INDIAN RETAIL INDUSTRY

ORIGIN OF RETAIL INDUSTRY The origins for retail business in India can be traced with the emergence of Kirana stores and mom-and-pop stores. These stores used to cater to the local people. Gradually the government started supporting the rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the 1980's resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for example, Bombay Dyeing, S Kumar's, Raymonds, etc. Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on from manufacturing to pure retailing.

ORIGIN OF RETAIL INDUSTRY The origins for retail business in India can be traced with the emergence of Kirana stores and mom-and-pop stores. These

stores used to cater to the local people. Gradually the government started supporting the rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the 1980's resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for example, Bombay Dyeing, S Kumar's, Raymonds, etc. Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on from manufacturing to pure retailing. INTRODUCTION Today India is the fifth largest in the world in terms of Retail Industry. Comprising of organized and unorganized sectors, Indian retail industry is one of the fastest growing industries, especially over the last few years. Though initially, the retail industry in India was mostly unorganized, with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually. The India retail industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore shortly. Striking features of Indian Retail
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At Subhiksha, 40 per cent of revenues and space come from cities that are not state capitals. At Vishal Megamart, 80 per cent of revenues come from tier II and III cities Around 70-75 per cent of visitors end up buying from retail outlets in smaller places, whereas, in large cities, it is around 50-55 per cent Retail Operations in smaller cities result in extra 3 4 percent margin

ECONOMIC ANALYSIS
1. TOTAL CONTRIBUTION TO THE ECONOMY/GDP Indian Retail Industry is the most promising emerging market for investment According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country in the year 2007. In 2009, it rose to 12% in the year 2008 and expected to reach 22% in the next few years. The Indian Retail Industry is expected to grow to US$ 700 billion in the year 2010 according to a report by Northbride Capital. In the same year the organized sector will be 20% of the total market

share as compared to the share of organized sector in 2007 was 7.5% of the total retail market. Retail is India's largest industry and for over 10% of the India's GDP and around 8% of the employment. Retail sector is one of India's fastest growing sectors with a 5% compounded annual growth rate. As India has a huge middle class base and its untapped retail industry are key attractions for global retail giants planning to enter newer markets. Due to the changing lifestyles, strong income growth in the middle class population and favorable demographic patterns, Indian retail is expected to grow 25% annually and expected that retail business in India could be worth US$ 175-200 billion by 2016. The CII-AT Kearney retail study shows that retailing is the largest contributing sector to the country's GDP. The retail sector contributes about 10 percent to the GDP compared to 8 percent in China 6 percent in Brazil and a matching 10 percent in the US.

All these factors reflect upon the opportunities available in this sector for new entrants. With rising consumer demand and greater disposable income, the US$ 400 billion Indian retail sector is expected to reach US$ 550 billion by 2014. Population expansion, the increasing wealth of individuals and the rapid construction of organized retail infrastructure are key factors behind the forecast growth. The organized retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like Noida, Amritsar, Kochi and Ghaziabad, are emerging as the favored destinations for the retail sector with their huge growth potential.

In 2010 the retail trade accounts for 12 % of the country's GDP and is expected to approach 22% according to Indian Brand Equity Foundation. Another analysis according to the Mckinsery 'The rise of Indian Consumer Market', foresees the Indian consumer market growing by four times by the year 2025, the Indian Retail industry is worth $300 billion in terms of value. The industrys contribution to the Gross Domestic Product is about 10%, the highest compared to all other Indian Industries. 2.INFLATION High inflation, mounting interest costs and rising rentals have hit growth of the domestic retail sector. Retailers are facing a slowdown in roll-out plans, as developers are not being able to deliver stores on time. Despite these impediments, the sector still has enough headroom to grow over the long term. Organised retail sales currently comprise around 4% of total sales in the domestic retail sector (annual sales $322 billion in 06-07). The pace of organised sectors sales growth is expected to increase at a much faster rate and its share in the total retail trade is likely to touch 16% by FY12. In its current stage, the unorganised retail sector will not be able to service the growing demand of the consuming class. The report says that the unorganised retail business is likely to grow at 10% per annum from $309 billion in FY07 to $496 billion in FY12. This will have a snowball effect on the organised sector. As a result, the share of organised retail is expected to grow at a rate of 45-50% per annum. This is what the big retailers are preparing for now. Macro-environmental factors are putting a downward pressure on the sectors margins. The March quarter (Q4) of FY08 registered a sharp slowdown in the sectors sales on a quarter-on-quarter (q-oq) basis, with sales slipping to 5.3%, vis--vis 12.4% in the previous quarter. Though it will not be prudent to compare the retail business on a q-o-q basis due to the seasonality factor, the situation worsened due to rising input prices. Despite this, the total expenses to sales have increased by a small 28 bps at 95.6%, as companies have been able to contain employee costs. But interest and depreciation costs still cause some concern. Since the beginning of FY08, the wholesale price index has been

rising at an average of 5.09%. This seems to be affecting the departmental store operators more than the value-format retailers. Food and grocery being essential items, a rise in their price leaves lesser income at the disposal of customers. A similar trend is observed in the international retail market as well. UKs Experian National Retail FootFall Index fell by 2.6% in June, the fifth monthly drop this year. In the UK, large department stores outside city limits experienced much larger drops in footfalls, down 5.8%, compared to a 1.5% fall in city centers. This fall is significantly impacting retail sales because these visits have a much better conversion to sales ratio and generate much higher value purchases for retailers. Pantaloon, the countrys largest retailer, has registered an 8.4% increase in its operating margins on account of efficient cost management. With 65% of its turnover coming from its value format, the company has managed to handle inflation by increasing its volumes. It has managed to increase the share of private labels, which, in turn, takes care of its margins. Shoppers Stop has managed to keep its same store sales higher, and also increased its average selling price. However, its interest costs and depreciation continue to be high. Similarly, Provogues costs continue to be on the higher side. What has been a surprise is the decline in sales for Trent. Despite opening a new store in the value as well as lifestyle formats, the companys sales are seeing a slowdown, which is hitting margins. The newly listed players, Vishal Retail and Koutons, continue to be in an aggressive expansion mode. Sales have been growing on a q-o-q basis, but margins are expected to remain under pressure till the full roll-out takes place. In addition, increasing competition will impact the margins of retailers, as the target audience more or less remains the same. Since inflationary trends are expected to continue in the near future, retailers will find new ways of luring customers. Product promotion, freebies, promotion of private labels and online discounts are some of the avenues they will resort to, because customer is the king. Ultimately, it will be the call of the consumer to choose the most cheapest in prices player. 3.Retail: Major Developments and Investments

After the US, Germany has also come up in full support of FDI in retail in India. Metro AG, one of the prominent German retail chains, has shown intentions to venture in Indian markets along with US' Wal-Mart and France's Carrefour.Cumulative FDI inflows in single-brand retail trading during April 2000 to September 2011 stood at US$ 44.45 million, according to the Department of Industrial Policy and Promotion (DIPP). Certain developments and investments that took place on the Indian retail canvas recently are discussed belowy

Real estate major DLF's subsidiary DLF Brands has struck a deal with Chicago-based Claire's Stores Inc to bring the latter to India and open its 75 stores over 2011-16. Claire's is a specialty retailer which targets young girls through over 3,000 stores globally. French retail chain, Carrefour is on an expansion spree in India wherein it is about to finalise lease deals across 10 to 12 sites in the country to open cash-and-carry (wholesale) outlets. The world's largest retailer Wal-Mart will open an innovation lab in Bengaluru by the end of 2011. The lab would be tasked to drive the US$ 422-billion company's next generation innovations that impact shopping behavior among the customers. US fast moving consumer good (FMCG) giant McCormick, that has recently formed a joint venture (JV) with Indian basmati rice brand Kohinoor Foods, intends to tap Indian packaged food industry and achieve sales of US$ 85 million in the first year of operations in the country. FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian breakfast cereal market by launching oats cereal under its flagship brand Horlicks'. The breakfast cereal market in India is currently dominated by PepsiCo and Kellogg's. Oral and dental hygiene products manufacturer Colgate Palmolive has decided to invest Rs 200 crore (US$ 38.52 million) to establish a greenfield facility at an upcoming industrial estate in Sanand which is being developed by state-run Gujarat Industrial Development Corporation (GIDC).

INDUSTRY ANALYSIS 1.RETAIL INDUSTRY LIFE CYCLE

Introduction Stage:An introduction is the opening phase of a market and is one that is just entering the GRDI, Global Retail Development Index This index is based on more than 25 macro-economic and retail specific variables.for instance ,the country risk includes parameters like political risk,economic performance,debt indicators,credit ratings,access bank finance and business risk.The market attractiveness covers reail sales per capita ,urban population ,laws and regulations and business efficiency. Iin this stage all, which are outside the top 30 markets, falls in this stage. At this stage, retailers should monitor and performing highlevel assessments, they should plan for their entry strategies. India in the late 1990's is a good example in the opening stage, while in 2006, Kazakhstan is the country in introduction stage. Strategy suggested :A rapid penetration strategy is suggested at this stage i>e low price and high promotion.

Growth Stage :In growth stage, the market is developing quickly and also ready for modern retailing. Countries, which are in Peaking stage, are India, Ukraine and Vietnam. Retailers entering this stage have the best chance for long-term success. Retailers at this stage should enter through local representations, sourcing offices and new stores. Wal-Mart success in china in the late 1990's and early 2000's gives us the importance of committing to a promising highgrowth market at right time. Strategy suggested: The strategy of adopting quality and styled products with new models and shift of advertising from product awareness to product preference Eg the big bazaar advt says surf excel is cheaper than the market price.The idea behind adopting strategy is to strengthen against competitors.

Maturity Stage:In this stage the market is still big and growing, but the space for new entrants will become tighter and retailers should act quickly at this stage because retailers at this stage have limited time to explore, and also their margin for error is thin. In general , they should act according to the established rules and should be open to face the competition from international retailers. This stage generally lasts longer than the previous two stages. Strategy suggested: Enter new market segments that is either enter new geographic areas eg vishal megha mart has opened stores in smaller cities tier II and III cities Decline Stage:The window of opportunity is closing fast and modern retail share is reaching 40 to 60 percent. Though the opportunity is closing the existing retailers can enter with new formats such as discount models or non-food formats such as consumer electronics and apparel. Window of opportunity ends for about 5 to 10years before a market enters the closing phase and reaches saturation level. India for example, was in the opening stage in 1995 and entered peaking stage in the year 2003 and reached number 1 rank in 2003

2. LABOUR MARKET STRUCTURE AND TRENDS:Relative to the workforce as a whole, the retail industry contains high proportions of women, young people and part-time workers. Some 58 per cent of Retail trade employees are female, one-third are aged 15 to 24 years and 48 per cent work part time.The Other store-based retailing and Food retailing subdivisions together employ 85 per cent of all retail workers (51 and 34 per cent, respectively). All subdivisions, except for Motor vehicle and motor vehicle parts retailing and Fuel retailing, have a preponderance of female workers. Part-time workers outnumber full-time workers in Food retailing.Retail workers tend to have lower educational qualications than the workforce as a whole.

This is related both to the large proportion of young people employed, and to the lowskilled occupations that predominate, in the industry.Retail trade workers are more likely than the workforce as a whole to be either unemployed or underemployed. They also have a shorter average job tenure and are more likely than unemployed workers from any other industry to have voluntarily left their last job.Over the last two decades, part-time employment in Retail trade has grown very strongly, alongside only modest growth in full-time employment. Between 1985 and 2008 the number of people employed increased by 70 per cent and total hours worked increased by 50 per cent.Over the same period there was strong employment growth in both Food retailing and Other store-based retailing. By contrast, Motor vehicle retailing and Fuel retailing showed only minor employment growth.Over the period 198889 to 200304 labour productivity improved more slowly in Retail trade than across the market sector as a whole, while the picture for multifactor productivity was more mixed. In the period 200304 to 200708, however, Retail trade experienced stronger growth than the total market sector in both measures of productivity.

3.GOVERNMENT POLICY AND REGULATION:India's government seems to be on a gradual but definite path toward allowing foreign retailers into the country.... suggests the A.T. Kearney's Retail Development Index 2006. It is a common knowledge that the Union government has to face a number of hurdles both from it's opponents as well as it's allies before it could announce the final verdict. There have been demands from all corners regarding framing of rules to safeguard interests of the socalled small traders. Simultaneously economists have the consensus that industrialization is imperative for the growth of the economy and foreign investment has to play an inevitable role in it. With Lok Sabha elections to come in 2009, the Union government too seems a bit confused regarding decision in who's favor can provide it a political edge. So in this study let us compare the views for and against liberalization as is held by Indian Bureaucrats

a. Entry of large players: stiff opposition from Left Parties The recent outburst of fury among the Kerala's LDF(Left Democratic Front) Government has been noticeable. They have exacted for a three-pronged approach to prevent the retail giants from serving the Keralians. At the first stage, not only MNCs but also the local retail giants like Reliance will be shown the red signal. In fact a magnified CPI protest has compelled a Reliance Fresh outlet in Kochi to take police protection. The draft of a bill has been finalized to amend the Kerala Essential Commodities Act so that the state government can intervene in the retail market. As a second step, local councils (70% of which is controlled by the Left) will deny licenses, that are mandatory to start a retail chain in the state. Kochi and Tiruvananthapuram corporations will be in fact commanded to reconsider the licenses of outlets that are already operating in the regions. This strategy grants more power to the state. However a ban on shopping in these outlets is still not clear. The third and the most revolutionary judgment is actually an outcome of the whole game. Government-controlled supermarkets and hypermarkets will be established in some of the key cities in the state. This rigid legal wall not only in Kerala but across the country has been born out of a traditional mindset. Kerala claims to have a literacy rate of 90.92% and a sex ratio of 1058 females per 1000 males. The data speaks for the government's prudent commitment in the case of Kerala. So it is high time that the government opens up avenues for its people to let them grow and become self dependent. But the government is still holding good, the conventional 'infant industry' outlook. The main worry is the negative impact on the already gloomy condition of employment. Let's make an attempt to understand the vicious circle of unorganized retailing and present employment scenario. Unorganized retailing has a share of about 96% in the Indian retail sector. But why should people work in such miserable

situations if the manufacturing and services sector are booming is the overwhelming question. There has been a trend to migrate to cities in search of alluring bright city lights. But the consequences has been been even worse- earning lower than expected wages(Harris Todaro model of migration). The illiterate and unskilled people ultimately set up a grocery shop to earn a living. This gives birth to another unorganized retail shop in India and thus enlarges its share. So the unorganized retail market in India has born out of fate rather than selection. b.The Actual Scene Those opposing the expansion of organized retail in India must understand that the share of primary sector shrinks an that of the secondary and then the tertiary sector expands as an economy grows. This is the basic structural adjustment in case of any transforming economy. India is at a take off stage. A retardation in the agricultural sector is not permissible but inhibiting the growth of services on grounds of protection to agriculture is more irrational. A proof of this has been seen in a small town of North Bengal. The opening of a Big Bazaar (brand name for stores under Pantaloon) departmental store has seen a human deluge of about 7,000 people in the 35,000 sqft shopping mall by 3pm. This clearly indicates that people (even in remote places) have become fed up of monotonous marketing practices and demand nowadays is purely governed by choice. c.The Ruling UPA government's outlook The UPA government is rather clear in its aim of taking India to new highs. The commerce minister has repeatedly asserted that FDI will kill two birds with the same stone. It will generate substantial direct as well as indirect employment and at the same time will not tamper with the present scope of the unorganized retail market. The indirect employment includes jobs in transport, packaging and other logistic services. It will enhance competition in the country thus giving a virtual chance to face global challenges while operating at home. Mr. Nath is clearly focused on the utilization of FDI in acquiring benefits. It is true that such

investments will bring in huge imports but this may also help in the Indian products reaching the foreign consumers. Foreign majors such as Wal-Mart, Tesco and Carrefour are ready to enter India. The UPA government has already permitted 51 percent FDI in Single-brand products without consulting its allies and it is expected that slowly but steadily the government will achieve its goal. 4.Growth Potential The key growth areas include the urban, luxury segment on one end of the spectrum and serving the rural sector on the other. In addition, government policy encouraging FDI in the segment has resulted in a plethora of international retailers keen on entering the market; American retail giant Wal-Mart has tied-up with Bharti Enterprises and global coffee giant Starbucks' has tied up with PVR Limited. In addition,Carrefour, Boots and others are also expected to come in.With so much action, it is natural that there is a huge scope for employment opportunities, and experts estimate that the sector will generate employment for ~ 2.5 million people in 2010. The top retail companiesin India include the Raheja Group, Reliance Retail, Tata Trent, Future Group, RPG Retail, and Ebony Retail Holdings.

5.Future Prospects:-

There are many opportunities for those seeking to enter this sector, and entry level positions such as sales executives dont even require a degree. Naturally, the higher order jobs for graduates with relevant degrees and work experience, involve more responsibility, challenges and remuneration. MBAs are increasingly being recruited, which marks a change of HR policy, from the traditional preference to hire those from the FMCG and hospitality sectors. In fact, senior executives in retail such as operations heads are extremely well looked after, and HR consultants believe they are paid in excess of Rs. 60 lakhs.The good news for graduates is that since the sector is so young and vibrant, career growth happens very rapidly, and these positions are very achievable in a compressed time period. Successful candidates across all levels are those who are dynamic, able to multi-task and are equipped with great communication skills.

INDIAN CONSTRUCTION INDUSTRY

Size of the Industry Geographical distribution

Indian Construction Industry consists of 200 firms in the corporate sector. In addition to these firms, there are about 1, 20,000 class A contractors registered with various government construction bodies. All the major cities of the country

The Indian construction industry has been playing a vital role in overall economic development of the country, growing at Output per annum over 20% Compound Annual Growth Rate over the past 5 years and contributing ~8% to GDP. Total sales of construction industry have reached Rs. Market 42885.38 crores in 2004 05 from Rs. 21451.9 crores in 2000Capitalization 01.

Indian Construction Industry is highly fragmented. There are mostly unorganised players in the industry which work on the subcontracting basis. As the Construction activity being labour intensive, construction companies have been mainly focusing on mechanization over past few years. Consequently, growth in quantum of labourers required has declined from 1.6% in FY 04 to 0.9% in FY 08. Projects in Construction industry are mostly working capital intensive. The Indian construction industry forms an integral part of the economy and a conduit for a substantial part of its development investment, is poised for growth on account of industrialization, urbanization, economic development and people's rising expectations for improved quality of living. Construction constitutes 40% to 50% of India's capital expenditure on projects in various sectors such as highways, roads, railways, energy, airports, irrigation, etc and is the second largest industry in India after agriculture. It accounts for about 11% of Indias GDP. For the first five-year plan, construction of civil works was allotted nearly 50 % of the total capital outlay. In 1954 National Industrial Development Corporation (NIDC), was set up in the public sector which is the first professional consultancy company. Then later many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc. and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.). Construction usually is done or coordinated by general contractors, who specialize in one type of construction such as residential or commercial building. Cost structure of the construction industry is dominated by raw material cost and subcontracting cost. Raw material cost which is the major cost accounts for 30-50% of the total cost and subcontracting cost accounts for about 20-40%. The

raw materials consumed by Construction Industry in any country mainly include cement and steel. The Consumption of steel by construction industry has grown of 16.1% over past 5 years whereas cement consumption has registered of 9.6%. Unprecedented rise in prices of these two raw materials has a direct impact on the cost of the project and in turn margins of construction companies. Profitability also depends upon the diversity of the projects a company can execute. Companies having strong presence in segments like power and industrial segment which are complex to execute, tend to enjoy higher margins. Today Indian sub continent is the second fastest-growing economy in the World. The Indian construction industry has been playing a vital role in overall economic development of the country, growing at over 20% Compound Annual Growth Rate over the past 5 years and contributing ~8% to GDP.

ECONOMIC ANALYSIS
     GDP Inflation Investment Infrastructure Budget

 India is on the verge of witnessing a sustained growth in infrastructure build up. The construction industry has been witness to a strong growth wave powered by large spends on housing, road, ports, water supply and airport development. The construction sector has registered double digit growth during the last few years and its share as a percentage of GDP has increased considerably as compared to the last decade. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017), which is double of that in the Eleventh five-year plan. From a policy perspective, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. During the first two years of the eleventh five-year plan (2007-2012), the share of private players in the total investment was 34%. This is higher than the target of 30% for the eleventh five-year plan. During the twelfth five-year plan, the contribution of private sector in total infrastructure investment is expected to increase to 50%. The balance will be borne by the public sector. The real estate industry comprising of construction and development of properties has grown from family based entities with focus on single products and having one market presence into corporate entities with multi-city presence having differentiated

products. The industry has witnessed considerable shift from traditional financing methods and limited debt support to an era of structured finance, private equity and public offering. The construction sector is a major employment driver, being the second largest employer in the country, next only to agriculture. This is because of the chain of backward and forward linkages that the sector has with other sectors of the economy. About 250 ancillary industries such as cement, steel, brick, timber and building material are dependent on the construction industry. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times.

KEY POINTS Supply Past 4-5 years have seen a substantial increase in the number of contractors and builders, especially in the housing and road construction segment. Demand Demand exceeds supply by a large margin. Demand for quality infrastructure construction is mainly emanating from the housing, transportation and urban development segments.. Barriers to entry Low for road and housing construction. However, high working capital requirements can create growth problems for companies with weak financial muscle. Bargaining power of suppliers Low. Due to the rapid increase in the number of contractors and construction service providers, margins have been stagnant despite strong growth in volumes.

Bargaining power of customers Low. The country still lacks adequate infrastructure facilities and citizens have to pay for using public services. Competition Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development.

Financial Year '11 After a slow growth in the last fiscal, order inflows in the construction industry registered a healthy growth in FY11. However, it was not reflected in the revenues and profitability due to execution delays and rising cost of construction. Nevertheless, considering the strong order backlog, the next fiscal could be promising provided execution remains on track. The 2011-12 Budget saw increase in allocation towards various infrastructure development schemes. The government earmarked Rs 2 trillion for infrastructure development as a whole. This is an increase of 23.3% over 2010-11. The government also increased FII limit for investment in corporate bonds issued in the infrastructure sector to US$ 25 bn from US$ 5 bn. Backed by governments sustained focus on housing, road, port and airport development, infrastructure sector in India is poised to grow. The first half of FY11 proved favorable for the real estate companies. The global economy improved, bringing back financial confidence to the home buyers along with low interest rates. As demand for houses mounted, developers increased the prices. Prices went up to pre-2008 levels and in some cases beyond that. However, the situation has changed since 4QFY11. Rising inflation

forced the Reserve Bank of India to hike interest rates. High interest rates and high property prices started denting demand for real estate. The real estate companies are reeling under heavy debt and rising costs (both operating expenses and interest costs). Nevertheless, as genuine demand exists for good quality homes, long-term fundamentals for real estate sector remains strong.

Prospects India is on the verge of witnessing a sustained growth in infrastructure buildup. Infrastructure investments continue to be the most important growth driver for construction companies. The proposed increase in allocation in the twelfth five-year plan (20122017) will translate into a healthy business for construction companies. Real estate investments account for majority of the total construction investments. Demand-supply gap for residential housing, favourable demographics, rising affordability levels, availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. According to the Technical Group on Estimation of Housing Shortage estimates, there would be shortage of 26.53 m houses during the Eleventh Five Year Plan (2007-12), which provides a big investment opportunity. In addition to this, demand for office space from IT/KPO segment is expected to continue due to emergence of India as a preferred outsourcing destination. Also, boom in organized retail is expected to result in huge demand for real estate construction. While long-term factors are likely to work in favour of the real estate developers, the outlook for the short term remains bleak. The double whammy of plunging sales and rising costs have taken their toll on the profitability of real estate majors. Also, banks turned cautious towards rescheduling debt or issuing fresh loans to real estate companies, as an aftermath of the bribe-for-loan scam. Prices of steel, cement and labor, which together make for almost

75% of overall construction cost, have risen by over 30% since 2009. Upward spiraling cost of construction materials has put great pressure on project execution, in turn leading to project delays. Entry into affordable housing is likely to pressurize margins but would arrest the free fall in topline as witnessed during the downturn.

INDUSTRIAL ANALYSIS
OUTLOOK AND POTENTIAL OF THE INDIAN CONSTRUCTION INDUSTRY SWOT ANALYSIS STRENGTHS: Emerging Industry: The Construction Chemical Industry is at a nascent stage. So there is a long way to go for the industry. The life of the industry goes with the construction industry, which is the end user of the Construction Chemical products. It is estimated that the life of the Indian Construction Chemical Industry will last atleast for fifteen years. Huge Growth Potential:

The Indian Construction Chemical Industry has a huge potential to grow. Even at todays nascent stage the industry is growing at the rate of fifteen percent, which is almost double than that of the current GDP rate of India. Today the end users are not aware of the construction chemical usage and its benefits. When the awareness among the end users will increase the industry will definitely grow with much rate than at which it is growing today. Huge Export Contributor: The Indian Construction Chemical Industry contributes considerably in the countrys exports. Around twenty percent of the industry turnover is achieved through exports. The major exports are to US, Europe, Germany and the SAARC nations. Hence the chemical segment supports at a considerable level to earn the foreign exchange.

Improves the Productivity: The construction chemicals improves the productivity of the construction sector by increasing the life of the structures, decreasing the abrasions, increasing bond strength and other qualities which the chemicals impart to the construction works if used on correct time and in correct manner. Adds Value: The construction chemicals adds value to the constructed structures, concrete, mortars as well as by making them dust proofed and other value adding properties of the construction chemicals. It improves the lifestyle of the place where it is used. Sophisticated Construction Input: The construction chemical is a sophisticated technique that supports the construction industry to get the desired or improved results from the products or structures so constructed. WEAKNESSES:

Improper Customer Services: The industry is not emphasizing on the marketing activities. As a result there is lack of technical personnels in the marketing department of the organisations. The repercussion results in improper customer services. Costly Products: The use of the construction chemicals increases the cost to the developers by two to five percent. Also the standard products are costlier than that of the sub standard products. Moreover construction chemicals are value-adding inputs for the construction industry. The chemicals add value or improve the productivity of the structures or works. So there is not necessary to use the products. Even if the chemicals are not used the projects can be developed. Low Skilled Labour: The construction chemical industry is less explored by the chemical industry technicians. Also the industry is at the nascent emerging stage. Therefore it is difficult to get the skilled labour for the industry processes. Low Emphasis on Marketing: One of the weaknesses of the organised industry is costly products. There is lack of technical marketing professionals for the industry. The industry personnels emphasize low on marketing activities. This is because the marketing expenditure will increase the cost for the company, which is already one of the weaknesses.

Low Awareness: Around eighty five percent of the construction industry personnels are not aware of the concept of construction chemicals. They are not aware of the productivity improvement and value addition for the construction works if the chemicals are used on proper time and in proper manner.

OPPORTUNITIES:SAARC Countries: The SAARC countries lack the well organised construction chemical industry. This is a great opportunity for the Indian Construction Chemical Industry to target the SAARC countries for the penetration of their products in the country where there is lack of branded and improved products. Exports: The cost of manufacturing is low is India as compared to that of the western nations. Also the organised player not compromise in the quality and hence there is a good opportunity to target the other western nations where the construction activity is increasing.

Low Labour Cost: The labour cost in India is lower than that of in the western nations. If the labours are endowed with better skills the cost of production can be decreased. Foreign Direct Investments: The Governments decision to introduce hundred percent FDI in construction industry has opened a great opportunity for the industry growth. The overseas organisations will improve the quality of construction and hence will increase the use of standard construction chemical applications in the construction industry to give better quality of construction work products. Expenditure in Construction Sector: As in the beginning we saw the growth rate of the construction industry, the Government has realized that the Nation will only progress with a sound infrastructure that will conjoin the Nation as one. The Government has increased the outflows for the

construction activities of the country. The huge projects like NHDP, PMGSY has brought a good opportunity for the Indian Construction Chemical Industry. CRAMS: Contract Research and Manufacturing Services (CRAMS) is the new emerging concept of the emerging industry. The Construction Chemical Industry is a problem solver industry. Hence it needs huge investments in Research & Development activities. Due to the criticalities involved in the chemical processes it becomes difficult for any company to manage the business processes from procuring to providing service for customers. Also in the competitive business world plays a vital role in the economies of scale for the production activities. The new emerging concept of CRAMS has a huge potential to restructure the industry for the favorable results. THREATS:Stricter Environment Regulations: The Environment Regulations are getting stricter day by day. The Government is passing laws to conserve the environment. These regulations if not maintained by the industry can hamper the growth of the Construction Chemical Industry. Lack of Technical Guidance: The result of the application of construction chemicals depends mainly on the way or manner in which the chemical has been used. The application of the chemicals require an excellent technical guidance to get the best results out of such costly products. Today in India the end users are not skilled in the application of these chemicals. So they require a technical guidance to develop the skills required for the application.

Government Policies:
1. In-Country Policies The Government has no constraints on the usage of construction chemical in the structures or in the Government projects except the projects funded by world development organisations. This provides an unfavorable opportunity for the developers to save the input cost to get a better quality structures. 2. Export Policies The inconsistent export policy hampers the decision of the exporters.The Government frequently changes the export policy. The policy is not consistent throughout the year putting exporters in a muddle to take decisions. Hence the exporters are unable to meet their obligations on time or they dont construction chemical export orders. Depreciating Foreign CurrencyDuring the last financial year 2005 2006 the value of dollar depreciated considerably. This hampered the exports of the overall goods. The depreciating foreign currency decreases the purchasing power of the importers, hence hampers the exports. Port Regulations: Labour Unions On the ports the handling of goods cannot be done by the outsider. Moreover the port labour are unproductive and unskilled to handle the critical material like construction chemical. This increases the wastage of the goods. Obsolete Equipments:The obsolete handling equipments lead to pilferage and wastage of the chemicals on port. This affects the export order. Either the exporters have to dispatch the order considering the wastage quantity or the delivered order is less than that of the order placed with the exporter by the importer. Lack of Research & Development:-

The Research & Development investments of the Indian companies is less than that of the MNCs. The construction chemicals are used only for a specific purpose either to add value or to improve productivity of the existing product. So a continuous R & D effort is necessary for the growth of the industry. Unskilled End Users: A large chunk of construction industry labours are unskilled or low skilled. Whereas the construction chemical application requires an adept knowledge to get the best results. Hence many a times the customers are not satisfied with the results of the construction chemical. Sub Standard Products: The introduction of sub standard products manufactured by the small players for the sake of making sound profit is spoiling the industry growth. The users using sub standard products dont get the results by the applications, developing unfavorable perceptions in the customers as well as end users for the future growth of the industry.

GROWTH STRATEGIES Growth strategies have been researched from multiple perspectives. These may be organic or inorganic in nature. Organic growth involves growth either into new products or in new markets. Growth is realized through and mainly fuelled by: (Groves 2000) y Geographic expansion of markets y Higher market share in current markets y New market share in new segments Diversification and integration are also types of organic growth. Inorganic growth on the other hand involves, mergers and acquisitions and joint ventures.According to study carried out on the IT Industry in India (Anandaram 2003) growth is driven by y Leadership and vision y Differentiated approach y Marketing investment y Alliances and partnerships y Cultivation of local market

Another similar study (Naidu 2003) shows that large size offers a firm the flexibility in offering products and services. Acquisition of resources and skills is another path to expand capabilities. y System integration y Project Management Skills y Partnerships y Serial entrepreneurship y Merger and Acquisitions 3.Retail: Major Developments and Investments After the US, Germany has also come up in full support of FDI in retail in India. Metro AG, one of the prominent German retail chains, has shown intentions to venture in Indian markets along with US' Wal-Mart and France's Carrefour.Cumulative FDI inflows in single-brand retail trading during April 2000 to September 2011 stood at US$ 44.45 million, according to the Department of Industrial Policy and Promotion (DIPP). Certain developments and investments that took place on the Indian retail canvas recently are discussed belowReal estate major DLF's subsidiary DLF Brands has struck a deal with Chicago-based Claire's Stores Inc to bring the latter to India and open its 75 stores over 2011-16. Claire's is a specialty retailer which targets young girls through over 3,000 stores globally. French retail chain, Carrefour is on an expansion spree in India wherein it is about to finalise lease deals across 10 to 12 sites in the country to open cash-and-carry (wholesale) outlets. The world's largest retailer Wal-Mart will open an innovation lab in Bengaluru by the end of 2011. The lab would be tasked to drive the US$ 422-billion company's next generation innovations that impact shopping behavior among the customers. US fast moving consumer good (FMCG) giant McCormick, that has recently formed a joint venture (JV) with Indian basmati rice brand Kohinoor Foods, intends to tap Indian packaged food industry and achieve sales of US$ 85 million in the first year of operations in the country.

FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian breakfast cereal market by launching oats cereal under its flagship brand Horlicks'. The breakfast cereal market in India is currently dominated by PepsiCo and Kellogg's. Oral and dental hygiene products manufacturer Colgate Palmolive has decided to invest Rs 200 crore (US$ 38.52 million) to establish a greenfield facility at an upcoming industrial estate in Sanand which is being developed by state-run Gujarat Industrial Development Corporation (GIDC).

INDUSTRY ANALYSIS 1.RETAIL INDUSTRY LIFE CYCLE

Introduction Stage:An introduction is the opening phase of a market and is one that is just entering the GRDI, Global Retail Development Index This index is based on more than 25 macro-economic and retail specific variables.for instance ,the country risk includes parameters like political risk,economic performance,debt indicators,credit ratings,access bank finance and business risk.The market attractiveness covers reail sales per capita ,urban population ,laws and regulations and business efficiency. Iin this stage all, which are outside the top 30 markets, falls in this stage. At this stage, retailers should monitor and performing highlevel assessments, they should plan for their entry strategies. India in the late 1990's is a good example in the opening stage, while in 2006, Kazakhstan is the country in introduction stage. Strategy suggested :A rapid penetration strategy is suggested at this stage i>e low price and high promotion. Growth Stage :In growth stage, the market is developing quickly and also ready for modern retailing. Countries, which are in Peaking stage, are India, Ukraine and Vietnam. Retailers entering this stage have the best chance for long-term success. Retailers at this stage should enter through local representations, sourcing offices and new stores. Wal-Mart success in china in the late 1990's and early

2000's gives us the importance of committing to a promising highgrowth market at right time. Strategy suggested: The strategy of adopting quality and styled products with new models and shift of advertising from product awareness to product preference Eg the big bazaar advt says surf excel is cheaper than the market price.The idea behind adopting strategy is to strengthen against competitors.

Maturity Stage:In this stage the market is still big and growing, but the space for new entrants will become tighter and retailers should act quickly at this stage because retailers at this stage have limited time to explore, and also their margin for error is thin. In general , they should act according to the established rules and should be open to face the competition from international retailers. This stage generally lasts longer than the previous two stages. Strategy suggested: Enter new market segments that is either enter new geographic areas eg vishal megha mart has opened stores in smaller cities tier II and III cities Decline Stage:The window of opportunity is closing fast and modern retail share is reaching 40 to 60 percent. Though the opportunity is closing the existing retailers can enter with new formats such as discount models or non-food formats such as consumer electronics and apparel. Window of opportunity ends for about 5 to 10years before a market enters the closing phase and reaches saturation level. India for example, was in the opening stage in 1995 and entered peaking stage in the year 2003 and reached number 1 rank in2003

2. LABOUR MARKET STRUCTURE AND TRENDS:Relative to the workforce as a whole, the retail industry contains high proportions of women, young people and part-time

workers. Some 58 per cent of Retail trade employees are female, one-third are aged 15 to 24 years and 48 per cent work part time.The Other store-based retailing and Food retailing subdivisions together employ 85 per cent of all retail workers (51 and 34 per cent, respectively). All subdivisions, except for Motor vehicle and motor vehicle parts retailing and Fuel retailing, have a preponderance of female workers. Part-time workers outnumber full-time workers in Food retailing.Retail workers tend to have lower educational qualications than the workforce as a whole. This is related both to the large proportion of young people employed, and to the lowskilled occupations that predominate, in the industry.Retail trade workers are more likely than the workforce as a whole to be either unemployed or underemployed. They also have a shorter average job tenure and are more likely than unemployed workers from any other industry to have voluntarily left their last job.Over the last two decades, part-time employment in Retail trade has grown very strongly, alongside only modest growth in full-time employment. Between 1985 and 2008 the number of people employed increased by 70 per cent and total hours worked increased by 50 per cent.Over the same period there was strong employment growth in both Food retailing and Other store-based retailing. By contrast, Motor vehicle retailing and Fuel retailing showed only minor employment growth.Over the period 198889 to 200304 labour productivity improved more slowly in Retail trade than across the market sector as a whole, while the picture for multifactor productivity was more mixed. In the period 200304 to 200708, however, Retail trade experienced stronger growth than the total market sector in both measures of productivity. 3.GOVERNMENT POLICY AND REGULATION:India's government seems to be on a gradual but definite path toward allowing foreign retailers into the country.... suggests the A.T. Kearney's Retail Development Index 2006. It is a common knowledge that the Union government has to face a number of hurdles both from it's opponents as well as it's allies before it could announce the final verdict. There have been demands from all

corners regarding framing of rules to safeguard interests of the socalled small traders. Simultaneously economists have the consensus that industrialization is imperative for the growth of the economy and foreign investment has to play an inevitable role in it. With Lok Sabha elections to come in 2009, the Union government too seems a bit confused regarding decision in who's favor can provide it a political edge. So in this study let us compare the views for and against liberalization as is held by Indian Bureaucrats Entry of large players: stiff opposition from Left Parties

The recent outburst of fury among the Kerala's LDF(Left Democratic Front) Government has been noticeable. They have exacted for a three-pronged approach to prevent the retail giants from serving the Keralians. At the first stage, not only MNCs but also the local retail giants like Reliance will be shown the red signal. In fact a magnified CPI protest has compelled a Reliance Fresh outlet in Kochi to take police protection. The draft of a bill has been finalized to amend the Kerala Essential Commodities Act so that the state government can intervene in the retail market. The recent outburst of fury among the Kerala's LDF(Left Democratic Front) Government has been noticeable. They have exacted for a three-pronged approach to prevent the retail giants from serving the Keralians. At the first stage, not only MNCs but also the local retail giants like Reliance will be shown the red signal. In fact a magnified CPI protest has compelled a Reliance Fresh outlet in Kochi to take police protection. The draft of a bill has been finalized to amend the Kerala Essential Commodities Act so that the state government can intervene in the retail market. As a second step, local councils (70% of which is controlled by the Left) will deny licenses, that are mandatory to start a retail chain in the state. Kochi and Tiruvananthapuram corporations will be in fact commanded to reconsider the licenses of outlets that are already operating in the regions. This strategy grants more power to the state. However a ban on shopping in these outlets is still not clear. The third and the most revolutionary judgment is actually an outcome of the whole game. Government-controlled supermarkets

and hypermarkets will be established in some of the key cities in the state. This rigid legal wall not only in Kerala but across the country has been born out of a traditional mindset. Kerala claims to have a literacy rate of 90.92% and a sex ratio of 1058 females per 1000 males. The data speaks for the government's prudent commitment in the case of Kerala. So it is high time that the government opens up avenues for its people to let them grow and become self dependent. But the government is still holding good, the conventional 'infant industry' outlook. The main worry is the negative impact on the already gloomy condition of employment. Let's make an attempt to understand the vicious circle of unorganized retailing and present employment scenario. Unorganized retailing has a share of about 96% in the Indian retail sector. But why should people work in such miserable situations if the manufacturing and services sector are booming is the overwhelming question. There has been a trend to migrate to cities in search of alluring bright city lights. But the consequences has been been even worse- earning lower than expected wages(Harris Todaro model of migration). The illiterate and unskilled people ultimately set up a grocery shop to earn a living. This gives birth to another unorganized retail shop in India and thus enlarges its share. So the unorganized retail market in India has born out of fate rather than selection.

b.The Actual Scene Those opposing the expansion of organized retail in India must understand that the share of primary sector shrinks and that of the secondary and then the tertiary sector expands as an economy grows. This is the basic structural adjustment in case of any transforming economy. India is at a take off stage. A retardation in the agricultural sector is not permissible but inhibiting

the growth of services on grounds of protection to agriculture is more irrational. A proof of this has been seen in a small town of North Bengal. The opening of a Big Bazaar (brand name for stores under Pantaloon) departmental store has seen a human deluge of about 7,000 people in the 35,000 sqft shopping mall by 3pm. This clearly indicates that people (even in remote places) have become fed up of monotonous marketing practices and demand nowadays is purely
governed by choice.

c.The Ruling UPA government's outlook The UPA government is rather clear in its aim of taking India to new highs. The commerce minister has repeatedly asserted that FDI will kill two birds with the same stone. It will generate substantial direct as well as indirect employment and at the same time will not tamper with the present scope of the unorganized retail market. The indirect employment includes jobs in transport, packaging and other logistic services. It will enhance competition in the country thus giving a virtual chance to face global challenges while operating at home. Mr. Nath is clearly focused on the utilization of FDI in acquiring benefits. It is true that such investments will bring in huge imports but this may also help in the Indian products reaching the foreign consumers. Foreign majors such as Wal-Mart, Tesco and Carrefour are ready to enter India. The UPA government has already permitted 51 percent FDI in Single-brand products without consulting its allies and it is expected that slowly but steadily the government will achieve its goal. 4.Growth Potential The key growth areas include the urban, luxury segment on one end of the spectrum and serving the rural sector on the other. In addition, government policy encouraging FDI in the segment has resulted in a plethora of international retailers keen on entering the market; American retail giant Wal-Mart has tied-up with Bharti Enterprises and global coffee giant Starbucks' has tied up with PVR Limited. In addition,Carrefour, Boots and others are also expected to come in.With so much action, it is natural that there is a huge scope for employment opportunities, and experts estimate that the sector will generate employment for ~ 2.5 million people in

2010. The top retail companiesin India include the Raheja Group, Reliance Retail, Tata Trent, Future Group, RPG Retail, and Ebony Retail Holdings. 5.Future Prospects:-

There are many opportunities for those seeking to enter this sector, and entry level positions such as sales executives dont even require a degree. Naturally, the higher order jobs for graduates with relevant degrees and work experience, involve more responsibility, challenges and remuneration. MBAs are increasingly being recruited, which marks a change of HR policy, from the traditional preference to hire those from the FMCG and hospitality sectors. In fact, senior executives in retail such as operations heads are extremely well looked after, and HR consultants believe they are paid in excess of Rs. 60 lakhs.The good news for graduates is that since the sector is so young and vibrant, career growth happens very rapidly, and these positions are very achievable in a compressed time period. Successful candidatesacross all levels are those who are dynamic, able to multi-task and are equipped with great communication skills.

INDIAN CONSTRUCTION INDUSTRY

Size of the Industry Geographical distribution

Indian Construction Industry consists of 200 firms in the corporate sector. In addition to these firms, there are about 1, 20,000 class A contractors registered with various government construction bodies. All the major cities of the country

The Indian construction industry has been playing a vital role in overall economic development of the country, growing at Output per annum over 20% Compound Annual Growth Rate over the past 5 years and contributing ~8% to GDP. Market Total sales of construction industry have reached Rs.

Capitalization

42885.38 crores in 2004 05 from Rs. 21451.9 crores in 200001.

Indian Construction Industry is highly fragmented. There are mostly unorganised players in the industry which work on the subcontracting basis. As the Construction activity being labour intensive, construction companies have been mainly focusing on mechanization over past few years. Consequently, growth in quantum of labourers required has declined from 1.6% in FY 04 to 0.9% in FY 08. Projects in Construction industry are mostly working capital intensive. The Indian construction industry forms an integral part of the economy and a conduit for a substantial part of its development investment, is poised for growth on account of industrialization, urbanization, economic development and people's rising expectations for improved quality of living. Construction constitutes 40% to 50% of India's capital expenditure on projects in various sectors such as highways, roads, railways, energy, airports, irrigation, etc and is the second largest industry in India after agriculture. It accounts for about 11% of Indias GDP. For the first five-year plan, construction of civil works was allotted nearly 50 % of the total capital outlay. In 1954 National Industrial Development Corporation (NIDC), was set up in the public sector which is the first professional consultancy company. Then later many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc. and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.). Construction usually is done or coordinated by general contractors, who specialize in one type of construction such as residential or commercial building. Cost structure of the construction industry is dominated by raw material cost and subcontracting cost. Raw

material cost which is the major cost accounts for 30-50% of the total cost and subcontracting cost accounts for about 20-40%. The raw materials consumed by Construction Industry in any country mainly include cement and steel. The Consumption of steel by construction industry has grown of 16.1% over past 5 years whereas cement consumption has registered of 9.6%. Unprecedented rise in prices of these two raw materials has a direct impact on the cost of the project and in turn margins of construction companies. Profitability also depends upon the diversity of the projects a company can execute. Companies having strong presence in segments like power and industrial segment which are complex to execute, tend to enjoy higher margins. Today Indian sub continent is the second fastest-growing economy in the World. The Indian construction industry has been playing a vital role in overall economic development of the country, growing at over 20% Compound Annual Growth Rate over the past 5 years and contributing ~8% to GDP.

ECONOMIC ANALYSIS
     GDP Inflation Investment Infrastructure Budget

 India is on the verge of witnessing a sustained growth in infrastructure build up. The construction industry has been witness to a strong growth wave powered by large spends on housing, road, ports, water supply and airport development. The construction sector has registered double digit growth during the last few years and its share as a percentage of GDP has increased considerably as compared to the last decade. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017), which is double of that in the Eleventh five-year plan. From a policy perspective, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. During the first two years of the eleventh five-year plan (2007-2012), the share of private players in the total investment was 34%. This is higher than the target of 30% for the eleventh five-year plan. During the twelfth five-year plan, the contribution of private sector in total infrastructure investment is expected to increase to 50%. The balance will be borne by the public sector. The real estate industry comprising of construction and development of properties has grown from family based entities with focus on single products and having one market presence into corporate entities with multi-city presence having differentiated products. The industry has witnessed considerable shift from

traditional financing methods and limited debt support to an era of structured finance, private equity and public offering. The construction sector is a major employment driver, being the second largest employer in the country, next only to agriculture. This is because of the chain of backward and forward linkages that the sector has with other sectors of the economy. About 250 ancillary industries such as cement, steel, brick, timber and building material are dependent on the construction industry. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. KEY POINTS Supply Past 4-5 years have seen a substantial increase in the number of contractors and builders, especially in the housing and road construction segment. Demand Demand exceeds supply by a large margin. Demand for quality infrastructure construction is mainly emanating from the housing, transportation and urban development segments.. Barriers to entry Low for road and housing construction. However, high working capital requirements can create growth problems for companies with weak financial muscle. Bargaining power of suppliers Low. Due to the rapid increase in the number of contractors and construction service providers, margins have been stagnant despite strong growth in volumes.

Bargaining power of customers Low. The country still lacks adequate infrastructure facilities and citizens have to pay for using public services. Competition Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development.

Financial Year '11 After a slow growth in the last fiscal, order inflows in the construction industry registered a healthy growth in FY11. However, it was not reflected in the revenues and profitability due to execution delays and rising cost of construction. Nevertheless, considering the strong order backlog, the next fiscal could be promising provided execution remains on track. The 2011-12 Budget saw increase in allocation towards various infrastructure development schemes. The government earmarked Rs 2 trillion for infrastructure development as a whole. This is an increase of 23.3% over 2010-11. The government also increased FII limit for investment in corporate bonds issued in the infrastructure sector to US$ 25 bn from US$ 5 bn. Backed by governments sustained focus on housing, road, port and airport development, infrastructure sector in India is poised to grow. The first half of FY11 proved favorable for the real estate companies. The global economy improved, bringing back financial confidence to the home buyers along with low interest rates. As demand for houses mounted, developers increased the prices. Prices went up to pre-2008 levels and in some cases beyond that. However, the situation has changed since 4QFY11. Rising inflation forced the Reserve Bank of India to hike interest rates. High interest rates and high property prices started denting demand for

real estate. The real estate companies are reeling under heavy debt and rising costs (both operating expenses and interest costs). Nevertheless, as genuine demand exists for good quality homes, long-term fundamentals for real estate sector remains strong.

Prospects India is on the verge of witnessing a sustained growth in infrastructure buildup. Infrastructure investments continue to be the most important growth driver for construction companies. The proposed increase in allocation in the twelfth five-year plan (20122017) will translate into a healthy business for construction companies. Real estate investments account for majority of the total construction investments. Demand-supply gap for residential housing, favourable demographics, rising affordability levels, availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. According to the Technical Group on Estimation of Housing Shortage estimates, there would be shortage of 26.53 m houses during the Eleventh Five Year Plan (2007-12), which provides a big investment opportunity. In addition to this, demand for office space from IT/KPO segment is expected to continue due to emergence of India as a preferred outsourcing destination. Also, boom in organized retail is expected to result in huge demand for real estate construction. While long-term factors are likely to work in favour of the real estate developers, the outlook for the short term remains bleak. The double whammy of plunging sales and rising costs have taken their toll on the profitability of real estate majors. Also, banks turned cautious towards rescheduling debt or issuing fresh loans to real estate companies, as an aftermath of the bribe-for-loan scam. Prices of steel, cement and labor, which together make for almost 75% of overall construction cost, have risen by over 30% since 2009. Upward spiraling cost of construction materials has put great

pressure on project execution, in turn leading to project delays. Entry into affordable housing is likely to pressurize margins but would arrest the free fall in topline as witnessed during the downturn.

INDUSTRIAL ANALYSIS
OUTLOOK AND POTENTIAL OF THE INDIAN CONSTRUCTION INDUSTRY SWOT ANALYSIS STRENGTHS: Emerging Industry: The Construction Chemical Industry is at a nascent stage. So there is a long way to go for the industry. The life of the industry goes with the construction industry, which is the end user of the Construction Chemical products. It is estimated that the life of the Indian Construction Chemical Industry will last atleast for fifteen years. Huge Growth Potential: The Indian Construction Chemical Industry has a huge potential to grow. Even at todays nascent stage the industry is growing at the rate of fifteen percent, which is almost double than that of the current GDP rate of India. Today the end users are not aware of the construction chemical usage and its benefits. When the awareness among the end users will increase the industry will definitely grow with much rate than at which it is growing today. Huge Export Contributor: The Indian Construction Chemical Industry contributes considerably in the countrys exports. Around twenty percent of the industry turnover is achieved through exports. The major exports are to US, Europe, Germany and the SAARC nations. Hence the chemical segment supports at a considerable level to earn the foreign exchange.

Improves the Productivity: The construction chemicals improves the productivity of the construction sector by increasing the life of the structures, decreasing the abrasions, increasing bond strength and other qualities which the chemicals impart to the construction works if used on correct time and in correct manner. Adds Value: The construction chemicals adds value to the constructed structures, concrete, mortars as well as by making them dust proofed and other value adding properties of the construction chemicals. It improves the lifestyle of the place where it is used. Sophisticated Construction Input: The construction chemical is a sophisticated technique that supports the construction industry to get the desired or improved results from the products or structures so constructed. WEAKNESSES: Improper Customer Services: The industry is not emphasizing on the marketing activities. As a result there is lack of technical personnels in the marketing department of the organisations. The repercussion results in improper customer services. Costly Products: The use of the construction chemicals increases the cost to the developers by two to five percent. Also the standard products are

costlier than that of the sub standard products. Moreover construction chemicals are value-adding inputs for the construction industry. The chemicals add value or improve the productivity of the structures or works. So there is not necessary to use the products. Even if the chemicals are not used the projects can be developed.

Low Skilled Labour: The construction chemical industry is less explored by the chemical industry technicians. Also the industry is at the nascent emerging stage. Therefore it is difficult to get the skilled labour for the industry processes. Low Emphasis on Marketing: One of the weaknesses of the organised industry is costly products. There is lack of technical marketing professionals for the industry. The industry personnels emphasize low on marketing activities. This is because the marketing expenditure will increase the cost for the company, which is already one of the weaknesses.

Low Awareness: Around eighty five percent of the construction industry personnels are not aware of the concept of construction chemicals. They are not aware of the productivity improvement and value addition for the construction works if the chemicals are used on proper time and in proper manner. OPPORTUNITIES:SAARC Countries: The SAARC countries lack the well organised construction chemical industry. This is a great opportunity for the Indian Construction Chemical Industry to target the SAARC countries for the penetration of their products in the country where there is lack of branded and improved products.

Exports: The cost of manufacturing is low is India as compared to that of the western nations. Also the organised player not compromise in the quality and hence there is a good opportunity to target the other western nations where the construction activity is increasing.

Low Labour Cost: The labour cost in India is lower than that of in the western nations. If the labours are endowed with better skills the cost of production can be decreased. Foreign Direct Investments: The Governments decision to introduce hundred percent FDI in construction industry has opened a great opportunity for the industry growth. The overseas organisations will improve the quality of construction and hence will increase the use of standard construction chemical applications in the construction industry to give better quality of construction work products. Expenditure in Construction Sector: As in the beginning we saw the growth rate of the construction industry, the Government has realized that the Nation will only progress with a sound infrastructure that will conjoin the Nation as one. The Government has increased the outflows for the construction activities of the country. The huge projects like NHDP, PMGSY has brought a good opportunity for the Indian Construction Chemical Industry. CRAMS: Contract Research and Manufacturing Services (CRAMS) is the new emerging concept of the emerging industry. The Construction Chemical Industry is a problem solver industry. Hence it needs huge investments in Research & Development activities. Due to the criticalities involved in the chemical processes

it becomes difficult for any company to manage the business processes from procuring to providing service for customers. Also in the competitive business world plays a vital role in the economies of scale for the production activities. The new emerging concept of CRAMS has a huge potential to restructure the industry for the favorable results.

THREATS:Stricter Environment Regulations: The Environment Regulations are getting stricter day by day. The Government is passing laws to conserve the environment. These regulations if not maintained by the industry can hamper the growth of the Construction Chemical Industry. Lack of Technical Guidance: The result of the application of construction chemicals depends mainly on the way or manner in which the chemical has been used. The application of the chemicals require an excellent technical guidance to get the best results out of such costly products. Today in India the end users are not skilled in the application of these chemicals. So they require a technical guidance to develop the skills required for the application.

Government Policies:
3. In-Country Policies The Government has no constraints on the usage of construction chemical in the structures or in the Government

projects except the projects funded by world development organisations. This provides an unfavorable opportunity for the developers to save the input cost to get a better quality structures. 4. Export Policies The inconsistent export policy hampers the decision of the exporters.The Government frequently changes the export policy. The policy is not consistent throughout the year putting exporters in a muddle to take decisions. Hence the exporters are unable to meet their obligations on time or they dont construction chemical export orders. Depreciating Foreign CurrencyDuring the last financial year 2005 2006 the value of dollar depreciated considerably. This hampered the exports of the overall goods. The depreciating foreign currency decreases the purchasing power of the importers, hence hampers the exports. Port Regulations: Labour Unions On the ports the handling of goods cannot be done by the outsider. Moreover the port labour are unproductive and unskilled to handle the critical material like construction chemical. This increases the wastage of the goods. 3.Retail: Major Developments and Investments After the US, Germany has also come up in full support of FDI in retail in India. Metro AG, one of the prominent German retail chains, has shown intentions to venture in Indian markets along with US' Wal-Mart and France's Carrefour.Cumulative FDI inflows in single-brand retail trading during April 2000 to September 2011 stood at US$ 44.45 million, according to the Department of Industrial Policy and Promotion (DIPP). Certain developments and investments that took place on the Indian retail canvas recently are discussed belowReal estate major DLF's subsidiary DLF Brands has struck a deal with Chicago-based Claire's Stores Inc to bring the latter to India

and open its 75 stores over 2011-16. Claire's is a specialty retailer which targets young girls through over 3,000 stores globally. French retail chain, Carrefour is on an expansion spree in India wherein it is about to finalise lease deals across 10 to 12 sites in the country to open cash-and-carry (wholesale) outlets. The world's largest retailer Wal-Mart will open an innovation lab in Bengaluru by the end of 2011. The lab would be tasked to drive the US$ 422-billion company's next generation innovations that impact shopping behavior among the customers. US fast moving consumer good (FMCG) giant McCormick, that has recently formed a joint venture (JV) with Indian basmati rice brand Kohinoor Foods, intends to tap Indian packaged food industry and achieve sales of US$ 85 million in the first year of operations in the country. FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian breakfast cereal market by launching oats cereal under its flagship brand Horlicks'. The breakfast cereal market in India is currently dominated by PepsiCo and Kellogg's. Oral and dental hygiene products manufacturer Colgate Palmolive has decided to invest Rs 200 crore (US$ 38.52 million) to establish a greenfield facility at an upcoming industrial estate in Sanand which is being developed by state-run Gujarat Industrial Development Corporation (GIDC).

INDUSTRY ANALYSIS 1.RETAIL INDUSTRY LIFE CYCLE

Introduction Stage:An introduction is the opening phase of a market and is one that is just entering the GRDI, Global Retail Development Index This index is based on more than 25 macro-economic and retail specific variables.for instance ,the country risk includes

parameters like political risk,economic performance,debt indicators,credit ratings,access bank finance and business risk.The market attractiveness covers reail sales per capita ,urban population ,laws and regulations and business efficiency. Iin this stage all, which are outside the top 30 markets, falls in this stage. At this stage, retailers should monitor and performing highlevel assessments, they should plan for their entry strategies. India in the late 1990's is a good example in the opening stage, while in 2006, Kazakhstan is the country in introduction stage. Strategy suggested :A rapid penetration strategy is suggested at this stage i>e low price and high promotion. Growth Stage :In growth stage, the market is developing quickly and also ready for modern retailing. Countries, which are in Peaking stage, are India, Ukraine and Vietnam. Retailers entering this stage have the best chance for long-term success. Retailers at this stage should enter through local representations, sourcing offices and new stores. Wal-Mart success in china in the late 1990's and early 2000's gives us the importance of committing to a promising highgrowth market at right time. Strategy suggested: The strategy of adopting quality and styled products with new models and shift of advertising from product awareness to product preference Eg the big bazaar advt says surf excel is cheaper than the market price.The idea behind adopting strategy is to strengthen against competitors.

Maturity Stage:In this stage the market is still big and growing, but the space for new entrants will become tighter and retailers should act quickly at this stage because retailers at this stage have limited time to explore, and also their margin for error is thin. In general , they should act according to the established rules and should be open to face the competition from international retailers. This stage

generally lasts longer than the previous two stages. Strategy suggested: Enter new market segments that is either enter new geographic areas eg vishal megha mart has opened stores in smaller cities tier II and III cities Decline Stage:The window of opportunity is closing fast and modern retail share is reaching 40 to 60 percent. Though the opportunity is closing the existing retailers can enter with new formats such as discount models or non-food formats such as consumer electronics and apparel. Window of opportunity ends for about 5 to 10years before a market enters the closing phase and reaches saturation level. India for example, was in the opening stage in 1995 and entered peaking stage in the year 2003 and reached number 1 rank in2003

2. LABOUR MARKET STRUCTURE AND TRENDS:Relative to the workforce as a whole, the retail industry contains high proportions of women, young people and part-time workers. Some 58 per cent of Retail trade employees are female, one-third are aged 15 to 24 years and 48 per cent work part time.The Other store-based retailing and Food retailing subdivisions together employ 85 per cent of all retail workers (51 and 34 per cent, respectively). All subdivisions, except for Motor vehicle and motor vehicle parts retailing and Fuel retailing, have a preponderance of female workers. Part-time workers outnumber full-time workers in Food retailing.Retail workers tend to have lower educational qualications than the workforce as a whole. This is related both to the large proportion of young people employed, and to the lowskilled occupations that predominate, in the industry.Retail trade workers are more likely than the workforce as a whole to be either unemployed or underemployed. They also have a shorter average job tenure and are more likely than unemployed workers from any other industry to have voluntarily left their last job.Over the last two decades, part-time employment

in Retail trade has grown very strongly, alongside only modest growth in full-time employment. Between 1985 and 2008 the number of people employed increased by 70 per cent and total hours worked increased by 50 per cent.Over the same period there was strong employment growth in both Food retailing and Other store-based retailing. By contrast, Motor vehicle retailing and Fuel retailing showed only minor employment growth.Over the period 198889 to 200304 labour productivity improved more slowly in Retail trade than across the market sector as a whole, while the picture for multifactor productivity was more mixed. In the period 200304 to 200708, however, Retail trade experienced stronger growth than the total market sector in both measures of productivity. 3.GOVERNMENT POLICY AND REGULATION:India's government seems to be on a gradual but definite path toward allowing foreign retailers into the country.... suggests the A.T. Kearney's Retail Development Index 2006. It is a common knowledge that the Union government has to face a number of hurdles both from it's opponents as well as it's allies before it could announce the final verdict. There have been demands from all corners regarding framing of rules to safeguard interests of the socalled small traders. Simultaneously economists have the consensus that industrialization is imperative for the growth of the economy and foreign investment has to play an inevitable role in it. With Lok Sabha elections to come in 2009, the Union government too seems a bit confused regarding decision in who's favor can provide it a political edge. So in this study let us compare the views for and against liberalization as is held by Indian Bureaucrats . Entry of large players: stiff opposition from Left Parties The recent outburst of fury among the Kerala's LDF(Left Democratic Front) Government has been noticeable. They have exacted for a three-pronged approach to prevent the retail giants from serving the Keralians. At the first stage, not only MNCs but also the local retail giants like Reliance will be shown the red signal. In fact a magnified CPI protest has compelled a Reliance

Fresh outlet in Kochi to take police protection. The draft of a bill has been finalized to amend the Kerala Essential Commodities Act so that the state government can intervene in the retail market. As a second step, local councils (70% of which is controlled by the Left) will deny licenses, that are mandatory to start a retail chain in the state. Kochi and Tiruvananthapuram corporations will be in fact commanded to reconsider the licenses of outlets that are already operating in the regions. This strategy grants more power to the state. However a ban on shopping in these outlets is still not clear. The third and the most revolutionary judgment is actually an outcome of the whole game. Government-controlled supermarkets and hypermarkets will be established in some of the key cities in the state. This rigid legal wall not only in Kerala but across the country has been born out of a traditional mindset. Kerala claims to have a literacy rate of 90.92% and a sex ratio of 1058 females per 1000 males. The data speaks for the government's prudent commitment in the case of Kerala. So it is high time that the government opens up avenues for its people to let them grow and become self dependent. But the government is still holding good, the conventional 'infant industry' outlook. The main worry is the negative impact on the already gloomy condition of employment. Let's make an attempt to understand the vicious circle of unorganized retailing and present employment scenario. Unorganized retailing has a share of about 96% in the Indian retail sector. But why should people work in such miserable situations if the manufacturing and services sector are booming is the overwhelming question. There has been a trend to migrate to cities in search of alluring bright city lights. But the consequences has been been even worse- earning lower than expected wages(Harris Todaro model of migration). The illiterate and unskilled people ultimately set up a grocery shop to earn a living. This gives birth to another unorganized retail shop in India and thus enlarges its share. So the unorganized retail market in India has born out of fate rather than selection.

b.The Actual Scene Those opposing the expansion of organized retail in India must understand that the share of primary sector shrinks and that of the secondary and then the tertiary sector expands as an economy grows. This is the basic structural adjustment in case of any transforming economy. India is at a take off stage. A retardation in the agricultural sector is not permissible but inhibiting the growth of services on grounds of protection to agriculture is more irrational. A proof of this has been seen in a small town of North Bengal. The opening of a Big Bazaar (brand name for stores under Pantaloon) departmental store has seen a human deluge of about 7,000 people in the 35,000 sqft shopping mall by 3pm. This clearly indicates that people (even in remote places) have become fed up of monotonous marketing practices and demand nowadays is purely
governed by choice.

c.The Ruling UPA government's outlook The UPA government is rather clear in its aim of taking India to new highs. The commerce minister has repeatedly asserted that FDI will kill two birds with the same stone. It will generate substantial direct as well as indirect employment and at the same time will not tamper with the present scope of the unorganized retail market. The indirect employment includes jobs in transport, packaging and other logistic services. It will enhance competition in the country thus giving a virtual chance to face global challenges while operating at home. Mr. Nath is clearly focused on the utilization of FDI in acquiring benefits. It is true that such investments will bring in huge imports but this may also help in the Indian products reaching the foreign consumers. Foreign majors such as Wal-Mart, Tesco and Carrefour are ready to enter India. The UPA government has already permitted 51 percent FDI in Single-brand products without consulting its allies and it is expected that slowly but steadily the government will achieve its goal.

SWOT ANALYSIS

4.Growth Potential The key growth areas include the urban, luxury segment on one end of the spectrum and serving the rural sector on the other. In addition, government policy encouraging FDI in the segment has resulted in a plethora of international retailers keen on entering the market; American retail giant Wal-Mart has tied-up with Bharti Enterprises and global coffee giant Starbucks' has tied up with PVR Limited. In addition,Carrefour, Boots and others are also expected to come in.With so much action, it is natural that there is a huge scope for employment opportunities, and experts estimate that the sector will generate employment for ~ 2.5 million people in 2010. The top retail companiesin India include the Raheja Group, Reliance Retail, Tata Trent, Future Group, RPG Retail, and Ebony Retail Holdings. 5.Future Prospects:-

There are many opportunities for those seeking to enter this sector, and entry level positions such as sales executives dont even require a degree. Naturally, the higher order jobs for graduates with relevant degrees and work experience, involve more responsibility, challenges and remuneration. MBAs are increasingly being recruited, which marks a change of HR policy, from the traditional preference to hire those from the FMCG and hospitality sectors. In fact, senior executives in retail such as operations heads are extremely well looked after, and HR consultants believe they are paid in excess of Rs. 60 lakhs.The good news for graduates is that since the sector is so young and vibrant, career growth happens very rapidly, and these positions are very achievable in a compressed time period. Successful candidatesacross all levels are those who are dynamic, able to multi-task and are equipped with great communication skills.

INDIAN CONSTRUCTION INDUSTRY

of the stry graphical ribution

Indian Construction Industry consists of 200 firms in the corporate sector. In addition to these firms, there are abo 20,000 class A contractors registered with various gover construction bodies. All the major cities of the country

The Indian construction industry has been playing a vital in overall economic development of the country, growing put per annum over 20% Compound Annual Growth Rate over the past years and contributing ~8% to GDP. ket Total sales of construction industry have reached Rs.

Capitalization

42885.38 crores in 2004 05 from Rs. 21451.9 crores in 200001.

Indian Construction Industry is highly fragmented. There are mostly unorganised players in the industry which work on the subcontracting basis. As the Construction activity being labour intensive, construction companies have been mainly focusing on mechanization over past few years. Consequently, growth in quantum of labourers required has declined from 1.6% in FY 04 to 0.9% in FY 08. Projects in Construction industry are mostly working capital intensive. The Indian construction industry forms an integral part of the economy and a conduit for a substantial part of its development investment, is poised for growth on account of industrialization, urbanization, economic development and people's rising expectations for improved quality of living. Construction constitutes 40% to 50% of India's capital expenditure on projects in various sectors such as highways, roads, railways, energy, airports, irrigation, etc and is the second largest industry in India after agriculture. It accounts for about 11% of Indias GDP. For the first five-year plan, construction of civil works was allotted nearly 50 % of the total capital outlay. In 1954 National Industrial Development Corporation (NIDC), was set up in the public sector which is the first professional consultancy company. Then later many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc. and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.). Construction usually is done or coordinated by general contractors, who specialize in one type of construction such as residential or commercial building. Cost structure of the construction industry is dominated by raw material cost and subcontracting cost. Raw

material cost which is the major cost accounts for 30-50% of the total cost and subcontracting cost accounts for about 20-40%. The raw materials consumed by Construction Industry in any country mainly include cement and steel. The Consumption of steel by construction industry has grown of 16.1% over past 5 years whereas cement consumption has registered of 9.6%. Unprecedented rise in prices of these two raw materials has a direct impact on the cost of the project and in turn margins of construction companies. Profitability also depends upon the diversity of the projects a company can execute. Companies having strong presence in segments like power and industrial segment which are complex to execute, tend to enjoy higher margins. Today Indian sub continent is the second fastest-growing economy in the World. The Indian construction industry has been playing a vital role in overall economic development of the country, growing at over 20% Compound Annual Growth Rate over the past 5 years and contributing ~8% to GDP.

ECONOMIC ANALYSIS
GDP Inflation Investment Infrastructure Budget

 India is on the verge of witnessing a sustained growth in infrastructure build up. The construction industry has been witness to a strong growth wave powered by large spends on housing, road, ports, water supply and airport development. The construction sector has registered double digit growth during the last few years and its share as a percentage of GDP has increased considerably as compared to the last decade. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017), which is double of that in the Eleventh five-year plan. From a policy perspective, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. During the first two years of the eleventh five-year plan (2007-2012), the share of private players in the total investment was 34%. This is higher than the target of 30% for the eleventh five-year plan. During the twelfth five-year plan, the contribution of private sector in total infrastructure investment is expected to increase to 50%. The balance will be borne by the public sector. The real estate industry comprising of construction and development of properties has grown from family based entities with focus on single products and having one market presence into corporate entities with multi-city presence having differentiated products. The industry has witnessed considerable shift from

traditional financing methods and limited debt support to an era of structured finance, private equity and public offering. The construction sector is a major employment driver, being the second largest employer in the country, next only to agriculture. This is because of the chain of backward and forward linkages that the sector has with other sectors of the economy. About 250 ancillary industries such as cement, steel, brick, timber and building material are dependent on the construction industry. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. KEY POINTS Supply Past 4-5 years have seen a substantial increase in the number of contractors and builders, especially in the housing and road construction segment. Demand Demand exceeds supply by a large margin. Demand for quality infrastructure construction is mainly emanating from the housing, transportation and urban development segments.. Barriers to entry Low for road and housing construction. However, high working capital requirements can create growth problems for companies with weak financial muscle. Bargaining power of suppliers Low. Due to the rapid increase in the number of contractors and construction service providers, margins have been stagnant despite strong growth in volumes.

Bargaining power of customers Low. The country still lacks adequate infrastructure facilities and citizens have to pay for using public services. Competition Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development.

Financial Year '11 After a slow growth in the last fiscal, order inflows in the construction industry registered a healthy growth in FY11. However, it was not reflected in the revenues and profitability due to execution delays and rising cost of construction. Nevertheless, considering the strong order backlog, the next fiscal could be promising provided execution remains on track. The 2011-12 Budget saw increase in allocation towards various infrastructure development schemes. The government earmarked Rs 2 trillion for infrastructure development as a whole. This is an increase of 23.3% over 2010-11. The government also increased FII limit for investment in corporate bonds issued in the infrastructure sector to US$ 25 bn from US$ 5 bn. Backed by governments sustained focus on housing, road, port and airport development, infrastructure sector in India is poised to grow. The first half of FY11 proved favorable for the real estate companies. The global economy improved, bringing back financial confidence to the home buyers along with low interest rates. As demand for houses mounted, developers increased the prices. Prices went up to pre-2008 levels and in some cases beyond that. However, the situation has changed since 4QFY11. Rising inflation forced the Reserve Bank of India to hike interest rates. High interest rates and high property prices started denting demand for

real estate. The real estate companies are reeling under heavy debt and rising costs (both operating expenses and interest costs). Nevertheless, as genuine demand exists for good quality homes, long-term fundamentals for real estate sector remains strong.

Prospects India is on the verge of witnessing a sustained growth in infrastructure buildup. Infrastructure investments continue to be the most important growth driver for construction companies. The proposed increase in allocation in the twelfth five-year plan (20122017) will translate into a healthy business for construction companies. Real estate investments account for majority of the total construction investments. Demand-supply gap for residential housing, favourable demographics, rising affordability levels, availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. According to the Technical Group on Estimation of Housing Shortage estimates, there would be shortage of 26.53 m houses during the Eleventh Five Year Plan (2007-12), which provides a big investment opportunity. In addition to this, demand for office space from IT/KPO segment is expected to continue due to emergence of India as a preferred outsourcing destination. Also, boom in organized retail is expected to result in huge demand for real estate construction. While long-term factors are likely to work in favour of the real estate developers, the outlook for the short term remains bleak. The double whammy of plunging sales and rising costs have taken their toll on the profitability of real estate majors. Also, banks turned cautious towards rescheduling debt or issuing fresh loans to real estate companies, as an aftermath of the bribe-for-loan scam. Prices of steel, cement and labor, which together make for almost 75% of overall construction cost, have risen by over 30% since 2009. Upward spiraling cost of construction materials has put great

pressure on project execution, in turn leading to project delays. Entry into affordable housing is likely to pressurize margins but would arrest the free fall in topline as witnessed during the downturn.

INDUSTRIAL ANALYSIS
OUTLOOK AND POTENTIAL OF THE INDIAN CONSTRUCTION INDUSTRY SWOT ANALYSIS STRENGTHS: Emerging Industry: The Construction Chemical Industry is at a nascent stage. So there is a long way to go for the industry. The life of the industry goes with the construction industry, which is the end user of the Construction Chemical products. It is estimated that the life of the Indian Construction Chemical Industry will last atleast for fifteen years. Huge Growth Potential: The Indian Construction Chemical Industry has a huge potential to grow. Even at todays nascent stage the industry is growing at the rate of fifteen percent, which is almost double than that of the current GDP rate of India. Today the end users are not aware of the construction chemical usage and its benefits. When the awareness among the end users will increase the industry will definitely grow with much rate than at which it is growing today. Huge Export Contributor: The Indian Construction Chemical Industry contributes considerably in the countrys exports. Around twenty percent of the industry turnover is achieved through exports. The major exports are to US, Europe, Germany and the SAARC nations. Hence the chemical segment supports at a considerable level to earn the foreign exchange.

Improves the Productivity: The construction chemicals improves the productivity of the construction sector by increasing the life of the structures, decreasing the abrasions, increasing bond strength and other qualities which the chemicals impart to the construction works if used on correct time and in correct manner. Adds Value: The construction chemicals adds value to the constructed structures, concrete, mortars as well as by making them dust proofed and other value adding properties of the construction chemicals. It improves the lifestyle of the place where it is used. Sophisticated Construction Input: The construction chemical is a sophisticated technique that supports the construction industry to get the desired or improved results from the products or structures so constructed. WEAKNESSES: Improper Customer Services: The industry is not emphasizing on the marketing activities. As a result there is lack of technical personnels in the marketing department of the organisations. The repercussion results in improper customer services. Costly Products: The use of the construction chemicals increases the cost to the developers by two to five percent. Also the standard products are

costlier than that of the sub standard products. Moreover construction chemicals are value-adding inputs for the construction industry. The chemicals add value or improve the productivity of the structures or works. So there is not necessary to use the products. Even if the chemicals are not used the projects can be developed.

Low Skilled Labour: The construction chemical industry is less explored by the chemical industry technicians. Also the industry is at the nascent emerging stage. Therefore it is difficult to get the skilled labour for the industry processes. Low Emphasis on Marketing: One of the weaknesses of the organised industry is costly products. There is lack of technical marketing professionals for the industry. The industry personnels emphasize low on marketing activities. This is because the marketing expenditure will increase the cost for the company, which is already one of the weaknesses.

Low Awareness: Around eighty five percent of the construction industry personnels are not aware of the concept of construction chemicals. They are not aware of the productivity improvement and value addition for the construction works if the chemicals are used on proper time and in proper manner. OPPORTUNITIES:SAARC Countries: The SAARC countries lack the well organised construction chemical industry. This is a great opportunity for the Indian Construction Chemical Industry to target the SAARC countries for the penetration of their products in the country where there is lack of branded and improved products.

Exports: The cost of manufacturing is low is India as compared to that of the western nations. Also the organised player not compromise in the quality and hence there is a good opportunity to target the other western nations where the construction activity is increasing.

Low Labour Cost: The labour cost in India is lower than that of in the western nations. If the labours are endowed with better skills the cost of production can be decreased. Foreign Direct Investments: The Governments decision to introduce hundred percent FDI in construction industry has opened a great opportunity for the industry growth. The overseas organisations will improve the quality of construction and hence will increase the use of standard construction chemical applications in the construction industry to give better quality of construction work products. Expenditure in Construction Sector: As in the beginning we saw the growth rate of the construction industry, the Government has realized that the Nation will only progress with a sound infrastructure that will conjoin the Nation as one. The Government has increased the outflows for the construction activities of the country. The huge projects like NHDP, PMGSY has brought a good opportunity for the Indian Construction Chemical Industry. CRAMS: Contract Research and Manufacturing Services (CRAMS) is the new emerging concept of the emerging industry. The Construction Chemical Industry is a problem solver industry. Hence it needs huge investments in Research & Development activities. Due to the criticalities involved in the chemical processes

it becomes difficult for any company to manage the business processes from procuring to providing service for customers. Also in the competitive business world plays a vital role in the economies of scale for the production activities. The new emerging concept of CRAMS has a huge potential to restructure the industry for the favorable results.

THREATS:Stricter Environment Regulations: The Environment Regulations are getting stricter day by day. The Government is passing laws to conserve the environment. These regulations if not maintained by the industry can hamper the growth of the Construction Chemical Industry. Lack of Technical Guidance: The result of the application of construction chemicals depends mainly on the way or manner in which the chemical has been used. The application of the chemicals require an excellent technical guidance to get the best results out of such costly products. Today in India the end users are not skilled in the application of these chemicals. So they require a technical guidance to develop the skills required for the application.

Government Policies:
5. In-Country Policies The Government has no constraints on the usage of construction chemical in the structures or in the Government

projects except the projects funded by world development organisations. This provides an unfavorable opportunity for the developers to save the input cost to get a better quality structures. 6. Export Policies The inconsistent export policy hampers the decision of the exporters.The Government frequently changes the export policy. The policy is not consistent throughout the year putting exporters in a muddle to take decisions. Hence the exporters are unable to meet their obligations on time or they dont construction chemical export orders. Depreciating Foreign CurrencyDuring the last financial year 2005 2006 the value of dollar depreciated considerably. This hampered the exports of the overall goods. The depreciating foreign currency decreases the purchasing power of the importers, hence hampers the exports. Port Regulations: Labour Unions On the ports the handling of goods cannot be done by the outsider. Moreover the port labour are unproductive and unskilled to handle the critical material like construction chemical. This increases the wastage of the goods. Obsolete Equipments:The obsolete handling equipments lead to pilferage and wastage of the chemicals on port. This affects the export order. Either the exporters have to dispatch the order considering the wastage quantity or the delivered order is less than that of the order placed with the exporter by the importer. Lack of Research & Development:The Research & Development investments of the Indian companies is less than that of the MNCs. The construction chemicals are used only for a specific purpose either to add value or to improve productivity of the existing product. So a continuous R & D effort is necessary for the growth of the industry. Unskilled End Users:

A large chunk of construction industry labours are unskilled or low skilled. Whereas the construction chemical application requires an adept knowledge to get the best results. Hence many a times the customers are not satisfied with the results of the construction chemical. Sub Standard Products: The introduction of sub standard products manufactured by the small players for the sake of making sound profit is spoiling the industry growth. The users using sub standard products dont get the results by the applications, developing unfavorable perceptions in the customers as well as end users for the future growth of the industry. GROWTH STRATEGIES Growth strategies have been researched from multiple perspectives. These may be organic or inorganic in nature. Organic growth involves growth either into new products or in new markets. Growth is realized through and mainly fuelled by: (Groves 2000) Geographic expansion of markets Higher market share in current markets New market share in new segments Diversification and integration are also types of organic growth. Inorganic growth on the other hand involves, mergers and acquisitions and joint ventures.According to study carried out on the IT Industry in India (Anandaram 2003) growth is driven by Leadership and vision Differentiated approach Marketing investment Alliances and partnerships Cultivation of local market Another similar study (Naidu 2003) shows that large size offers a firm the flexibility in offering products and services. Acquisition of resources and skills is another path to expand capabilities. System integration Project Management Skills

Partnerships Serial entrepreneurship Merger and Acquisitions For growth may companies have also used moves beyond core successfully (Zook 2004, Zook et al.2003). Zook prescribed six ways to move into adjacent space: expand along the value chain, grow new product or services, use new distribution channel, enter new geographies, address new customer segment and move into a new space with a new business built around strong capability. In leveraged growth strategies (Hagel III 2002), the thrust is on expanding sales without sacrificing profits, by adopting outsourcing. The McKinsey Growth Pyramid model argues that businesses should develop their growth strategies based on:Operational skills Privileged assets Growth skills Special relationships Finally, one should also appreciate that Growth matures out but what should continue is tough processes of screening acceptance of lower growth in matured/developed economies looking for a new growth platform deeper appreciation that growth too follows a mature and die cycle Growth is sustained through Value addition Increase in productivity via operational efficiencies and technical skills acquired Vertical integration New production techniques Acquisitions Partnerships and collaborations

Growth strategies should revolve around

building and defending dominate market share in geographical areas market expansion to other geographic market segments Profit maximization and risk minimisation thru selling of existing product in new market Attract new socio demographic segments Develop new core services innovate new products Move towards concentric diversification Conglomerate diversification In related research (Ahmad et al. 2004) proposes a 5-I Framework for Winning viz. Inspiring Leadership, Innovative Strategy, Internal and External Stakeholder Relationship, Identity, Implementation. CEO of General Electric, Jeffrey Immelt (2006) considers organic growth a six part process involving Innovation, Technology, Globalisation, Commercial Excellence, Leadership,Customer Satisfaction. Peter Gutman (1964) found that growth rates ranged up to 76.7% annually. Firms with highest growth rates were those which (a) Chose industries where sales increased more rapidly than the economy as a (b) Concentrated on market segments within the industry, which grew more rapidly than the industry. (c) Entered the market earlier than the competing firms. (d) Operated in multinational markets. A study (Chevalier et al. 1974), which included three U.S. industries, revealed that some growth strategies were more effective than others i.e. (a) Strategy that focused on products whose markets was growing. (b) Strategy that involved assuming leadership role in a market segment which is growing (c) Strategy that involved competing in specific market segments rather than trying to compete with giants.

Importance of a well-chosen strategy that is being well executed to deliver strong financial results in the present and in the future has been recognized. The growth of the various Companies are usually financially evaluated on basis of various models such as Sales Revenues, Compound Average Growth Rate, Return on Capital Employed, Economic Value Added, Market Value Added, Long Term Capital Invested, etc. Lately, a new metric called Relative Value of Growth (RVG) has been proposed by Mass (2004). However, all the respective models of evaluation could not be employed in this study due to the lack of Data. The available data has been best utilized to investigate the various hypothetical propositions that have emerged from the Literature Review KEY FINDINGS 1. Trends over the last few years have indicate that the growth areas in this industry are admixtures and repair system products. Increase in manufacturing activities and industrial growth is expected to trigger higher usage of flooring compounds. Companies should look to develop application based products. 2. Brand building will prove to be the most fruitful exercise for the companies. Demand for user and application friendly products will grow faster than traditional products while value added products will be a focus area for sustained growth. Selective acquisitions and mergers and industry consolidation will enhance product portfolio and expanding market reach of companies. 3. This study was taken up on the highly relevant background of high prospective growth of the Construction Chemical industry in India To gear up and meet the future challenges, as well as competition from the global level companies, the Indian companies are required to grow in 4. size and volume. Also, a preliminary literature review put forth growth as the most cherished value for companies with sustained market leadership. 5. To carry out the study, first Literature Review was undertaken. On basis of the same, a few theoretical propositions and growth enablers were identified. These theoretical propositions were analysed for selected two top Indian companies in the field of construction chemicals

6. selected on basis of their rankings and quantitative performance. Very interesting findings emerged from comparison of firms on key performance parameters of competitiveness with respect to growth in the study.

REFERENCES:1. http://www.indianmirror.com/indian-in 2. http://www.citeman.com/3605-organised-retail-industry-growth-ininflation.html 3. http://www.articlesbase.com/publishing-articles/retail-industry-inindiachallenges-opportunties-and-strategies-158550.html 4. http://www.fairpay.gov.au/NR/rdonlyres/64BEEA8B-4A1C-473FAC21-B7A25AB70021/0/Retail_Trade_Industry_Profile_report.pdf 5. http://www.economywatch.com/business-and-economy/indianretail-industry.html 6. http://www.indianmirror.com/indian-industries/construction.html 7. http://www.equitymaster.com/research-it/sector-info/construction/ 8. http://www.iitk.ac.in/infocell/announce/convention/papers/Changing %20Playfield-07-Milind%20Despande%20final.pdf