1. MERGERS AND ACQUISITIONS
TOPIC : ARCELOR MITTAL MERGER
SANCHITA S.LAD/MMS-3/A-26
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The Indian construction sector is an integral part of the economy and a
conduit for a substantial part of India’s development investment. The
construction industry is primarily driven by Government of India (GOI)
investments on core infrastructure projects and creation of urban
infrastructure; industrial capital expenditure (capex) by corporate sector and
development activities of real estate/housing sector. The sector plays a pivotal
role in developing the country’s infrastructure, a pre-requisite for high levels of
economic growth and an area of focus for the GoI.
Construction sector accounts for nearly 45% of the total investment in
infrastructure and is expected to be the prime beneficiary of the surge in
infrastructure investment in the near to medium term. The importance that the
GoI places on bridging the country’s acute infrastructure deficit is evident from
the two fold increase in the planned outlay for the infrastructure sector in the
XIIth five year plan. Significant infrastructure investments, along with revivial
in industrial capex and improvment in real estate scenario, are likely to
catalyse growth for construction companies in India, going forward.
The construction sector, however, continues to face challenges from land
acquisition issues, adverse political and structural changes, shortage of talent,
design and constructability issues, and rising material and labour costs.
Further, deficiencies in project planning, use of inappropriate procurement
contracts and faulty contract management also contribute to delays in project
implementation. The financial impact of delays on construction companies is
worsened by the absence of an efficient arbitration mechanism. In addition, the
flow of funds to the sector is constrained by sectoral caps/exposure norms,
asset-liability mismatches, and the absence of an active corporate bond
market.
It contributes more than 5 per cent to the nation's GDP and 78 per cent to the
gross capital formation. Total capital expenditure of state and central govt. will
be touching 8,02,087 crores in 2011-12 from 1,43,587 crores (1999-2000).