore Process platform of ONGC
Bombay High in joint venture with
Gunanusa of Indonesia – Value US $
366 million.
3. Bulk Jetty for Sohar, Oman in joint
venture with Saipem, France – Value
US $ 200 million.
4. First Underwater Metro Tunnel in
India for Kolkata Metro, Kolkata –
Value US $ 210 million.
5. Marine Transport Terminal facility at
Aquaba, Jordan – Value US $ 240
million.
6. Two packages of underground Metro
Line EPC Civil Construction at
Chennai (India) - Value US $ 600
million
7. Four laning of NH 1 Highway at
Jammu – Udhampur, India – Value US
$ 350 million
8. Stand-by Jetty at Dahej, India for
Petronet - Value US $ 150 million
9. Marine facility for Liberia for Arcelor
Mittal – Value US $ 55 million

028

Client : Royal Court Affairs
Consultant : Consulting Engineering
Services LLC
Year of Completion: Ongoing
Location: Muscat, Oman
Project Brief: Construction of West Break
water 1234m and East Break Water 960m
long with crust width varying between
3.2m to 7.51m
Construction of Quay walls 86m and
139m long
Construction of Boat ramp & boat repair
area
Design & construction of Floating
pontoon & Gangway
Vallarpadam Bridge
Client : Rail Vikas Nigam Ltd - Delhi,
India
Year of Completion : 2009
Location: Vallarpadam, Kerala, India
Project Brief
Construction of Longest Bridge on Indian
Railways – 4.62 kms.
Rail Connectivity: Idapalli to ICTT
Vallarpadam
Length of Project - 8 Km
Length of Elevated Structure - 4.62 Km
No. of Major / Minor Bridges - 5 Nos
Cruise Berth Facility, Mauritius
Client : Mauritius Ports Authority
Consultant: Royal Haskoning.UK
Year of Completion : 2009
Location: Mauritius
Project Brief: Construction of Piled Jetty
and two access bridges. Construction of


four land based mooring points. Design
and construction of Fender System.
Afcons Infrastructure Limited plays pivotal
role in Marine infrastructure development
in Mauritius. As the principal gateway of
the country, the port plays a vital role in the
national economy by handling about 99%
of the total volume of the country's external
trade. Over the past two decades, the port
has been transformed into an economic
nerve centre, with modern port facilities, a
dynamic Freeport and, port-based
facilities.
Afcons takes pride in the fact that it was the
chosen one by the Mauritius Port Authority
to do both the Oil Jetty and Cruise Berth.
The Port Authority has hugely appreciated
Afcons' contribution in developing the
critical infrastructure.



Brief on the Projects
Bulk Jetty At Port Of Sohar – Oman
Client : Sohar International Development
Company LLC
Consultant : Royal Haskoning
Year of Completion : Ongoing
Location: Sohar, Oman
Project Brief:
Design and construction of bulk jetty
Design and construction of approach
Design and construction of trestle mooring
dolphin structures
The joint venture of Italy-based
international engineering contractor
Saipem and leading Indian infrastructure
firm AFCONS, has been awarded a
contract to design and construct a
deepwater bulk jetty at the Port of Sohar.
The total investment in the project, which
also includes a dredging component to be
undertaken by Van Oord of The
Netherlands, amounts to RO 95 million.
Maqbool bin Ali Sultan, Minister of
Commerce and Industry and Chairman of
the Port of Sohar, signed the agreements
together with Jan Meijer, CEO of Sohar
Industrial Port Company (SIPC). The
investment will help create a major
deepwater jetty at the Port of Sohar to
support the bulk shipping needs of Brazilian
mining conglomerate Vale, which is
currently building a huge iron ore pelletising
and distribution centre at the industrial port.
With the addition of this 1,380 metre long
and 25 metre deep jetty, the Port of Sohar
will join a select handful of ports in the world
with the capability to receive Very Large Ore
Carriers of 400,000 DWT.
Van Oord, which has many major dredging
projects to its credit including previous
work done at the Port of Sohar, will
increase the depth of the existing approach
channel from 18.5 metres to a depth of 23
metres. A new harbour basin will also be
created with a berthing pocket of 25 metres
in front of the jetty. For their part, Saipem
and AFCONS have set up a 50:50 joint
venture to execute the construction of the
jetty. Saipem will focus on the design and
management of the project. The facility is
set to come on stream in the first quarter of
2011 at around the same time that Vale's
1.4 billion iron ore pelletising and
distribution plant will be operational.
Maritime facilities for guarding the
restricted area Bait Al Barakah

Creating the world of tomorrow

R

eliance Infrastructure Limited is
India's leading utility company
having presence in across the
value chain of power business i.e.
generation, transmission, distribution,
EPC and trading and the largest
infrastructure company by developing
projects in all high growth areas in
infrastructure sector i.e. roads, highways,
metro rails, airports and specialty real
estate. The company's presence spans
across three verticals: Engineering,
procurement and construction, energy
and Infrastructure.
Engineering, Procurement and
Construction
EPC offers a single point solution to the
execution of power plants including
project engineering, procurement,
construction and commissioning for its
clients. Along with full service project
advisory capabilities, it manages power
plants on a turnkey basis and provides
industry specialist services such as fuel
management advice and fiscal advice.
The turnover of the division was Rs 557
crore (US$ 120 million) and order book
position of over Rs 18,530 crore (US$ 4
billion) as on June 30, 2010.

Reliance Infrastructure Ltd, a part of
Reliance Group, is India's largest infrastructure
company developing projects in all high growth
areas in infrastructure sector i.e. roads,
highways, metro rails, airports and specialty.
Excerpts of the interview with Lalit Jalan, CEO & Whole Time Director
Reliance Infrastructure.
Infrastructure
RInfra has a significant presence in the
construction of roads, metros, airports
and real estate. Infrastructure is
decidedly the most visible and important
form of development in a nation. We
signify this with our 11 road projects of
970 kms worth about Rs 12,000 crore
(US$ 2.6 billion). We are currently
implementing 3 metro rail projects in
Mumbai and Delhi worth around Rs
16,000 crore (US$ 3.4 billion).In the real
estate space, we are in various stages of
bidding/negotiation/planning with over
400 million sq. feet of mixed use built up
potential.
Highlights for company profile:
One of the largest Indian business
conglomerates.
Leading private utility firm in
transmission.
Significant presence in EPC, Energy
and Infrastructure.

Projects undertaken:
Construction of Oil jetty at Port
Louis, Mauritius
Afcons partnered with Mauritius Port
Authority to construct a dedicated
petroleum/oil jetty at Mer Rouge.
The project's impor tance is
underlined by the fact that this jetty is
the only source of oil receipt to the
country. The oil jetty is now capable
of accommodating tankers of up to
55,000 DWT compared to 40,000
DWT earlier. The company also
constructed two Berthing Dolphins
in around 14-15 mtrs of water depth
with adequate fendering system.
Corrosion protection to steel piles at
Port Louis and Port Mathurin
Afcons implementing protection
measures to the corroded steel tubular
piles at Quay 1m2,3,4 and at Latainer
Bridge
Sheet piles at Quay B, Quay E and the
Quay at Port Mathurin
The project aims at extending the
serviceable life of the steel piles.
030

»May - June 2011 » Construction And Architecture Magazine

Infrastructure in India is always
perceived as the major short comings
of the country.
Investment in Infrastructure is the new
mantra to achieve India's economic
growth. As per the 12th five year plan
there has been a jump from 5.5 to 10% in
GDP which is invested in the
infrastructure sector. India has an
extensive road network of 3.3 million
km. The lack of dispute resolution
mechanism, archaic land acquisition
norms, a not so transparent bidding
process and state level intervention
among other things are slowing the pace
of change. These are some of the key
challenges faced in developing roads.
How and when do you see this being
over come?
India has demonstrated its progressive
approach with huge investments
earmarked for infrastructure. With a
renewed focus, the govt has made policy
reforms, land acquisition norms, bidding
processes; single window clearance in

032


have participated by forging strategic
alliances and JV's with key
Infrastructure majors. These alliances
will aid flow of engineering expertise,
technological advancement, designing,
energy and environmental process and
human capital for faster execution of
infrastructure projects.
Is Government funding adequate at
the moment for the development of
roads and highways?
The government has adopted a road
development policy setting out the
guidelines for investment in highways.
Infrastructure development is basically
funded through bank loans and equity. A
good bond market helps to solve the long
term finance in this sector. Also, NHAI
has formed Special Purpose Vehicle
(SPV) for funding projects. It involves
very less cash support from NHAI in the
form of equity, so it gives an opportunity
to Foreign Investors, Financial Intuitions
/ Infrastructure companies to invest. In
order to meet the huge investment
requirements in road sector, 100% tax
exemption is available for those who are
engaged in development of roads and
highways. Such tax holiday can be availed
for any consecutive period of 10 years
within a block of 20 years starting from
the year when the developer starts
developing the roads/highways.
Additionally, in technology front,
government permits duty free import of
high capacity equipment required for
highway construction. However one
major critical factor that has bearing on
infrastructure projects is availability of
long term money. The fund flow to the
infrastructure sector which was 1% of
banking assets at the beginning of the
century now has gone up to 10%. Since,
banks do not have long term money; they
may not be able to sustain the pace.
Why are foreign investors wary of
investing in the sector?
Some of the key aspects why foreign

investors are wary would be political
stability, governance issues, land
acquisitions, compensation policies,
political inter vention and poor
coordination within ministries to name a
few. However one must note that the
investment through Foreign Investors in
India will boost the economy growth
contributing to the present GDP.
Foreign Direct Investment is being
specially encouraged. In order to achieve
time and cost bound infrastructure
projects, various challenges are faced by
the Government. Despite the various
issues arising pertaining to this sector, a
considerable interest of Foreign
Investors has been encountered with
countries like Canada, Singapore and
Australia. There is an interest amongst
foreign investors in the road sector in
India, especially given the opportunity
available in the sector and the returns
expected from such investment. The
high quality management, speedy
construction, upgraded technology are
the various aspects coupled to build
mega highway projects in India. There
are, however, certain measures and
policies that the government need to
rope in. Huge investments are needed
for the sector from international and
national long-term investors.
Also, do you see foreign investment
increase in the sector?
The foreign investment depends upon
the long term consistent policy which
will secure their investment and returns.
However, Government's ambitious
program to construct 35,000 kms of
roads by 2014 will call for the foreign
investment to meet the financial
requirement. Infrastructure
investment is to be doubled in the 12th
Five –Year Plan to 1$trillion from $500
billion in the Eleventh Five Year Plan
ending 2011-12, which signifies the
growth and momentum gained in the
road sector.



the road sector has attracted interest and
investments from global players.
Another interesting observation has
been that the infrastructure spending has
increased to 8 percent of India's GDP in
2009 which can be largely attributed to
participation from private sector. In the
roads space NHAI has awarded many
projects on Build Operate Transfer
(BOT) and annuity basis, with
participation from private players.
Interestingly 65% of the NHAI projects
are awarded under PPP model
demonstrating the success of this model
and it's still growing. As per the recent
amendments to FDI legislation in India,
100% equity ownership by foreign firms
was allowed. As a result the most
common mode of foreign investment is
through joint ventures (JV). The
government has recently allowed FIIs to
invest additional $5 billion in bonds
issued by companies engaged in
infrastructure sector. So, we can
confidently make the observation that
India is still an attractive destination for
foreign investment.
Has the private sector participation
increased in the roads sector and how
many road projects have been
executed by you?
The active involvement of the private
sector in developing infrastructure has
been astoundingly high compared to any
other country in the world. Of the
8percent of GDP that we are spending
on infrastructure, 50 percent is being
held by the private sector. This is as part
of the 12th year plan. Huge
opportunities are unfolding in Indian
Road Sector. We see increased interest
and active participation of the private
players in PPP project for road sector.
The total projected investment size of
$70 billion (Rs 3.09 lakh crore), the likely
investments from private sector
including FDI (foreign direct
investment) will be about $41 billion (Rs
1.81 lakh crore). Rinfra, has emerged as
the largest concessionaire of NHAI with
11 road projects of 1,000 kms worth
Rs12, 000 crore ($2.6 billion) and
deploying 6,500 people.
Is the private sector enthusiastic
enough to invest in this sector and are
there any foreign partnerships that
you have forged?
Yes, there is active interest from global
institutions and infrastr ucture
corporations in engineering and
technology space. With an increased
thrust of the government, global players

“One is that it needs to make
sure the investment in
infrastructure happen and it
should be their key result are
and focus. Projects that they
have decided to roll out they
indeed roll-out and other
important issues says,” Vinayak
Deshpande, President, HCC in
his candid conversation with
Remona Divekar.

Infrastructure issues needs
to be addressed seriously

Having estimated approx Rs 34, 385
billion (~US$860 billion) worth of
construction opportunity in India for
the next five years underlines the
impressive growth inflection in the
industry? What is the company's
projection for this year?
Right now the company is suffering
from huge shortfall in infrastructure
investment. For example last year we
expected several things to move ahead.
We did not see many road projects
coming through because NHAI had also
had some problems. We also had several
hydro projects getting stagnated
because of the environmental
clearances. We also had metal projects
like POSCO, Alumina again coming to
standstill because of some such
situations. Although there is a large
deficit which is being converted into the
investment required there reality on the
ground and hardly anything being
rolled out which is quite disappointing.
Everyone in the industry is going to
suffer because of the last year's lack of
activity and that's the background we
have. There is now increased awareness
within the government, the policy
makers and several other people to do
something urgently and quickly about
this. Also NHAI activities are picking
up again; we would see some action start
to happen in the next 2-3 quarters and
this is again a cautious optimism.
Several times one has seen cautious
optimism as one has seen activity where
something else is come into the way and
there is slowdown. I hope the will to
p ro m o t e i n f r a s t r u c t u re p ro j e c t
strengthens and several things happen.
034

» May- June 2011 » Construction And Architecture Magazine

But the background has been very tight
over the last three quarters of what it has
happened so our turnover has mediocre
to nil kind of growth. Our margins are
going to be under lot of pressure
because of lack of growth. It has been
the tough year for the industry and for
us.
How the company expects growth to
remain robust as opportunity increases.
What would be the key drivers in terms
of large investments planned in India's
infrastructure in the current year and
following years?
We remain optimistic and hopeful as
the whole infrastructure investment
starts and we expect that the NHAI
project will kick start soon enough. We
also wish the water projects starts
rolling. Water is the state level subject
and last year 5-6 states have gone
through election process and therefore
there has been slowdown on those one.
But they will come to election process
for one or two months. Once that
happens water projects also will see
happening. Thermal power there is

already a deficit of 10 percent. NTPC
will be a big driver in driving the
thermal power project. With all these
there is an optimistic hope that we need
to see some thing on the ground that is
really going to happen. This is the
situation as far as the industry goes.
When it comes to us as a company or
organization we have a large order
backlog. To that extent we stand
protected. Our order backlog is approx
between Rs 18,000-Rs 19,000 crore
which is about 4-5 times the current
turnover size. So that gives us enough
fields going forward and much of these
is through which are active and 1-2
projects which are at the back foot. We
also believe that we can contribute,
perform in terms of turnover
expectations from our backlog. We
have to focus on operational excellence
going forward. We need to focus on
working capital because the input costs
have gone up. Input cost for cement,
steel, sand, restriction on sand mining
manpower cost, rural labor availability
and unavailability of all these resource
costs factor has gone up. Also because
of the inflation interest rates have gone
up. So if you look at all the resources
cost have gone up and to some extent
we are protected through our contracts
but it is going to create pressure on the
bottom-line. So while we have a good
backlog for doing the turnover and we
will do the required turnover but the

margins will be under pressure.
Do you think that the demand for
quality infrastructure companies is on
rise due to increased complexities and
stretched timelines of projects?
The trend in infrastructure is to create
large projects and people are looking at
more and more mega projects like mega
airports, mega power stations. With the
year situation is unprecedented. In
hydropower we saw not many
investment happening and lot of
environmental and forest related issue
cropping up. All sectors are hit from all
sides and I think only government and
policy makers can do something about
it in proactive manner to make this
sectors perform. So otherwise in 4-5
infrastructure sector one thing helps
the other.
What are the challenges in
implementing infrastructure projects
in India and outlines several steps that
government, nodal agencies and
infrastructure providers can take to
accelerate the delivery of world-class
infrastructure?
At three levels government needs to
work. One is that it needs to make sure
the investment in infrastructure happen
and it should be their key result are and
focus. Projects that they have decided to
roll out they indeed roll-out. The type
of different KRA for different ministries
needs to be enforced at the planning and
the implementation level. The y need to

036


In PP system there are two type of risk.
Risk that you may have at the
construction of the project and the
second one you may have at the
operation of the facility, operation of
the concession, and nature of the
project so if you look at the road
projects, I think the construction risk
is very minimum but the concession
risk could be considerable depending
on how the assessment is done. At the
same time if you look at the marine
port kind of a situation, the
construction risk may be high and the
concession risk may be moderate so it
really depends on type of the facility
the infrastructure will create.
How w o u l d yo u l o o k a t t h e
development of infrastructure projects
beyond 2011 when some situation

arises like the Japan crisis? How India
is equipped to handle such kind of
crises?
Whatever happened in Japan is an
accident. The infrastructure which we
created now is modern infrastructure so
the risk to a reactor which is
constructed before 1980 is much higher
than a reactor which is constructed
now. So today's reactor is generation
3+ and much more safety and disaster
management systems are incorporated
in the design itself so the more modern
systems the more modern infrastructure
facilities as they have better
appreciation and safe guard against risk.
In a way if they have skipped some
infrastructure in the last two or three
decades. It is good because now we will
create more modern and more
sustainable and will be more safe than
having a legacy of something which is
not so safe. At the same time because of
the lack of infrastructure lot of us are at
risk every day. Our problem is lack of
infrastructure and that is seriously
needs to be taken care of. But when if
we implement new infrastructure we
will be far better because our
infrastructure will be modern, much
more safe and robust.



create good framework for the
financing of these projects so long term
debt finance so the money available to
developers, contractors creating a
investment friendly financing
atmosphere. There are reforms in
project evaluation process such as
the tendering norms, master
concession agreement in the area of
the roads, ports and other
infrastructure the PPP framework
should become more reformed and
more mature. The financing should
be made more robust.
With respect to infrastructure debt
ratings, what is the propensity for
construction risk, is it over-dependence
on project sponsors for risk mitigation
and financing constraints? Does it have
risks implications for the development
of infrastructure finance in India
beyond 2011?

An innovative infrastructure
solutions provider

In the recent times, India has stepped up
its development agenda. Do you view that
it is one explicit indicator of this is the
aggressive pace of construction activity in
the country?
Any country which is poised towards
growth or which is ramping up towards
global competitiveness cannot neglect or
avoid a priority development agenda.
Hence, if development of a nation is
hinged on its infrastructure then it is very
obvious positive indicators for
construction activities. Whether the pace is
aggressive or progressive, fast track
approvals and supportive policies can
definitely expect heightened levels of
opportunities.
With the investment activities shaping up
in this sector, this sector could go up to
93.36 billion by FY2010. How is the
company focused with such developments
happening? In what ways is the company
focused in its prospects for infrastructure
developments?
Synefra is an end to end solution provider
in the E & C sector and offers a suite of
services related to project management,
EPC and facility management. With its
varied service profile, Synefra is completely
geared to take all opportunities that this
sector has to offer. The niche services
provided by Synefra in terms of
sustainability and business excellence
values are unique and the company is
focused to make a difference by providing

Sanjeev Nakhasi, Corporate
Vice President – Operations
at Synefra E&C says if
development of a nation is hinged
on its infrastructure then it is
very obvious positive indicators
for construction activities.
sustainable and green infrastructure in true
sense and not just for aesthetic values.
In its existence for over a decade now, what
significant developments Synefra as a
company have done from a fledging service
provider to Suzlon group to a company
today with in house capability of providing
hi tech infrastructure solution?
Synefra Engineering & Construction Ltd
formerly known as Suzlon Infrastructure
Ltd (a Tanti group co) was established in
1998 with a focus to conceptualize, invest,

038 » May - June 2011 » Construction And Architecture Magazine

develop and maintain industrial
infrastructure globally. With more than a
decade of execution expertise Synefra has
evolved to be an innovative infrastructure
solutions provider to different industrial
business segments.
With experienced professionals and
SMEs, Synefra now offers a wide array of
specialized services in efficient project
management (e-PM), Engineering,
Procurement and Construction (EPC)
and Integrated Facility Management (iFM) services.
The e-PM business vertical provides
concept to commissioning services and the
intensive involvement of the team provides
in-depth value driven management
approach with cost effectiveness and time
compliance factors. The EPC services of
Synefra ensure a single point responsibility
for optimal application of resources,
focused project execution practices,
stringent quality parameters and effective
risk management plan. While efficient
planning and execution is only part of a
good facility, it is post commissioning
operative costs that deliver the value of
investment for the client. Hence, e-PM
and EPC services ensures cost effective
design and execution, Synefra I-FM assists
in meeting client's specific requirements
through strategic and efficient engineering
solutions for asset management.
Synefra with distinctive edge in
developing cutting edge industrial parks
which are at par with leading global
developments, share with us the insights
and best practices gathered by virtue of
being a leading industrial occupier
provided irrespective of the locations?
Synefra has today evolved as the only
alternative for anyone seeking an
integrated infrastructure solution for
different industrial segments. Synefra's
core business philosophy is represented by
the company for all its practices and
services. Synefra is conscious of its role as a
developer and is sensitive towards impacts

additional focus area as it is embedded into
every process and approach of the business
model. The company with its flagship
project of having conceived managed and
executed Suzlon One Earth, the global HQ
of Suzlon Group which is world's greenest
corporate campus, has set an example for
Corporate India to emulate. The day is not
far when end user will demand effective
and nature oriented services and hence it is
time that designers, builders and investors
start thinking green. The community is
now realizing the need to adopt more
sustainable practices as the demand from
conscious users' gains momentum. Market
is now asking for specifics and wants to
know what is good for their health and
information on ill effects of their
surrounding and the quality of air that they
breathe. Sustainable construction and
materials is the need of the hour and the
sector inevitably has to change their
outlook towards all existing practices. The
sector has tremendous opportunity for
development in green infrastructure as it is
a fairly untapped and unexplored but now
a very fast growing sector. In terms of
material, lighting, HVAC, architecture,
landscape and interiors, various prospects
can be implemented and explored. Synefra
will continue to surpass its own
benchmarks and establish trend setting
projects one after another with a continual
improvement focus.
According to you whom segment in
infrastructure are likely to throw huge
investment opportunities?
What
opportunities will this sector unlock the

040 » May - June 2011 » Construction And Architecture Magazine

potential and also meet increasing demand
levels?
Buildings constructed on sustainable
principles will be in demand. New
technologies are constantly being
developed to complement current
practices in creating greener structures;
however the common objective is that
green buildings are designed to reduce the
overall impact of the built environment on
human health and the natural
environment by:
Efficiently using energy, water, and
other resources.
Protecting occupant health and
improving employee productivity.
Reducing waste, pollution and
environmental degradation.
The end consumer is becoming well read
and knowledgeable about the sustainable /
green products used in the construction.
They are ready to pay a little more than the
regular cost for facilities like natural
daylight, use of non toxic paints, efficient
lighting systems, etc because ultimately the
operations costs come down and it works
in their favour.
In the current fiscal year what should be
the focus of the Governments on
improving the infrastructure activities to
bring significant investments
opportunities?
While growth oriented policies and
programs should be the focus of
Government but what is essential is to
focus on growth at what cost to the
environment question. There is an urgent
need to implement integrated policies so
that sustainability and green do not remain
seminar themes and round table discussion
topics but get woven into existing practices
and permissions.



on environment and ecology associated
with infrastructure. It focuses towards
incorporation of basic sustainability
principles which is not offered as a
premium or add-on services but it integral
and woven into the regular process and
systems. The integrated management
approach, the cost effective and methodical
plan of execution and engineering focus in
facility management are the best practices
that Synefra deploys which provides the
company its distinctive edge.
What does the company further aims to
nurture, an environment that facilitates the
development of technology, innovation,
material science and its application to
infrastructure?
Innovation and efficient use of technology
in all its business verticals is imbibed in the
vision of the company. As a progressive
organization and a pioneer in sustainable
development, Synefra has set various
precedents in project management by
achieving projects in record time and
lowest comparative costs. It has various first
to its credit in terms of providing
innovative solutions using renewable
energy, low cost material, intensive use of
regional material and minimal impact on
existing ecology.
Is the company more focused on the green
infrastructure? What does it vision to do
in near future in this sector? Tell us about
the opportunities does it see in this sector?
Will it continue to come to the fore thus
moving upwards?
At Synefra green has never been an

A diversified construction company
Over the years, SEW Constructions Ltd has diversified into
construction of lined irrigation canals, hydel, thermal and gas based
power, industrial, dams and barrages.

I

n the year 1959,Sri. Vallurupalli
Nageswara Rao, founded 'Southern
Engineering Works' (SEW) in
Vijaywada, A.P. India, with late Sri. Y.
Purnachandra Rao and Sri. Y.M.G.
Nageswara Rao as co-founders to pursue
civil engineering
construction
activities. The first
project SEW
worked on, was the
prestigious
Nagarjuna Sagar
Dam in Andhra
Pradesh. During the
period of expansion,
other partners
joined the company
and contributed to
the growth of the
organization to its
present status.With
the experience
gained at the
Nagarjuna Sagar
Dam, the company
participated in the
building of other
major dams of Tawa, Bargi, Bansagar,
Hasdeo Bango, in Madhya Pradesh and
Srisailam and Priyadarshini Jurala in
Andhra pradesh. SEW attained
specialization in the constr
In the year 1983, the company was
converted to a Private Limited Company
with the name SEW Constructions
Ltd.Over the years, SEW Constructions
Ltd., has diversified into construction of:
Lined Irrigation Canals. Hydel.Thermal
and gas based power. Industrial.
Commercial and Residential Buildings.
Dams & Barrages. Lift irrigation
Schemes. Canal structures.Roads and
Bridges. Fabrication and erection of
G a t e s , . Wa t e r Su p p l y Pr o j e c t s .
Transmission Lines. In the year 2008, the
company was renamed as SEW
Infrastructure Ltd. to highlight our
commitment to infrastructure project
works. The company continues to aim
towards being a leader in the
construction industry with strong client
relationships, dedicated and satisfied
042


workforce with an impeccable
reputation to be the top quality provider
without cost and time overruns.
Business Units:Tunnels
Tu n n e l s w i t h t h e i n c r e a s e i n
development work
of hydroelectric
projects in India,
the quantum of
tunneling work has
increased manifold.
Besides to achieve
time bound
programmes of
construction of
mega projects in a
period of four to
five years, modern
methods of tunnel
driving are being
considered as only
solution to achieve
a high rate of
progress. In 1980s a
progress of 75m per
face per month was
considered as a high
rate of progress whereas nowadays even
150m per face per month is not
considered as a good progress. The only
solution to achieve a time bound
programme of tunnel excavation in long
reaches is use of Tunnel Boring Machine
(TBMs).SEW has extensive experience
in tunneling and underground structures
in every kind of ground condition, from
the hardest rock to softest soils.
Jorethanh Tunnel Project
SEW Infrastructure Ltd completes the
four lane Highway Project in Madhya
Pradesh.
The project was awarded by National
Highways Authority of India.
The project includes 82.882 Km of
highway development and 768m
length of major bridge across the river
Narmada.
The project is completed within the
estimated cost of Rs.790 crores.

This prestigious highway project was
awarded by NHAI to SEW Navayuga
Barwani Tollways Private Limited, a
joint venture between SEW
Infrastructure Ltd & Navayuga
Engineering Company Limited on BOT
basis. The project includes 82.882 Km of
highway development and 768m long
major bridge across the river Narmada.
Specialising in the development of
sustainable infrastructure, SEW
diversified into allied strategic business
areas, which are wide ranging and
impressive by any standards.
Dams and barrages:
India has been declared to be the
third in the world in Dam building
after US and China. Since
Independence, more than 3,700
Dams were built to enrich the flood
control system, irrigation, hydro
electric Power and transport
sectors.Nagarjuna Sagar Dam is one
of the earliest hydro-electric projects
of India and a symbol of modern
India's architectural and
technological triumphs over nature.
SEW is continuing to evaluate over
the evolution of modern technology
and has gained its phenomenal
method of executing the massive
Dams and thus playing the lead role
in construction of major and minor
dams in India.

044




Strengths:
Specialising in the development of
sustainable infrastructure, SEW
diversified into allied strategic business
areas, which are wide ranging and
impressive by any standards. A total
commitment to quality and time has
earned SEW the reputation of a highly
dependable company.
Strong Technical and Management team
to identify, develop and execute all types
of infrastructure projects.
Experienced and well equipped state of
the art in house Design facility to execute
EPC projects.
Meeting and exceeding customer
expectations of project completion dates
and quality.
Proven qualification credentials to take
up big size projects.
Capability in bringing together Joint
Venture Partners to take up mega
projects of high value.
Vision:
"To be a leader in the construction
industry setting standards in technology,
quality and deliverables while ensuring
growth of employees and creating value
to share holders.”
Core Values:
The company actively demonstrate our
core values at all times because we are a
customer and employee oriented
organization delivering maximum value
to our stakeholders.
We always do what we say.
It does the best to excel in everything.
It respects and collaborates with each
other to succeed.
The company continually believes
change and innovate to improve.
It strives to enrich its stakeholders and
community.
Business Units:
Tunnels
Pipelines
Hydel Power
Dams & Barrages
Canals & Aqueducts
Power Transmission
Thermal Power
Lift Irrigation
Metro Rail

Buildings
Highways
Few of their Signature Projects:
NAGPUR CITY WATER SUPPLY
Development of Water Supply system
through Pench Dam to Nagpur city Geographical centre of India.
NATIONAL HIGHWAY FROM
SHADNAGAR TO JADCHERLA :
AP-3(B)
Strengthening and Widening of existing
2 -lane road to 4 -lane divided
carriageway from Km 51.263 to Km
80.000 section NH-7 from GMR
Projects Private Ltd
Location: Hyderabad, Andhra Pradesh
MAHESHWAR DAM: Construction
of non-overflow, overflow and Power
Dam sections.
NAGARJUNA SAGAR DAM:
Construction of masonry dam at a
height of 124m, across Krishna river in
Nagarjuna Sagar. The tallest and earliest
Irrigation and Hydroelectric project in
India.
SRISAILAM DAM
Construction of 512m long dam across
river Krishna in Srisailam. One of the
twelve largest hydroelectric projects.
Client: Irrigation & CAD Department,
Government of Andhra Pradesh
Location: Srisailam, Andhra Pradesh

SULWADE BARRAGE
Construction of 40m high, 400m long
Sulwade barrage across river Tapi.
Client: Tapi Irrigation Development
Corporation, Govt. of Maharashtra
Location: Dhule, Maharashtra
Business Unit: DAMS & BARRAGES
GMR AIR CARGO BUILDING
Construction of Air Cargo Complex at
Rajiv Gandhi International Airport The first of its kind in India
Client: GMR hyderabad international
airport Ltd
Location: Hyderabad
Business Unit: BUILDINGS
Awards
Gold Medal received for
completing the Veligallu Spillway
work in record time.
Gold Medal for completing the
Sulwade Barrage in record time.
Chief Minister's Certificate of
Appreciation for work done at
Telugu Ganga Project.
Momento for constr uction
excellence at Tembhu Barrage.
Gold Medal and Bonus for
completing the Bridges & Flyovers,
NHAI package AP5 in record time.

Indian Infrastructure Outlook 2011
Key Project Risks to Watch in 2011:
With respect to infrastructure debt ratings,
these are execution capacity, the propensity
for construction risk, over dependence on
project sponsors for risk mitigation and
financing constraints. These risks have
implications for the development of
infrastructure finance in India beyond
2011.
Toll Road Problems: Many of India's toll
road projects are still under construction
and face lingering right of way problems. In
some cases, Fitch expects sponsors to
continue extending support through ad
hoc equity injections, in order to maintain
credit quality. Other toll roads which are in
the early stages of traffic and revenue ramp
up could face financial stress, given the
broad industry trend of underperformance
vis-à-vis original traffic projections. The
debt for some fully operational toll road
projects could be upgraded, although such
action will be limited by aggressive loan
amortization profiles and interest reset
provisions.
Construction Progress: Power projects
which have the necessary physical and
financial requirements in place should be
able to register construction progress and
retain stable credit profiles, especially
where their sponsors have broad experience
within the sector; a few may see upward
rating migration as they become
operational. Never theless, the
unprecedented pace of new thermal power
plant construction in India is placing stress
on construction schedules and also on the
value chain for skilled manpower,
equipment and fuel supplies.
What Could Change the Outlook?
Individual project debt Outlooks could
change. For projects under construction,
unexpected delays in completion — or
positive surprises in terms of achieving
early completion — could trigger a change
in Outlook or a rating action. In respect of
operating projects, marked deviation in
a c t u a l re ve n u e p e r f o r m a n c e ( i n
comparison with initial forecasts) may
result in an Outlook change. Continued
hardening of interest rates, leading to
pressure on coverage matrices, delayed loan
disbursements or difficulties in raising
residual sponsor equity commitments,
could contribute negatively to a project
debt Outlook.

046


Fitch Ratings has a stable outlook for Indian infrastructure debt
ratings in 2011. This expectation covers the spectrum of rated
projects across the energy (thermal and biomass), transportation
(roads, rail and airport) and urban infrastructure (solid waste
management, desalination) sectors.

Global infrastructure and project
finance
2010 in Review
Outlooks were generally stable to positive
during 2010, with 39% of ratings affirmed
(see Chart 1) and 44% upgraded. The
upgrades for the debt of these stand alone
special purpose vehicles (SPVs) were
entirely due to better than expected
operating performance and significant
reductions in construction and completion
risk (often for very large projects).
Downgrades in 2010 (16% of total rating
actions) occurred in the transportation and
municipal solid waste space, primarily due
to a broad range of project specific factors,
including construction delays, revenue
under performance and counter party
payment delays.
Key Issues for 2011
The majority of current rating Outlooks is
Stable. Some transactions remain on
outlook Negative or even Rating Watch
Negative (RWN) as a result of project
specific factors, but in general, these
characteristics are not typical of the body of
debt ratings. The key inter related credit
concerns to watch in 2011, with respect to
infrastructure debt ratings, are execution
capacity, construction risk, sponsor
dependence and financing constraints.
Execution Capacity
The agency's belief that this dearth of
execution capacity represents a key credit
risk has been influenced by three factors in
particular: the growth in new project
construction activity, particularly in the
last four to five years; the increasing scale

and complexity of projects (the road sector
will soon have its own mega projects just
like the power sector); and the small base of
qualified developers available to
accomplish these tasks.
Greenfield projects — particularly those
implemented by sponsors with no previous
experience in the sector (a growing issue
for power projects) — tend to
underestimate the shortage of skilled
manpower and the pressure placed on
e q u i p m e n t v e n d o r s ' c a p a c i t y.
Consequently, such projects will remain
vulnerable to disruption in terms of
schedules and costs, leading to pressure on
credit quality. India is now one of the
largest and most dynamic infrastructure
and project finance markets in the world
(the total number of project based SPVs is
around 800).
According to India's Ministry of Finance
public private partnership (PPP) database
(pppinindia.com), this includes roughly
500 concession based project SPVs
(mostly in the transportation sectors);
besides, there are several privately owned
and financed independent power projects.
India's vast project pipeline (see Table 1,
which excludes privately owned and
financed independent power projects)
includes projects in various stages of
expression of interest (EoI), bidding,
construction and operation (although
projects under construction form the
largest grouping); it spans almost all
sectors, including energy, ports, roads, rail,
airports, education and hospitals. While
India's achievements in this area are
impressive, capacity constraints are now
becoming a serious issue.


following instances (among others): the
sponsor company has a strong presence
and experience within the infrastructure
sector; the project is integrally tied to the
core business interests of its sponsor; and
there are no contractual provisions for
project support other than the initial
injections of project equity.

Construction Risk
Chart 2 shows actual data for cost overruns
(as a percent of original construction
budget) and time overruns (in months)
collected for projects rated by Fitch, which
were under construction at the time of the
initial rating (typically rated in the 'BBB
(ind)' category). Many of these projects are
now operational. This data is mostly for toll
road projects, although not exclusively so.
Nevertheless, the data justifies initial
concerns about the high construction risk
profile of these projects and validates the
findings of a previous government study
about project construction risks (see
“Indian Infrastructure Outlook 2010: the
Accommodation of Project Risk,”
published March 2010).
Fitch's views on these construction risks
and their low levels of mitigation has
evolved as the pool of project debt has
increased. In its 2008 and 2009 India
Infrastructure Outlook reports, Fitch
stated that it expected a fair amount of loan
restructuring to take place over the next few
years. In addition, the agency stated that
the relatively low project debt ratings
reflected both the propensity for multiple
project risks to occur, as well as the
economic capacity (within the project cash
flows) for project debt restructuring.
Finally, in its 2010 India Infrastructure
Outlook report, Fitch formally recognized
'jugaad' — the Hindi word for a process of
accommodation between parties, in this
case between project counterparties — as
an important rating factor. In the absence
of rigorous adherence to contractual
provisions, project companies and
sponsors have been forced to take on
additional costs, either through the
drawdown of available cash, the raising of
equity, or the issuance of debt.
Governmental concession granting
authorities have also appeared willing to
extend the schedule for project delivery.
This process for rated projects (again, most
of the data relates to toll roads),
demonstrating commercial operating date
(COD) extensions of six months or more
and additional sponsor equity injections of

046


between 5% and 15% of total project costs
(more in extreme cases). Recognising these
systemic constraints and responding to the
requests of project companies and
concession granting authorities, banks
have occasionally been willing to
reschedule project loans, chiefly by
postponing the commencement of
principal amortisation.
Some project bank loan agreements allow
for principal amortization to commence
within six months of COD. However, the
process of jugaad within the power sector
could produce an outcome that is
somewhat different; this is because
off-take agreements create even more
counterparties to negotiate with (eg,
multiple state utility boards, power
traders) and coal rights are intertwined
with delicate considerations for the
environment, wildlife and tribal rights. For
these reasons, coupled with the expected
scaling up of sponsor and commercial
bank commitments for new projects over
the next few years, Fitch recognises that the
capacity for jugaad is limited, at least until
the portfolios of operating and profitable
projects increase, or until new capital
market tools develop to offset some of
these risks.
Sponsor Dependence
Construction risk mitigants — including
contingency budgets and funded reserves
for capitalised interest and debt service —
are almost always inadequate. This leads to
situations where a portion of the credit
quality is determined by an evaluation of
the sponsors' willingness and ability to
lend additional debt and equity support to
their project SPVs. Fitch's project debt
ratings take contractual provisions for
credit enhancement into account by
notching up from the underlying project
credit profile, as long as the sponsor's
credit profile exceeds that of the project.
Where support meets the required tests of
credit substitution (an unconditional and
irrevocable sponsor guarantee of project
debt), Fitch rates the project debt equal to
the rating of its corporate sponsor. Fitch
also notches up project debt in the

Financing Constraints
Except for a brief period at the height
of the financial crisis in 2008,
infrastructure projects have been able
to secure funding at costs that are
reasonable, relative to the equity and
commercial bank financing available
in India. The commercial banking
system has shown sufficient depth to
accommodate the debt needs of most
projects. Buoyant equity markets and
foreign interest in the India growth
story has meant that sponsors have
been able to adequately manage
equity commitments. However, this
scenario could change. While
significant levels of infrastructure
project financing are likely to
continue, the hoped for “scaling up”
of financing activity — called for in
government plans and anticipated by
project developers — may not be so
dramatic. Funding requirements are
increasing, along with the size and
number of projects which require
financing. Volatility of capital flows
and subdued equity markets could
limit future equity raising exercises.
With lending levels approaching the
maximum permissible levels
stipulated by regulatory exposure
guidelines, commercial banks may
find their ability to expand credit
stressed. Tight liquidity conditions
could further choke debt availability.
Rising interest rates — as monetary
authorities try to quell persistent
inflationary pressures — could begin
to impinge on project economics,
although current rating levels
anticipate higher borrowing costs.
While the biggest effect of this could
be to slow the time required for new
projects to achieve financial closure,
the credit quality of debt for existing
projects could also be affected by
delays in the drawdown of loan
proceeds, or by contractual interest
reset provisions. So far, the latter has
not resulted in any ratings
downgrades, but projects with
marginal debt service coverage or
weak revenue ramp-up are vulnerable
to such interest reset clauses.

Construction and Architecture Magazine 11 may june 2011

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Construction and Architecture Magazine 11 may june 2011