Chanakya 1

Chanakya
Marg Constructions Ltd

Strategic Planning Department Volume 1, Issue VIII

Ship Building Industry set to Grow at 30%

The Indian shipbuilding industry is on a high growth trajectory

and is expected to grow at a compound annual growth rate
(CAGR) of 30%. In a recent report, I maritime, a consultancy firm,
has said that India's share in global order book is expected to be
around 15 % by 2020 from current 0.4%, aided by cost
competitiveness and skilled manpower. The industry, estimated
to be $22 billion by 2020, currently contributes less than 0.1 %
towards the GDP, a figure which will rise up to 1.1% by 2020.

In earlier days, the industry was dominated by government

In this Issue
shipyards. However, given the growth opportunities today, the
Ship Building Industry Set to private sector has started to expand their operations. This is also
Grow at 30% -1 evident from the share of private players in the overall Indian

China Vs India: Whose Real shipbuilding order book, which currently stands at 73%

Estate Market Wins -2 The order books of the shipyards would reveal that private

Green Building Opportunities shipyards are mostly banking on export orders out of their total

in India -3 orders share of $2,686 million, export orders account for almost
$2,284 million. In the case of PSU shipyards, it is the other way
Economic Indicators -4 around, with domestic orders accounting for $517 million out of

SEZ Snippets -4 their total share of $1,011 million.

Team Chanakya -4 The shipbuilding industry is a highly labour intensive industry and there is dearth of skilled labour in
India. The global order book has registered a 29% CAGR over the period 2003-06. Going forward, a
similar trend is expected on the back of a growth in demand for vessels, which is seen as a result of
replacement demand and capex boom in the offshore segment.

Earlier, Indian shipyards were focused on the construction of only small vessels. After the proposed
expansions, shipyards will be able to build large vessels. India is also starved of shipyards to construct
large vessels.
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China Vs India: Whose Real Estate Market Wins

There is no doubt that there are several similarities between India and China in terms of GDP
growth, residential property boom, organized retail malls and improving lifestyle. Both the
countries are undergoing large economic expansion and envisage political and technological
ambitions.

However, China has been leading in some developments for the past four to five years. Emerged
as a significant employment channel, the real estate in China is certainly one of them. Growing
by leaps and bounds, Indian real estate also continues to make rapid strides and is expected to
outperform China, despite a concerted innovation drive from the latter. Indian realty is
attracting large attentions from international players desiring to make large scale investments.

The Indian economy began to witness growth after 1990 and should not
be compared to China, where free market systems started to take hold
after 1978. The effects of reforms in Indian economy are now becoming
apparent.

It took China 10 years to allow private ownership of real estate when the
country started to allow overseas businesses to mainland China in 1978.
Earlier, the entire housing was owned by the government.

The country began to invest heavily in building infrastructure, roads and

tunnels after the year 1988-89. State governments used their proceedings
that came from selling the land into large infrastructure development
projects. This way, China stepped up its efforts to support its growth
initiatives.

China is manufacturing based whereas the credit of India’s success goes

to large proliferation of IT companies. Growth in India is comparatively
easier with fewer infrastructure required for IT Sector in comparison to
manufacturing which actually need large, complex infrastructure including huge highways and machinery.

Today, there has been a rapid ramp up in development of Special economic zone (SEZ) in India. Considering the
same, the Chinese model is different from India. An SEZ in China is not a small affair. Why there are only four SEZs
in China is because the country does not consider an SEZ a part of the city but the entire cities are being considered
located within SEZs.

The mode of financing the projects is different too. Real estate developers in India have just begun to explore the
IPO market whereas China is more an IPO and pre-IPO market and witnessing a large inflow of real estate funds.
India does not have a much scope for pre-IPO financing and the pressure to go up into an IPO is stronger. For that
reason, several companies are making their mark in the market today.

The Chinese Government has taken high risks to boost its economic development. The country removed all
restrictions on incoming foreign money which opened the ways for prospective investors from all across with major
ones being Singapore, Hong Kong, and Japan.
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Foreign players brought a lot of transparency and modern techniques in China real estate sector.
Similar transformations are expected to happen in India as well, with large foreign direct investments
(FDI) flowing into India’s real estate sector. India seems to outshine China in terms of real estate
growth prospects as China’s ability to get large tracts of land is limited. All land in China is owned by
the government.

Taking the difference on basis of property developers, India leads again. Most Indian builders such as
Unitech, DLF, Omaxe, and Ansal API possess vast experience in construction and development. On the
other hand, most developers are pretty new in Communist China.

India is believed to be a two speed market accommodating both large and small realty players. In
China, the size of companies is more uniform which is a major reason for a stiffer competition there.
No property developer in China dominates more than 2-3 per cent of any market.

China offers low net and gross profit margins which is why most foreign investors are looking forward
to India as the profitability is undoubtedly higher here. Net profit in China for listed companies is
believed to be 15 to 25 per cent while in India it could be 30-40 per cent or, even higher.

Green Building Opportunities in India

Construction Industry in India is growing at a scorching pace of 10.2%

against the world average of 4.2%. The construction Industry contributes
around 10% to the GDP of India. India is now becoming a basion for the
green enthusiasts to focus on. The government passed the green building
codes a few months back and would become mandatory in by the August
2008.

With this is opening a whole new opportunity for developers like us.

Green Building Potential

There is a tremendous opportunity for construction of green buildings in

India. The overall investment in the urban building infrastructure in India
is estimated to be US$1000 million annually. This could open a plethora
of opportunity for developers, architects, construction companies,
equipment suppliers etc.

The estimated market potential of green buildings in India is given here

Projected Market The supply of green material is the major concern in India as of now. The material
Year Number of Potential for green buildings like fly ash cement, fly ash blocks, recycled aluminum and
buildings (Million US$)
recycled steel are available in India. However, there is a huge untapped potential
2005 10 40
for material like Compositing toilets, waterless urinals, Low VOC adhesives &
2006 23 80
sealants, CRI certified carpets, FSC certified wood, high albedo roof paints, BIPV,
2007 32 120
CTI certified cooling towers etc for which the estimated potential is around
2008 45 180
US$4000 million per annum by the year 2010.
2009 74 280
2010 126 400 With greater climate change concerns new technologies such as Off Grid
Sustainable Housing (OGSH) would become reality in a very short span of time.
Like Europe, in India as well, once the Green Building Code becomes mandatory a
new segment of the market would open up for developers like us to exploit.
 Chanakya 4

Economic Indicators

The economic indicators suggest a gloomy

Indicator 15 Oct 2007 15 Sep 2007
picture again for the real estate industry
consecutively for the past two monetary
Bank Credit 20% 22.6
policies.

Deposits 26.6% 24.4 As may be seen from the indicators the home
loan may increase with the increase in the CRR
Money Supply 21.8% 21.7%
by 50 basis points.

Inflation 3.32% 4.41% The deposit rate of the banks is been increasing
at a scorching pace and the credit growth is
Home Loan Rate 11.5% 11% falling at the same speed suggests that people
are now comfortable parking their funds in
IIP 10.7 9.7
bank deposits and have decided to wait and
watch in which side the home loans will move,
Forex Rate 39.23 39.70
when Real estate industry is waiting.

SEZ Snippets

1. There are 847 SEZs in the World by the end of March 2006
2. India will have 747 SEZs by 2010
3. India already has 19 functional prior to SEZ act and 154 notified
4. OMR has 14 IT/ITeS SEZs out of which 4 are notified and 9 with
formal approvals
5. The total land under IT/ITeS SEZ in OMR is 439.11 hectares
6. South India has the most number of SEZs with 174 In-principle
approvals and 36 formal approvals
7. As on September 30, 2007 the total land extent under SEZs is
2,27,906 hectares
8. IT/ITeS is the numero uno with 11,890 hectares
9. As of March 2007 the employment at 19 functional SEZs are
1,78,763

Mr. Subramanyam Ms. Gayathri. N

Team Chanakya
Mr. D Joel K Pandian

Mr. Anup Choudhry

Mr. Sheetal Shah

Mr. Manish