Nagarjuna Construction Company Limited tomorrow!

Building the India of

tomorrow!

www.ncclimited.com

Nagarjuna C

onstructio

n Co

mp

any Limited

Annual report 2006-07

Annual rep

ort 2006-07

Forward-looking statement

In this Annual Report we have disclosed forward-

looking information to enable investors to

comprehend our prospects and take informed

investment decisions. This report and other

statements - written and oral - that we periodically

make contain forward-looking statements that set

out anticipated results based on the management’s

plans and assumptions. We have tried wherever

possible to identify such statements by using words

such as ‘anticipate’, ‘estimate’, ‘expects’, ‘projects’,

‘intends’, ‘plans’, ‘believes’, and words of similar

substance in connection with any discussion of

future performance.

We cannot guarantee that these forward-looking

statements will be realized, although we believe we

have been prudent in assumptions. The achievement

of results is subject to risks, uncertainties and even

inaccurate assumptions. Should known or unknown

risks or uncertainties materialize, or should

underlying assumptions prove inaccurate, actual

results could vary materially from those anticipated,

estimated or projected.

We undertake no obligation to publicly update any

forward-looking statements, whether as a result of

new information, future events or otherwise.

A [email protected]

Ahmedabad211-212, Sarthik – IIOpp. Rajpath ClubSarkhej – Gandhi Nagar HighwayAhmedabad- 380 054Tel: 91-079-26871478/79

Bangalore301 Batavia Chambers,8 Kumara Krupa Road, Kumara Park East, Bangalore – 560 001Tel: 91-80-22253309

BhopalB-1, Comfort GardenChuna Bhatti, Bhopal – 462 016Tel.: 91-0755-2428784

Bhubaneswar122, Madhusudhan Nagar Unit – 4, Bhubaneswar – 751 001Tel.: 91-0674-6450506

ChennaiNo.190A, 7th & 8th Floors,Pettukola TowersPoonamalle High Road, KilpaukChennai – 600 010Tel.: 91-44-25323401/02

Delhi9th Floor, JMD Regent Square,DLF Qutub Enclave Phase - II,Mehrauli-Gurgaon Road,Gurgaon – 122 022Tel: 91-124-4052458/59

Kolkata932, Marshall House 33/1, Netaji Subhash Road,Kolkata – 700 001Tel.: 91-33-30221369

KochiG-183, Panampilly Nagar,Kochi – 682 036Tel: 91-0484-2324721

LucknowA 3/171, Vishal Khand,Gomthi Nagar, Lucknow – 226 010Tel:91-0522-2394418

MumbaiB-402 Dipti ClassicOff. M. V. Road, Suren Lane, Andheri (E), Mumbai – 400 093Tel.:91-022-26845560

Ranchi351-A, Road No.5, Ashok Nagar, Ranchi – 834 002Tel:91-0651–2241818

Overseas OfficesDubaiP O Box : 117333 DUBAI, U A ETel:971-4-3377727

Sultanate of OmanP O Box : 3678, PC 112, RUWI Sultanate of OmanTel:00968-24600329

Regional Offices

www.global-reports.com

07

2007NCC is the fastest growing

construction Company in India

(Construction World –

NICMAR, 2006) – Corporate

identity

10 NCC is committed to credible

and profitable growth –

Message from the Chairman

12 NCC has come a long way –

Corporate milestones

16 NCC is dedicated to growth –

What our numbers reveal

22 NCC is present in fast-growing

sectors – Business segment

review

18 NCC is positioned to capture

every infrastructure upturn –

Managing Director’s review

04 NCC is led by a set of

corporate ethos – Vision,

mission, values

56 NCC is de-risked, enabling it to

ride industry downturns – Risk

management

What this annual report contains

74 Management’s discussion and

analysis

64 NCC is a transparent

organisation – Directors’ report

80 Report on corporate

governance

94 NCC is delighted to present its

financial statements –

Auditors’ report

98 Balance sheet

99 Profit and loss

account

100 Cash flow

statement

102 Schedules

125 Consolidated

accounts

124 Balance sheet

abstract

06 Corporate information

32

Indian infrastructure on a fast track

A projected infrastructure

investment of US$ 140.4 billion

in India between 2002 and 2007

is probably the highest investment

going into the infrastructure

of any country in the world,

China excluded.

The Company reported revenues of

Rs. 4415 million in 2001-02; it

finished 2006-07 with revenues of

Rs. 29002 million.

The Company possessed assets

worth Rs. 1016 million in 2001-02;

it finished 2006-07 with assets of

Rs. 5007 million.

The Company enjoyed a market

capitalisation of Rs. 230 million in

2001-02; it finished 2006-07 with a

market capitalisation of Rs. 33507

million.

Going ahead, the Indian

government expects to double its

investment to US$ 288.8 billion in

the Eleventh Plan…

NagarjunaConstructionCompany Limited has emerged as a significantbeneficiary.


54

VisionTo be a world-class construction and

infrastructure enterprise committed to

quality, timely completion, customer

satisfaction, continuous learning and

enhancement of stakeholders’ value.

ValuesOpenness and Trust

Integrity and Reliability

Team work and collaboration

Commitment

Creativity

Quality PolicyNagarjuna Construction Company strives to

achieve enhanced customer satisfaction by

delivering the quality product through timely

completion with safe working environment. We

dedicate ourselves to continual improvement in all

fields of our business.

Quality objectivesTo consistently deliver quality products by adhering

to set specifications, contractual, regulatory and

statutory requirements.

To achieve enhanced customer satisfaction through

cost-effective and timely completion.

To motivate and train the staff for continual

improvement of quality standards.

To update and implement procedures complying

with international standards.

We enjoy a rich 29-year trackrecord in responsible nation-building

Mission To build a strong future ensuring increased

returns to shareholders and enhanced support to

associates.

To adopt latest technologies in the field of

engineering, construction, operation and

maintenance of infrastructure projects.

To encourage innovation, professional integrity,

upgradation of knowledge and skills of

employees and a safe working environment.

To be a responsible corporate citizen committed

to social cause.

76

NCC has been acknowledged asthe fastest-growing constructioncompany in India.

Our corporate identity We enjoy a rich 29-year track

record in responsible nation-building

We are present across India’s

fast-growing industry sectors

(transportation, buildings and

housing, water and environment,

irrigation, electricals and real estate)

We employ nearly 3245

members; more than 60 per cent are

engineers

We possess an order book of

Rs. 73021 million (as on March 31,

2007), which is more than twice our

2006-07 turnover

Our presence Our pan-Indian presence enables

us to identify emerging business

opportunities and bag new projects

with speed

Our regional offices in Delhi,

Ahmedabad, Bhubaneshwar,

Kolkata, Mumbai, Bhopal, Lucknow,

Hyderabad (including corporate

headquarters), Chennai and

Bangalore are managed by senior

professionals leading to informed

decision making

Our overseas offices in Dubai and

Muscat capture opportunities in the

United Arab Emirates and Gulf

countries

Our financial highlights,2006-07

57 per cent increase in turnover

from Rs. 18425 million in 2005-06 to

Rs. 29002 million in 2006-07

64 per cent increase in EBIDTA

from Rs. 1641 million in 2005-06 to

Rs. 2698 million in 2006-07

50-basis point increase in EBIDTA

margin from 8.9 per cent in 2005-06

to 9.4 per cent in 2006-07

46 per cent increase in post-tax

profit from Rs. 1039 million in 2005-

06 to Rs. 1519 million in 2006-07

22 per cent increase in earnings

per share from Rs. 6.04 in 2005-06

to Rs. 7.35 in 2006-07

Board Of DirectorsSri A V S Raju

Chairman

Sri P C Laha

Director

Sri S Venkatachalam

Director

Sri Rakesh Jhunjhunwala

Director

Smt. Bala Deshpande

Nominee Director

ICICI Venture Funds

Prof. Dr.Ing.V. S. Raju

Director

Sri P. Abraham, IAS (Retd.)

Director

Sri N R Alluri

Director

Sri R V Shastri

Additional Director

Sri J V Ranga Raju

Wholetime Director

Sri R N Raju

Wholetime Director

Sri A V N Raju

Wholetime Director

Sri A S N Raju

Wholetime Director

Sri A G K Raju

Executive Director

Sri A A V Ranga Raju

Managing Director

Company Secretary &

Chief General Manager (L)

Sri M V Srinivasa Murthy

Joint Statutory Auditors1) M/s. M Bhaskara Rao & Co

Chartered Accountants, 6-3-652 5-D,

Fifth Floor, ‘KAUTILYA’

Amrutha Estates, Somajiguda,

HYDERABAD – 500 082

2) M/s. Deloitte Haskins & Sells

Chartered Accountants

Coromandel House

1-2-10, Sardar Patel Road

SECUNDERABAD– 500 003

BankersState Bank of India

Canara Bank

Andhra Bank

State Bank of Hyderabad

Syndicate Bank

Indian Overseas Bank

Allahabad Bank

ICICI Bank

Registered Office41, Nagarjuna Hills, PunjaguttaHyderabad – 500 082Tel: + 91 40 23351753Fax: + 91 40 23350214www.ncclimited.come-mail: [email protected]

Registrar & Share TransferAgentsM/s. Sathguru ManagementConsultants Pvt. Ltd.,Plot No.15, Hindi Nagar,Punjagutta, Hyderabad – 500 034Ph: 040- 23356507 Fax: 040-23354042E-mail: [email protected]

Corporate information


98

Our recognition 2006: Fastest growing construction

company in India (Construction World –

NICMAR study) in 2006

2005: The only Indian construction

Company to figure in Forbes Asia’s 200

‘Best under a billion’ companies in the

Asia Pacific

2004: Award for ‘Excellent aesthetics

matching with environment’ given by the

Indian Institute of Bridge Engineers for

the Company’s project in Latur

(Maharashtra), comprising a flyover,

bridge, pedestrian subway and allied

structures

2003: Award for ‘Outstanding concrete

structure of the year’ for the main athletic

stadium at Gachibowli, Hyderabad,

awarded by the Indian Concrete Institute

2002: Award for ‘Outstanding concrete

structure of the year’ for Shilpakalavedika,

a state-of-the-art auditorium at

Hyderabad, conferred by the Indian

Concrete Institute

1999: National Aluminium Company

(NALCO) awarded a safety certificate for

maintaining the highest standards of

safety while constructing a factory in

Damanjodi, Orissa

Our financial credibility Rs. 1500 million commercial paper

rated P1+ by CRISIL, the highest rating

in India and indicating a strong degree of

safety with respect to timely payment of

interest and principal

A consortium of banks headed by the

SBI extending fund and non-fund

facilities of Rs. 28 billion

Our shareholder focusAn investment of Rs. 10 made in 1992

would have appreciated to Rs. 1607

(excluding dividends) as on March 31,

2007

The Company declared a 1:1 bonus in

September 2006

Our listing The NCC stock is actively traded on

the National Stock Exchange and the

Bombay Stock Exchange

The GDRs of the Company are listed

on the Luxembourg Stock Exchange and

traded on the London Stock Exchange

and portal segment of the New York

Stock Exchange

Our major customers National Highway Authority of India

State Public Works Departments

across various Indian states

Karnataka Road Development

Corporation

Irrigation and CADD departments of

various states of India

Hyderabad Municipal Water Supply

and Sewerage Board

Gujarat Water Supply and Sewerage

Board

Chennai Metropolitan Water Supply

and Sewerage Board

State Electricity Board across various

states in India

Maharashtra Airport Development Co.,

Mumbai

Government of West Bengal, PHE

Office, Kolkata

Sahara India Commercial Corp.

Limited., Pune

Hindustan Aeronautics Limited

Bharat Heavy Electricals Limited

National Thermal Power Corporation

Reliance Industries Limited

Karnataka Housing Board

Andhra Pradesh Housing Board

Sports Authority of Andhra Pradesh

Zuari Cements

Bennett, Coleman and Company

Limited

Patni Computers

Satyam Computers

Delhi Metro Rail Corporation Limited

Sriram Properties Pvt. Limited

Reserve Bank of India

Muscat Municipality, Sultanate of

Oman

An investment of Rs. 10 made in1992 would haveappreciated to Rs. 1607 (excludingdividends) as onMarch 31, 2007

1110

From the desk of the Chairman

At NCC, we are leveraging our richpast to address projects for thepresent with the objective to buildthe India of tomorrow.

We possess a rich and diversified presence across attractively-

growing sectors (transportation, buildings and housing, water and

environment, irrigation, electricals and real estate)

PerspectiveIndia occupies the seventh largest landmass (3.29 million

square kilometres), the second-largest population (1.1

billion) and the tenth largest economy with an

infrastructure that is clearly a decade or two behind the

global average.

However, this anomaly is being corrected faster than ever

before: the Central Government’s proposed infrastructure

spend increased from US$ 88 billion in the Ninth Plan to

US$ 140.4 billion in the Tenth Plan (proposed) to US$ 228.8

billion in the Eleventh Plan (estimated).

Hearteningly, this increased government funding is being

accompanied by reforms facilitating increasing private

sector funding as well. India’s planned infrastructure spend

of Rs. 12.7 trillion (49 per cent of India’s GDP of 2005-06) is

likely to be funded through a public-private mix. The total

investment in Indian infrastructure is estimated at US$ 284

billion over the next five years. As a result, investment in

infrastructure is expected to rise from 4.5 per cent of the

GDP to 8 per cent by 2012.

These numbers indicate that there is adequate business to

keep us busy over the coming years.

Our brand As India’s frontline construction Company, we are

positioned attractively to take our business ahead through

the following drivers:

Brand: We enjoy an established track record of being in

the construction business for the past 29 years.

Portfolio: We possess a rich and diversified presence

across attractively-growing sectors (transportation,

buildings and housing, water and environment, irrigation,

electricals and real estate).

Order book: We have a strong business outlook

reflected in the size of our order book at Rs. 73021 million

(as on March 31, 2007).

Assets: We possess Rs. 5007 million of owned

equipment; nearly 70 per cent of these assets are state-of-

the-art and imported.

Confidence: We deliver quality projects on time; we

were one of the first construction companies in India to be

certified for the ISO 9001:2000.

People: We possess rich intellectual capital, reflected in

the recruitment of multi- disciplinary professionals across

verticals. We manage our human resource through a spirit

of continuous learning, trust, relationships, opportunities

and empowerment.

PerformanceYour Company achieved a turnover of Rs. 29002 million,

an increase of 57% over previous year and a net profit of

Rs. 1519 million, an increase of 46% over previous year in

2006-07.

Based on the findings of the dependable Construction

World – NICMAR study, we emerged as the fastest-

growing construction Company in India in 2006.

Such awards endorse our ability to capitalise effectively on

the industry opportunities, grow our order book, translate

these into enhanced income and sustain our industry

leadership for years to come.

A time of recognition Of course, this could not have been possible without all the

arms of the Company working in tandem – our

shareholders, our customers, financial institutions and

banks, employees, partners, suppliers, associates and

community.

I must assure them that the Company will continue to

practise what it has always done – deliver superior value

for all those who depend on us, work with us and invest in

us.

Sincerely,

A.V.S. Raju

Founder Chairman

Nagarjuna Construction Company Limited


1312

At NCC, we have an exciting futurebuilt over anexemplary past

1978Nagarjuna Construction

Company was established as a

partnership firm.

1990Became a limited company.

1992Floated an IPO; raised Rs. 18

million through the issue of 1.8

million equity shares.

1995Crossed a turnover

of Rs. 1 billion.

1996Established the Property

Division (Real Estate) to

capitalise on emerging

opportunities.

1998Established the Transportation

Division, which later became

the third largest segment.

1999Established the Water and

Electrical Divisions.

2001Became one of the first Indian

construction companies to receive

the prestigious ISO 9001-2000

certification.

2004Established the Irrigation Division.

2005Crossed Rs. 10 billion turnover,

a 10-fold growth within a decade.

2007Net worth crossed Rs. 10 billion.

1514

In the India oftomo rrow…

Mohandas Damle

will be able to commute

from one point to another

with speed, safety and

convenience on flat and

wide roads. Suhasini Sharma will live with the comfort that

she deserves in a spacious

and modern house.

Bertie D’silva will be able to enhance her

efficiency and effectiveness in

a spirit-enhancing office.

Ramzaan Ali will be able to grow crops with

surety to feed his growing family

and nation through a cross-country

irrigation linkage.

Surojit Mahapatrawill be able to drink safe drinking

water from inside his home deep

inside Orissa without walking a

long distance to fetch it.

Shanthi Ramachandran will be able to cook under a

bulb at night through the

simple flick of a switch.


1716

At NCC, the strength of ourbusiness model is reflected in the growth of our numbers

*Dividend on enlarged capital after the 1:1 bonus issue

(as on 31, March)

1918

10 minutes with the Managing Director

We are fast emerging as anopportunity-led, bottomline-drivenand profitability-centric organisation. A.A.V. Ranga Raju, Managing Director, Nagarjuna Construction Company Limited, reviews the performance of the

Company in 2006-07 and shares his optimism for the future.

Q. Were you satisfied with the performance ofthe Company in 2006-07? A. Absolutely! While our gross income registered a 57 per cent

increase to Rs. 29002 million in 2006-07, our post-tax profit

strengthened 46 per cent to Rs. 1519 million.

This indicates clearly that as the Company grew its business,

the profitability increased; this contradicts the assumption that

growth is often at the cost of profitability. We grew our EBIDTA

margins from 8.9 per cent in 2005-06 to 9.4 per cent in 2006-07.

These numbers emphasise our positioning as an opportunity-

led, bottomline-driven and profitability-centric organisation.

Our profitability focus is critical for three important

reasons: our business is working capital-intensive, the

prequalification requirements for profitable contracts are

rising all the time and there is a growing shareholder

expectation to perform. All these three challenging

requirements can be seamlessly addressed through a

strong profitability focus in the following way: a volume-

value mix translates into a stronger cash flow; when

redeployed, this strengthens net worth; a higher net worth

enables us to bid for larger and more profitable projects.

This sets into motion a virtuous cycle keeping the need for

an external injection of funds to the minimum, keeping the

equity relatively low, strengthening earning per share and

translating into attractive returns for our shareholders.

As a result, the Company’s EBIDTA margin of 9.4 per cent

has emerged among the highest quartile of construction

companies in India today. So we are not only among the

largest, we are also among the most profitable.

Q. Through what initiatives did theCompany strengthen its profitability? A. It all boiled down to a strong construction focus and a

consistent conviction that India will need to increase

infrastructure investments to support its economic growth.

We strengthened our knowledge repository, we invested

consistently in the direct ownership of equipment, we

enriched our diverse terrain understanding, we reinforced

customer relationships and entered into a collaborative

participation with various stakeholders enabling us to

embark on large projects. It is the complement of these

initiatives that is now translating into an attractive

profitability churn. So the increase in our profitability is not

just the outcome of the projects that we are handling today

but a visible result of the philosophy guiding our business

for nearly three decades.

This profitability focus iscritical for three importantreasons: our business isworking capital-intensive, theprequalification requirementsfor profitable contracts arerising all the time and there isa growing shareholderexpectation to perform.


2120

Q. What other reasons would you ascribeto the profitability churn? One, we have selected to be present in some of the most

attractive verticals (transportation, buildings and housing,

water and environment, irrigation, electricals and real

estate), representing the right volume-value mix. While the

water and environment vertical represents the principal

portion of our business and provides us with stable

operating margins, our electricals segment enables us to

achieve and maintain decent margins on account of our

strong resident engineering-design-commissioning-

operating capabilities as well as robust cost management.

When seen holistically, the business mix ensures that

selective downturns will not drag down the Company’s

overall profitability during any year.

Two, there are a number of synergies emerging from this

business mix. For instance, our real estate division was

created following the success achieved in the established

buildings and housing spaces. Besides, we rotated our

employees and equipment across sectors to spread our

costs over a larger number of contracts.

Three, we now possess the scale and status to be more

selective about new projects. We generally bid for large

denomination projects which, by their nature, limit the

number of bidders and eliminate most intending

competitors; once awarded, these projects accelerate

growth on the one hand and enhance economies-of-size

on the other. This combination has strengthened our

profitability churn.

Q. What were some of the highlights of2006-07? A. Our emerging visibility in India’s construction industry.

We were bestowed with the most coveted honour of being

the fastest growing construction Company in India in 2006

by Construction World – NICMAR. We surpassed the

growth rates of some of the most visible companies

operating in our industry and reinforced our ability to

maximise prevailing opportunities.

In one of our other significant highlights, we stepped

abroad in a big way through the bagging of a transportation

contract in Oman (worth US$164.64 million). We believe

that this project and the accompanying visibility will

emerge as our stepping stone to capture global

infrastructure opportunities.

Our consortium bagged the Machilipatnam Seaport

Contract valued at Rs. 15 billion. We expect to develop the

same as a deep-water, all-weather port strategically

located between Chennai on the South and Visakhapatnam

on the North.

Our consortium comprising Tishman Speyer of the US,

ICICI Venture and ourselves bagged a 400-acre integrated

township project at Tellapur in Hyderabad. The full

potential development value of this project is estimated at

Rs. 85 billion.

Q. What are some of the key trendsinfluencing the industry and how does theCompany expect to respond? A. Earlier, the government would award item rate

contracts. Then it started giving out EPC/ turnkey

contracts. We are now in the final stage of infrastructure

development where the government is not just asking us

to build the infrastructure but also asking us to maintain it

for a number of years.

This last stage of evolution – Build-Operate-Transfer (BOT)

– is challenging and attractive at the same time. On the

one hand, it is challenging because it requires a large

quantum of equity resources to be invested in such

projects. On the other, some of these projects are

attractive on account of their significant revenue

generation capabilities. At NCC, we are attractively placed

to capitalise on the opportunity: we possess the rare

combination of rich industry experience and a net worth of

Rs. 10.40 billion (as on March 31, 2007), which will

reinforce our pre-qualification capability for a number of

coveted projects.

Q. What is the Company’s outlook for 2007-08 and beyond? A. Our order book of Rs. 73021 million (as on March 31

2007) will provide us with adequate revenues for over two

years. To sustain the pace of growth, we intend to expand

our presence across our existing verticals. For instance, in

the transportation sector, we intend to enhance our

presence in the aviation, ports and railways segments even

as we strengthen our exposure to roads. Within the real

estate vertical, we expect to capitalise on the growing

industry opportunities through our subsidiary NCC Urban

Infrastructure Limited. We also established oil and gas,

metal and power divisions where we perceive attractive

opportunities. In view of the size of our order book and the

ongoing projects, we expect to report a 35 to 40 per cent

increase in our topline during 2007-08.

10 minutes with the Managing Director Order book: Rs. 73021 million

2002-03 (Rs. million)

Total Rs. 11418 million Total Rs. 73021 million

2006-07 (Rs. million)

To sustain the pace of growth,we intend to expand ourpresence across our existingverticals. For instance, in thetransportation sector, we intendto enhance our presence in theaviation sector

23

6 businessspaces.

NCC is present in eachwith the singularobjective to enhance lifequality for the secondlargest population groupin the world.

0102

0304

0506

Buildings and housingTo contribute to the industrial and socio-economic

development of India.

Water and environment To reach water to sustain and nurture lives; to energise lives

through providing hygienic and healthy living conditions.

ElectricalsTo facilitate development by providing a convenient access

to power at the flick of a switch.

Irrigation To provide access to water for ensuring agricultural progress,

hygienic and healthy living conditions.

Real estate To enrich the quality of lives by offering convenient, comfortable

and cost-effective housing.

TransportationTo ensure swifter, faster and safer connectivity.

22


2524

Business segment review – 1

Buildings and Housing

Segment status within the Company: Second largest

Portfolio: Industrial buildings, commercial buildings,

housing projects, IT parks and shopping malls, sports

complexes and hospitals

Revenue, 2006-07: Rs. 7246 million

Revenue growth, 2006-07: 38 per cent

Contribution to the total revenue in 2006-07:

26 per cent

Order book, as on March 31 2007: Rs. 15964 million

2726

Business segment review | Buildings and Housing

Overview

Since its inception in 1978, this division – the oldest in the Company – evolved from amere contractor to a full-fledged infrastructure solutions provider. The Company utilisesmodern construction techniques (folded plate and shell roof, pre-cast and pre-stressedroof elements) to facilitate the quick and economical construction of large factories andworkshop structures. This division now specialises in the construction of industrialbuildings, commercial buildings, housing projects, IT parks, shopping malls, sportscomplexes, big stadia and hospitals.

Key strengths Experience: The Company acquired superior skills in

the management of complex projects. Over the years,

this goodwill extended into the commissioning of

other divisions.

On-time delivery: The Company established a

reputation for timely and competent delivery, making

it a preferred contractor. For instance, it was awarded

Rs. 10 million bonus following the early completion of

a building project for the National Academy of

Construction, Hyderabad. A significant part of the

Company’s order book is derived from repeat client

orders.

Client-specific solutions: The wide clientele of this

division comprises government organisations and

large industrial houses (Mahindra Ford, Zuari

Cements, National Academy of Construction, Airports

Authority of India and state housing boards with

customised solutions).

Asset strength: The division deploys world-class

equipment comprising the batch mixer, concrete

batching plant and crawler tower cranes, which

enhance project quality and shrink commissioning

time.

Knowledge-centric approach: The 1085-employee-

strong division represents a prudent mix of academics

and hands-on experience, enabling it to address

challenging projects.

Outlook

The division expects to increase its presence

in the construction of high-rise superstructures

The Company is partnering with a German

company for the manufacture of form work for

captive use and exports

The Company is selectively focusing on large

projects to liberate management time to

concentrate on other high-margin opportunities

Continuous upgradation of technology

Major projects bagged in 2006-07 Office of the Executive Engineer, Building

Construction Department, Special Works Division.

Ranchi – Construction of a mega sports complex,

Package –II, in Howar, Ranchi. Project value: Rs. 1522

million

Civil and allied works for Times Print City, Airoli,

Navi Mumbai. Client: Bennett Coleman & Co. Project

value: Rs. 1143 million

Cricket stadium in Mohali, Chandigarh. Client:

Punjab Cricket Association. Project value: Rs. 740

million

Jawahar Lal Bhavan, New Delhi. Client:

Government of India, Central Public Works

Department. Project value: Rs. 970 million

Cabinet Secretariat Building, New Delhi. Client:

Central Public Works Department, New Delhi. Project

value: Rs. 860 million

Sahara India Commercial Corp. Limited, Pune.

Project value Rs. 650 million

Showcase projects Shilpakalavedika, which involved the construction

of a multipurpose indoor auditorium with a seating

capacity for 2500. The project was adjudged the

‘Outstanding Concrete Structure of the Year 2002’

by the Indian Concrete Institute

IT Centre at MIDC Knowledge Park, Airoli, Navi

Mumbai. Assignment comprised civil and external

development works. Client: Patni Computer

Systems Limited, Mumbai

The main athletic stadium in Gachibowli,

Hyderabad, with a spectator capacity of 30,000 was

declared the ‘Outstanding Concrete Structure of the

Year 2003’ by the Indian Concrete Institute

Block-I, Government General Hospital Campus,

Chennai. Client: PWD (Chennai)

Singapore Class Residential Apartments,

Hyderabad. Client: Andhra Pradesh Housing Board,

Hyderabad


28

Five minutes with the business head

“We expect to optimise our presence in the buildingsand housing sector” Interview with Mr. E. Venkatesan, Senior Vice President, Buildings and Housing

Q. Whatopportunities arepresent in theindustry? A. There are a number of

points of optimism. Urban

infrastructure is expected

to account for US$18.8

billion or 23 per cent of

the aggregate construction spending in the Thirteenth

Five Year Plan. The fundamentals of the Indian economy

– high GDP growth, increasing income levels and

growing urbanisation, among others – are strongly in

place to encourage us to strengthen investments in this

division. A recent McKinsey Global Institute study has

projected India as the fifth largest consuming economy

by 2025. The middle class, which has broadly been

defined as households earning between Rs. 2 lakh to Rs.

10 lakh per year, is expected to surge from 50 million to

583 million by 2025.

Q. How is the division poised to capitaliseon these opportunities? A. We expect to reduce our presence in some sectors

and focus on select high-growth areas. For instance,

increasing population density and tardy growth of

accommodation are strengthening vertical urban growth.

We expect to leverage our expertise in the construction

of commercial and residential buildings. We intend to

partner with a German company for the manufacture of

‘form work’ to facilitate faster and quality execution. We

expect that these initiatives will enhance our revenues

from this business vertical.

Unique project, distinctive response Project details: Construction of main athletic

stadium at Gachibowli, Hyderabad.

Client: Sports Authority of Andhra Pradesh,

Government of Andhra Pradesh.

Project value: Rs. 220 million.

Scope: To construct 225 metres x 190 metres oval

shaped main athletic stadium as per international

standards with a seating capacity of 30,000.

Challenges: Tight time line for completion of the

project in view of the ensuing National Games. First

stadium project for the Company

Execution excellence: A dedicated on-site team

supervised project progress. Month-wise targets were

fixed. A safety team was appointed to implement best

safety precautions

Results: The stadium was declared ‘The Best

Concrete Structure of the Year-2003’ by the Indian

Concrete Institute

Client endorsement “The firm proved itself to be resourceful, with

excellent organisational ability and technical

manpower, besides possessing a mindset to

complete the work on time. I congratulate them

for completing the project on schedule.

Ranjan Chatterjee, Chairman, Airports Authority of

India

Prestigious project, rolled out aheadof schedule

Project details: Terminal Building (1A) at the

Indira Gandhi International Airport, New Delhi

Client: Indira Gandhi International Airport, New

Delhi

Project value: Rs. 202 million

Scope: Re-construction of the terminal 1A

building at Indira Gandhi International Airport,

which was gutted by fire. Design and

construction of an RCC framed structure of the

Terminal 1A building. The project also involved

providing utility services including electrical, fire

alarm, detection system, fire fighting, air-

conditioning, electronic works like public address

system, CCTV surveillance and a flight

information display system, on a turnkey basis.

Built-up area 200,000 sq. ft.

Challenges: The Company’s first project in the

aviation space. Timeframe a mere 10 months.

Prestigious project under the surveillance of the

Prime Minister’s Office

Execution excellence: Turnkey responsibility.

Comprehensive project blueprint ensured proper

planning and robust implementation. Project

received direct management control. Over 300

people deputed 24x7. Deployed state-of-the-art

equipment comprising cranes, excavators and

batching plants, among others

Result: Completed the project in a record seven

months, well ahead of schedule

Financials of the building and housingsegment

29

3130


Transportation

Segment status within the Company:

Third largest

Portfolio: Roads, highways, bridges and flyovers

construction


Revenue growth, 2006-07: 61per cent


23 per cent

Order book as on March 31 2007:

Rs. 17671 million


3332

Business segment review | Transportation

Overview

The transportation division of NCC was established in 1998 with the objective to captureopportunities arising out of the NHDP programme announced by the Government ofIndia. Over the years, the division extended its competence from roads to bridges,flyovers, railway lines, airport terminals and ports. The division is now the Company’sthird largest segment in terms of turnover, accounting for 23 per cent of revenues in2006-07 and 24 per cent of the order book (as on March 31, 2007).

Key strengths Strong financial base: A strong net worth

enabled the Company to bid for progressively

larger projects insulating it from competitors

without this prequalification capability.

Robust engineering talent: A rich talent pool of

434 engineers, having graduated from reputed

engineering institutes and now possessing an

average work experience of 8.85 years, helped

the Company undertake diverse projects with

challenging deadlines and complexity.

Plant and equipment: The Company

progressively invested in the ownership of state-

of-the-art plant and equipment with the objective

to turn projects around with speed, economy

and quality. The Company’s plant and equipment

portfolio comprises the latest generation of

sensor pavers, tandem rollers, pneumatic tyred

rollers, hotmix plants (batch mix type), three-

stage crushers, piling rigs, wet mix plants,

among others. Most of the plant and equipment

have been acquired from the leaders in their

field, which enabled the Company to create

world-class qualitative infrastructure on

schedule.

Quality: The Company’s quality commitment is

reflected in the commissioning of independent

laboratories across all sites, irrespective of

project size and equipped with the latest

technology. This facilitated quality checks across

the entire project cycle – from raw material

procurement to project completion – comprising

input blends and a comparison against specified

parameters.

Credible partners: The Company entered into

business-enhancing partnerships with reputed

organisations like LG Engineering (South Korea),

Daelim International Corporation (DIC) (South

Korea), SMJ (Indonesia), Somdatt Builders Ltd

(India) and Unitech (India). These partnerships

strengthened the Company’s financial and

technical capabilities while bidding for large and

specialised projects.

De-risked approach: The division de-risked its

presence from an excessive dependence on the

road segment with an extension into related

areas like railways and sea ports.

Timely completion: All projects undertaken by

this division were completed on time or within

the extended period; the Company was awarded

a bonus for early project completion for the

Kalina-Vakola flyover project, which was

completed in nine months against the stipulated

12 months.

International presence: The division’s order

book reflects a growing global presence. It was

recently awarded the RO 60.04 million

(equivalent to Rs. 7200 million)-contract for the

dualisation and realignment of the AI-Amerat-

Quriyat Road for the Muscat Municipality

(Sultanate of Oman), representing one of the

largest road projects ever awarded in the region.

Outlook

The division expects to embark on the

following:

Strengthen its existing workforce with the

objective of graduating the division to a profit

centre with higher margins

Enhance equipment utilisation

Recruit manpower through tie-ups with

engineering and other institutes

Enter the aviation sector through the

construction of terminals and runways; widen

presence through projects related to mass rapid

transport systems (MRTS), urban flyovers, ports,

interchanges, city roads and railways, which

offer significant scope in engineering and value-

addition

Leverage better technology

Showcase projects The Ahmedabad-Vadodara six-lane

expressway on the NH-8 (Phase-II) covering 50

km of new formation. The project was

completed in joint venture with LG E&C of South

Korea. Project value: Rs. 3517 million. Client:

National Highways Authority of India

The turnkey design and construction of

approaches for the road overbridge (ROB) and

grade separator-crossing NH-4. Project value:

Rs. 270 million. Client: Bangalore Development

Authority, Bangalore

DMRCL Railway line, New Delhi. Client: Ircon

International Limited

3534


“We are actively looking at strengthening economiesof scale and skill to capitalise on the scope”Interview with Mr. Kanchan Roy, Vice President, Transportation

Q. How does thedivision expect tomaximiseprofitability in whatis widely perceivedas a competitiveand commoditisedbusiness? A. Through economies of

scale and skills. For instance, we are now in a position of

strength to focus only on projects with denominations

exceeding Rs. 1500 million, leading to higher margins on

account of superior asset utilisation and engineering

understanding. This has started a virtuous cycle: higher

revenues, increased profitability, stronger reinvestment,

higher net worth, quicker asset purchase and in-time

recruitment.

Q. What are the key trends shaping up theindustry? A. The government is increasingly awarding projects on a

BOT basis, which necessitates that the bidders have

deep pockets to commit equity to the SPV. In our

opinion, this will filter competition and those who are

awarded projects will strengthen their brand and

prospects to bid for similar projects. By the virtue of our

size and scale, we are in the right position to capitalise

on this emerging opportunity.

Challenging deadline, commensurateresponseProject: Construction of flyover at Kalina-Vakola junction

on Western Express Highway, Mumbai, Maharashtra.

Client: Maharashtra State Road Development

Corporation (MSRDC Limited), Mumbai.


Scope: 1427 metres in length

Challenges: High traffic area and stiff 12-month deadline

Execution excellence: The use of 400 span PSC girders,

among the largest in India. The use of approaches

300 metres long with reinforced earth pre-cast panels as

retaining walls. The consumption of around 32,000 cu.m.

of concrete per day. The use of a carriage width of 24.2

m. The use of nearly 3,000 M.T. of reinforcement steel.

The piling of 540, 1200 mm bored cast-in-site, spanning a

length of 7200 metres

Result: The Company beat the challenging deadline

by nearly three months and was awarded a bonus of

Rs. 10 million

Planning leading to scheduledcompletionProject: Phase – II of Ahmedabad-Vadodara Six

Lane Express Way

Client: National Highways Authority of India.

Project Value: Rs. 3,517 million.

Total Length: 50 kilometres.

Scope: Six-lane access controlled expressway

Challenges: To develop a six-lane gross root

expressway

Execution excellence: Strong planning and

scheduling leading to precise implementation.

Daily meetings to assess project progress. The

use of state-of-the-art equipment comprising

crushing plants, sensor pavers and pneumatic

tyred rollers among others.

Result: The project was completed on schedule

resulting in a favourable client endorsement

Client endorsement: “Nagarjuna Construction

mobilised the required plant and machinery and

deputed experienced engineers for the Kalina-

Vakola flyover project. The assignment was

executed as per the specifications with a robust

quality consideration. The Company is

resourceful as well as technically and

professionally competent to handle pre-

stressing work.”

V.G. Dhokre, Executive Engineer, Maharashtra

State Road Development Corporation Limited

Financials of the transportation segment


3736


Water and Environment

Segment status within the Company: Largest

Portfolio: Water supply projects for drinking

water and irrigation consisting of transmission

pipelines, distribution networks, reservoirs,

pumping stations, river intake works, electro

mechanical works, water treatment plants,

underground drainage networks, sewage

pumping stations and sewage treatment plants




32 per cent

Order book as on March 31 2007:

Rs. 16500 million

3938

Business segment review | Water and Environment

Overview NCC’s water and environment division was established in 1999 in response to theincreasing investments in several projects by various government agencies in the watersupply and sanitation sector and also in the irrigation sector. These projects are designedto provide safe drinking water to the country’s urban/rural areas and also for the irrigation.Initially, the division was started with water supply and sewerage projects; it executed anumber of water supply projects and subsequently ventured into lift irrigation schemes.The projects have similarity in terms of in terms of equipment and other resource.

Now the division undertakes the following types of

projects:

Turnkey implementation of rural, urban and

industrial water supply projects

Turnkey implementation of waste water collection

systems for urban communities and industrial waste

disposal

Turnkey implementation of water treatment plants,

underground drainage works; and sewage treatment

plants from design to commissioning

Storm water drainage projects

Lift irrigation schemes involving large diameter

transmission pipelines and pumping stations

Key strengthsDiverse project management: The Company

manages diverse assignments involving urban and

industrial water supply projects, storm water drainage

projects, lift irrigation schemes and sewage treatment

plants.

Value chain – EPC contracts: The Company not only

creates, operates and maintains projects but also

designs and engineers them – a one-stop solution that

facilitates proper scheduling and complete quality

management.

Rich talent resource: The Company’s team in the

division comprises around 292 engineers.

Outlook

Increase market share over the foreseeable

future.

Strengthen intellectual capital through the

recruitment of qualified engineers and other

professionals

Acquire new technology and equipment

(including equipment for trenchless technology

in pipe laying, vertical cast concrete pipe

fabrication units and desalination plants, among

others)

Technology orientation: The Company’s technology

orientation, among others, includes steel pipe fabrication

units, imported modular formwork for structures,

excavators and rock chiseling equipment, which help in

the timely completion of work with protected quality.

Design capability: This division has an in-house facility

for designs of drinking water supply, irrigation and

sewerage projects. The design wing is equipped with

capabilities using standard software for designs and Auto

CAD for the preparation of drawings.

Timely completion: This division built a reputation for

timely completion of projects through a complement of

prudent asset management, strong project mapping and

high asset utilisation.


4140

Showcase projectsWater supply scheme for 156 villages, including

pipelines for about 880 km, water treatment plant, etc for

Maharashtra Jeevan Pradhikaran (Amravati).

Project value: Rs. 1100 million-mentioned in the Limca

Book of Records as the largest rural water supply scheme

entirely with gravity

Sewerage scheme, including sewage treatment plants

for Bellary city from conceptualising to commissioning for

the Karnataka Urban Water Supply and Drainage Board.


Providing and laying 2200 mm-diameter MS pipeline

for Phase I of Krishna Drinking Water Supply Project for

Hyderabad city commissioned eight months ahead of

schedule; client: HMWSBB.


Providing and laying MS pipeline for the Khorsam Lift

Irrigation project including branch lines and extension

lines enroute.

Client: Gujarat Irrigation Development Corporation

Limited, Ahmedabad


Design-Build-Operate contract for the distribution

network for Package SSW A-2 (Telav Group) under

Sujlam-Suflam Drinking Water Supply Scheme in

Ahmedabad

Client: Gujarat Water Supply & Sewerage Board, Jal

Bhavan, Ahmedabad

Project value: Rs. 932.21 million

HMWSSB-Krishna Drinking Water Supply Project

Phase-II – Providing and laying 2375 mm (diameter) MS

pumping main and other appurtenances from the WTP at

Kodandapur to CWR at Nasarlapally (along the

Nagarjunasagar-Hyderabad road).

Client: HMWSSB, Hyderabad



network for Package SSW BK-1 under Sujlam-Suflam

Drinking Water Supply Scheme, district, Bansakantha

Client: Gujarat Water Supply & Sewerage Board



network for Package SSW BK-4 under Sujlam-Suflam

Drinking Water Supply Scheme, district, Bansakantha

Client: Gujarat Water Supply & Sewerage Board


Major projects bagged in 2006-07Executed the advancement of Bisalpur Water Supply

Project, Phase 2 (Ajmer)

Client: Additional Chief Engineer, PHED (Ajmer)


Received a major order for surveying, planning,

designing, delivery, erection and construction of all civil,

electrical and mechanical works for the surface water-

based water supply scheme for arsenic affected areas in

Nadia district, West Bengal. This is the first major water

supply project bagged by the division in eastern India

Client: Directorate of Public Health Engineering

(Government of West Bengal, Kolkata).

Project value: Rs.2460 million

Was awarded a project for designing, providing and

constructing a water supply and underground sewerage

system in the SEZ at the Nagpur Airport

Client: Maharashtra Airport Development Company

Limited, Mumbai



“At the water and environment division, we willquench the thirst of millions and enhance theirhygiene standards” Interview with Mr. V. Radha Krishna, Associate Director, Water and Environment.

Q. What are theprospects of thisbusiness segment? A. Jawaharlal Nehru

National Urban Renewal

Mission (JNNURM) was

formulated by the

Government of India with

a goal to create

economically productive, efficient, equitable and

responsive cities. In line with this objective, the scheme

touches the urban poor, strengthens municipal bodies

and eliminates legal and other bottlenecks stifling land

and housing markets. A total of US$25000 million has

been committed to it. The government is also focusing

on the supply of drinking water to rural India. In addition,

sewerage networks are being provided to most of the

municipalities especially in Tamil Nadu, Andhra Pradesh,

Maharashtra, Gujarat and West Bengal.

Q. How is the Company positioned tocapitalise on the emerging opportunities? A. We are fulfilling a critical role by quenching the thirst

of millions and helping enhance hygiene standards. We

executed a number of prestigious projects comprising

the Krishna Drinking Water Supply Project which entailed

providing drinking water to the twin cities of Hyderabad

and Secunderabad; we worked on a sewerage project in

Chennai that required a complete overhaul of the existing

sewerage networks; a water supply project in

Maharashtra required the drinking water to be

transported to nearly 156 villages and two towns. By the

virtue of being associated with these projects, we

developed strong competencies and relationships, which

will enable us to capitalise on emerging industry

opportunities.

Financials of the water and environment segment

4342

In the Limca Book of RecordsProject details: Construction of a Combined Water

Supply Scheme in Amravati district, Maharashtra,

covering 156 villages and two towns on a turnkey basis.

Client: Maharashtra Jeevan Pradhikaran, Amravati Circle.


Scope: Laying a 880-km pipeline (150 mm to 900 mm in

diameter). Construction of a 50-MLD water treatment

plant, construction of reservoirs of various capacities

Challenges: The bidding process involved eight large

players with rich experience. The only project of its kind

in India; the first assignment undertaken by this division.

A turnkey project requiring supply, laying, jointing and

testing of ductile iron pipes (150 mm to 900 mm

diameter)

Execution excellence: The deployment of 150 skilled

people. The use of DI pipes (80 mm to 600 mm) across

365 km, PVC pipes (63 mm to 200 mm diameter) across

125 km, 104 overhead tanks with a staging height of 25

metres), modern assets comprising excavators, cranes,

concrete mixers and foam wash among others and the

construction of 104 RCC elevated reservoirs of various

capacities

Result: The project was completed within two years and

the Company found mention in the Limca Book of

Records for laying a 880 km pipeline and providing

drinking water to 156 villages and two towns entirely by

gravity

First ever such assignment by theCompany, completed eight months beforescheduleProject details: HMWSSB (Hyderabad Metro Water

Supply and Sewerage Board) – Krishna Drinking Water

Supply Project

Client: HMWSSB, Khairatabad, Hyderabad


Scope: HMWSSB – Krishna Drinking Water Supply

Project Phase-I from terminal balancing reservoir at

Godakondla to Hyderabad city

Challenges: This was the biggest such project

undertaken by the Company. The project involved the

manufacturing, supplying, delivery, lowering, laying,

jointing, testing and commissioning of 2.2 metres

diameter (7 feet) MS pipes across 60 km. The need for a

rapid rollout in view of a severe water shortage in

Hyderabad and Secunderabad.

Execution excellence: The division commissioned two

on-site pipe fabrication plants at a cost of Rs. 50 million

to convert steel plates into pipes. An anti-rust mortar-

lining was done. The Company deputed a team of 15

engineers focused only on this project.

Result: The pipeline project was completed within 16

months, eight months ahead of schedule. Although the

scheme is in operation for more than three years, not a

single leak has been reported. The pipeline has a capacity

to transport 410 million litres of water per day, the largest

in the city.

Congested location, smooth projectrolloutProject details: Construction of sewerage network

and sewage pumping stations in Chennai

Client: Chennai Metropolitan Water Supply &

Sewerage Board


Challenges: First such project in Chennai. The

sewage required to be pumped out rather than

gravity drainage. Working area involved difficult

clay and slippery soil, high water table, congested

streets and densely populated areas with several

underground utility lines.

Execution excellence: High capacity pumps of

2400 cubic metres per hour were imported from

the UK. Steel piling was deployed to prevent soil

collapse. De-watering equipment was used. Active

coordination with the police, water works,

municipalities and public. Deployed nearly 200

skilled workmen. Created a separate car parking

facility for residents of some of the areas where

the work was being executed.

Result: The project was completed in 30 months

as against a normal period of 36 months. The

Company received a favourable client

endorsement.

Client endorsement“Nagarjuna Construction completed the

assignment as per the targets provided by

the HMWSSB and completed the work

much ahead of schedule. The Company is

well-equipped to accomplish quality work.”

HMWSSB-Krishna drinking water project,

Hyderabad.


44


Electricals

Segment status within the Company: Fourth largest

Portfolio: Design, engineering, erecting, testing and

commissioning of transmission lines and substations,

project electrification and system improvement projects



Contribution to the total revenue in 2006-07: 9 per cent

Order book, as on March 31 2007: Rs. 4654 million

45

4746

Business segment review | Electricals

Overview

This division was established in 1999 to tap the opportunities arising from themodernisation by the government in the area of power distribution. This division hasemerged as a potential driver of the topline and bottomline.

The various types of projects that this division

undertakes includes:

APDRP projects

Rural electrification under RGGVY Scheme

System improvement projects

HVDS projects

Key strengthsGood relationships: Nearly 65 per cent of the value of

the contract comprises material which is procured

from various registered/approved vendors and about

10 per cent value includes erection outsourced to sub-

contractors. Sub-contractors need to be selected with

care based on their engineering capability and track

record. The Company works with focused sub-

contractors across enduring relationships leading to

smooth project rollout.

Engineering capability: This division’s 120-plus

technical people comprises engineers and another

120 include commercial and financial staff. These

professionals help the division undertake and

complete complex projects on schedule.

Tendering efficiency: The division possesses

excellent tender management skills derived from a

deep engineering insight.

Technology orientation: The division develops in-

house technology required for customised fabrication,

thereby possessing a competitive edge. The division

is focused on continuous technology upgradation.

Pan-India presence: This division adapts to local

conditions through local recruitment, leading to a pan-

India presence and accelerated project completion.

Outlook Focus on transmission lines of 400 KV / 220

KV by imparting training to employees for a

better handling of these transmission projects

Entering new markets through a strong

presence in the business

Recruitment and training of qualified

professionals to grow this business.

Showcase projects AP Transco, 101-km long 400 KV transmission

lines in Khammam, Andhra Pradesh.


APSPDCL-HVDS project in Tirupati. The first

HVDS project in Andhra Pradesh.



“Our electrical segment generates the highestoperating margins within our organisation” Interview with Mr. Premnathan, General Manager, Electricals

Q. What was therationale for theCompany to enterthis segment? A. India’s power supplyneeds to grow at 12 percent annually if thecountry is to sustaineconomic growth at 8 per cent. The central

government introduced a number of attractive schemes,including APDRP, to improve power transmission and

distribution across India, creating a basis for ourpresence in this vertical.

Q. What are the strengths of the division? A. At the electrical division, we possess robustengineering, project management, testing andcommissioning capabilities. We developed a number ofsub-agencies to support us across all non-core activities,facilitating faster project execution. The experiencesshared with Tata International Ltd. in the erection of 400- KV transmission lines encouraged us to take up 400- KV transmission lines.

Urgent deadline, completion ahead ofscheduleProject details: 400-KV double circuit lines of 101 km inKhammam-Mandalapalli, Andhra Pradesh

Client: Tata International Ltd/AP TRANSCO

Scope: Erection of Khammam-Mandalapalli 400 KVPGCIL substation section of the Vizag-Khammam 400 KVdouble circuit line

Challenge: Though the generating station was ready,there were no transmission lines. The project wasmonitored by the office of the Chief Minister, AndhraPradesh

Execution excellence: This was the first project beingexecuted by the division across 400-KV lines. Nearly 600people worked round the clock.

Result: The project was completed within 13 months.

Project details: High voltage distribution system (HVDS) –Tirupati, Andhra Pradesh

Client: SPDCL Tirupati

Scope: Design, supply, erection and commissioning of16 KVA 11 KV/433 V, 15000 transformers and conversionof 11 KV line across 3000 km

Challenges: As a challenge we took up the design,manufacture, erection and commissioning of 15000transformers and 11 KV lines across 3000 km inMadanapalli, Chittor district.

Execution excellence: This is the first project of its kindto be executed in Andhra Pradesh with the objective toreduce rural distribution losses.

Result: The project was completed within 24 months.

Financials of the electricals segment


4948


Irrigation

Segment status within the Company: Fifth largest

Portfolio: Irrigation projects, including dam projects, lift

irrigation projects, gravity irrigation projects and

hydroelectric power projects



Contribution to the total revenue in 2006-07: 6 per cent

Order book as on March 31 2007: Rs. 5985 million

5150

Business segment review | Irrigation

OverviewThe irrigation division was started in April 2004 to reinforce agriculture. Over the years,the Company formed joint ventures with a number of respected construction companiesto bag dam, lift irrigation, gravity irrigation and hydroelectric projects. Besides, thedivision’s strong presence in this sector is defined by its capability in executingconstruction projects comprising canals and spillway with gates, among others.

Key strengthsRobust joint venture partnership: The Company’s

strategic alliance with joint venture partner Maytas

helped procure and complete projects through each

other’s expertise.

Knowledge: This division recruited qualified engineers

with the experience to complete projects from design to

execution.

Quality and timely delivery: This division, in spite of

being the newest, acquired the skill to complete projects

on time without quality compromises.

Modern equipment: This division’s modern equipment

(including excavators, tippers, dumpers, rollers and

batching plants) enhances project quality.

Strong regional presence: The Company’s strong

presence in Andhra Pradesh helps it leverage the state’s

focus on irrigation.

Outlook To sustain profitability, capitalise on

growing irrigation expenditure of the

government and enter new states with a

growing irrigation emphasis.

Showcase projects Gundlakamma Reservoir (Andhra Pradesh)

Client: Chief Project Administrator &

Superintending Engineer, VGP Circle, Ongole,

under joint venture with Maytas



“At the Irrigation division, we are fulfilling a criticalrole of providing assured water supply for agriculture” Interview with Mr. B.A.N. Raju, Senior General Manager, Irrigation

Q. Why isagriculturebecomingincreasinglyimportant tosustain economicgrowth? A. Though agriculture

supports nearly 60 per

cent of the population, it contributes only around 18 per

cent to the GDP. The government expects the growth of

agriculture to increase from 1.5–2 per cent to nearly 4 per

cent. This is translating into a significant increase in

irrigation investments in a number of states.

Q. How is this division placed to capturegrowing opportunities? A. This division was established in 2003-04 and received

a large number of projects in 2004-05. The division

initiated the mobilisation of resources to execute

projects within time. We are currently working on 10

projects, a majority of which are in advanced stage of

execution. Further, we are working with a couple of joint

venture partners, strengthening our pre-qualification

capability to bid and bag projects.

Projects bagged in 2006-07Irrigation project in Kurnool district. Client: Government of Andhra Pradesh, Irrigation & CAD (PW)

Department. Project value: Rs. 1716 million (with Maytas)

Widening the SRBC main canal under turnkey assignment in joint venture with Maytas Infra Pvt. Ltd.

Client: Government of Andhra Pradesh. Project value: Rs. 2579 million

Financials of the irrigation segment


5352


Real estate

This division was established in 1996. It was a natural

transition for NCC to venture into real estate

development as it already possesses the necessary

experience in the building and housing segments.

Besides synergic advantages, a presence in this

business segment represents a progression up the

value chain. The division undertook initial ventures in

Bangalore and Mysore.

5554

Business segment review | Real estate

Key strengthsSynergic advantages: The long-standing experience of

the Company’s housing and building division proved

useful.

Strong brand: This business enjoys a strong brand,

resulting in high project quality and on-time delivery.

The division received projects from existing clients,

emphasising a strong recall.

Showcase projects

Nagarjuna Green Woods (Bangalore). The

project comprises 144 flats with a built-up area

of 2.05 lakh sq. ft. Commenced in 2004 and

completed in 2006


Nagarjuna Green Ridge (Bangalore).

The project comprises 284 flats with a built-up

area of 3.9 lakh sq. ft.


Outlook

The Company intends to ramp up

development activities into a separate profit

centre called NCC Urban Infrastructure Ltd.,

which will spearhead real estate development,

both residential and commercial

The Company formed a Special Purpose

Vehicle (SPV) NCC Vizag Urban Infrastructure

Ltd., a 100 per cent subsidiary of NCCL to

develop residential and commercial properties

across 97.3 acres in Vizag

NCC, along with Tishman Speyer (USA) and

ICICI Venture intends to develop an integrated

township (residential, commercial and

recreational among others) of about 18 million

sq. ft. across 400 acres at Tellapur, Hyderabad.

The estimated potential value of this project is

Rs.85 billion


“Our upcoming real estate subsidiary holds apotential to contribute a substantial part of ouraggregate turnover”Interview with Mr. Ramesh Raju, Divisional Chief, Real Estate Division

Q. What was therationale forcreating a separatesubsidiary for thereal estatebusiness?

A. To enhance focus. Let

me provide you with

some numbers: the

volume of business in the real estate industry is

estimated at US$12 billion, growing at 30 per cent per

annum. Besides, almost 80 per cent of real estate

developed in India comprises residential space and only

20 per cent covers offices, shopping malls, hotels and

hospitals among others. This potential entailed the

creation of a separate company for focused attention.

Q. Is the business synergic with the othersegments of the Company?

A. Very much so. Our strong brand reputation, robust

engineering capabilities and presence in the construction

of housing and buildings reinforce our position in this line

of business. Besides, we possess adequate land bank of

530 acres; we have already completed and handed over

nine residential projects in Karnataka. We are currently

executing nine projects in Karnataka and Tamil Nadu,

besides initiating five new projects in South India. In view

of the specialised needs of this business, we are

spearheading our real estate business through a separate

company called NCC Urban Infrastructure Limited.

OverviewThis division was established in 1996. It was a natural transition for NCC to venture intoreal estate development as it already possesses the necessary experience in the buildingand housing segments. Besides synergic advantages, a presence in this businesssegment represents a progression up the value chain. The division undertook initialventures in Bangalore and Mysore.


5756

Risk management framework Business is far from being a risk-free activity. Risk is inherent in the construction business. At NCC, ‘risk’ is viewed as

events either external or internal that may at some point of time exploit the weaknesses in the Company’s current

processes, procedures and systems, impacting objectives and financials. Though informal in nature, NCC follows a

process of risk assessment that comprises risk identification and analysis followed by the design of a suitable control

environment comprising control activities/procedures. NCC employs a series of governance and activity level controls

to ensure that the financial statements are free from material misstatements. At the enterprise level, the risk

identification and mitigation procedures employed comprise the following:

Risk impactDemand is dependent on general

economic conditions. A downturn can

adversely affect the Company’s

business and earnings.

Risk mitigation measures:Buoyant macroeconomic conditions

in India have been sustaining

economic reform and investments in

infrastructure and construction

industries (which has been the

second largest contributor to GDP

growth). In addition, a targeted

double digit growth by the end of the

Eleventh Plan period (2007-12) only

suggests an increased spending by

the government on infrastructure,

which bodes well for the Company.

Besides, NCC has diversified across

several verticals within the

construction industry, reducing its

excessive dependence on any single

sector.

Industry risk1

Risk impactDemand is dependent on general

economic conditions. A downturn can

adversely affect the Company’s

business and earnings.

Risk mitigation measures:Buoyant macroeconomic conditions in

India have been sustaining economic

reform and investments in infrastructure

and construction industries (which has

been the second largest contributor to

GDP growth). In addition, a targeted

double digit growth by the end of the

Eleventh Plan period (2007-12) only

suggests an increased spending by the

government on infrastructure, which

bodes well for the Company. Besides,

NCC has diversified across several

verticals within the construction

industry, reducing its excessive

dependence on any single sector.

Competitionrisk3

Risk impactUncertainties with government polices

can significantly affect operations.

Risk mitigation measuresThe government has been giving a

significant priority to infrastructure

investments, limiting the inherent policy

risk. The residual risk is managed by

seeking opportunities to control costs to

limit the adverse policy changes, being

aware of the needs and priorities of the

governments in the region of the

Company.

Governmentpolicy risk4

Risk impactStaff attrition and non availability of

key personnel

Competence gaps, affecting

Company’s operations

Volatility in the prices of critical raw

materials, affecting project profitability.

Health and safety risks

Risk mitigation measures(a) NCC maintains a workforce based on

its current and anticipated workloads.

Temporary disturbances at project sites

are addressed by relocating the available

workforce. Attrition is managed by the

adoption of healthy employee practices

that promote and encourage a good

work culture, coupled with performance-

based promotion and rewards; conflict

resolution mechanisms, sound pay and

incentive structures are benchmarked

with industry standards.

(b) i) NCC provides adequate training to

all of its staff on operating

procedures and policies as well as

the development of project

management skills

ii) In addition, the staff is encouraged

to upgrade their skill sets and multi-

tasking through job rotation

c) i) NCC implemented adequate

procurement procedures that include

long term contracts to reduce price

volatilities, regular augmentation of

storage facilities for stocking of

materials and a careful review and

monitoring of the carrying cost of

raw materials

ii) The project contracts comprised a

cost escalation clause to ensure that

price volatility could be passed on to

project owners

(d) i) Projects are executed using

standard quality certified equipment

and materials benchmarked against

global standards

ii) Crisis management teams have

been established at all project sites

to manage any eventuality

iii) The project operating procedures

institute the most effective accident

prevention measures across all

stages of construction activity

Operationalrisks5

Risk impactSkewed business strategy may result

in lost opportunities.

Risk mitigation measures:The long-term business strategy and

the annual business plans are

approved by the Board of Directors

following thorough discussion and

analysis. In addition, mid-term

reviews of the business strategy and

the annual plans ensure that the

Company initiates a mid-course

correction should the situation

warrant. The long-term business

strategy comprises:

a. Fortifying the Company’s presence

in the select verticals;

b. Focusing on the quality of the

Company’s products;

c. Diversifying presence in different

sectors and in different countries to

reduce cyclical risk;

d. Expansion in international markets

that fit the Company’s strategic

vision;

e. Increasing focus on BOT and

BOOT projects in Transportation and

Hydropower;

f. Expansion into gas pipeline, metals

and power projects.

All the above measures resulted in a

topline growth of 45 per cent y-o-y

over the last five years.

Strategy risk2

5958

Industry overview India’s GDP increased from 8.4 per cent in 2005-06 to 9.4 per cent in 2006-07, making itthe fastest growing economy after China for the following reasons:

Industry segment

Transportation

Optimism India has the second-largest highway and road

network in the world after United States

The National Highways grid spans 1.8 per cent of the

entire roads network, but accounts for 40 per cent of the

total traffic

One of the significant developments in road

infrastructure in India is the NHDP involving a total

investment of US$ 49 billion up to 2012. The recent

Cabinet approval for Phase NHDP V and NHDP VI are

estimated at US$ 13 billion.

Projects are being financed using multiple methods

including tax inflow, foreign aid and private sector

participation

Increasing private sector participation and BOT

contracts are expected to drive road construction.

While India has been clocking impressive GDP growth,

the performance of the transport sector has lagged

economic and trade growth, resulting in a significant

transport infrastructure gap. The total logistics cost in

India is estimated at 11 percent of the GDP, comparing

unfavourably with the global average of 6 percent. It is

estimated that this gap erodes India’s GDP by at least

150 to 200 basis points.

As India aspires to greater growth, constraining factors

need to be addressed on priority a basis.

The transport sector comprises the roads, ports, airports

and railways sectors.

Roads: The government’s expenditure on roads in India

equals 12 per cent of capital and 3 per cent of its total

expenditure. The budget allocation for ministry is Rs.

15500 million, out of which Rs. 400 million has been

allocated to NHAI. However, road maintenance is grossly

under-funded with only one third of its needs being met.

The sector, on the other hand, occupies an eminent

position in India’s transportation landscape as it carries

nearly 70 per cent of freight and 85 per cent of the

country’s passenger traffic. Presently, India’s road

network spans around 3.3 million kms.

Ports: About 95 per cent by volume and 70 per cent by

value of India’s international trade is conducted through

maritime transport. In view of this, the privatisation of

port facilities and services has gathered momentum.

India is now putting together an enabling policy

framework to address the sector's needs. The National

Maritime Development Programme targets investments

of almost US$ 13 billion over the next 10-year period.

About 60 percent of this investment is envisaged to

come from the private sector amounting to

approximately US$ 8 billion. Some 387 port projects are

envisioned to be accomplished through public-private-

partnerships. These comprise the creation of berths, port

facilities, landside infrastructure and hinterland

connectivity.

Airports: The growth of airport infrastructure is slated to

take place through public-private participation with 100

per cent FDI allowed through the automatic route for the

greenfield airports in Bangalore, Hyderabad, Goa, Pune,

Navi Mumbai, Nagpur (hub) and Greater Noida. The

existing international airports in Delhi and Mumbai are

being restructured and modernized through private

sector participation. In the joint ventures, AAI and other

Government PSUs hold 26 per cent equity, the balance

74 per cent being held by the strategic partner. The

principal approval for the modernization of 37 non-metro

airports (including Sikkim and Arunachal Pradesh airports)

has been given. The Ministry of Civil Aviation set a target

of 2008-09 for the completion of these projects.

Railways: After a record breaking 2006-07, Indian

railways embarked on modernization and network

expansion. The construction of eastern and western

dedicated freight corridors at a cost of Rs. 30,000 cr will

commence from 2007-08 with completion slated during

the Eleventh Plan. Most of the metre-gauge lines will be

converted into broad-gauge by the end of this five-year

plan. High speed passenger corridors will be constructed

to run trains at more than 300 km/hr. The thrust of the

annual plan is to maintain high traffic growth by focusing

on the early completion of works for throughput

enhancement on high traffic density routes, improvement

of traffic facilities and enhanced sectional capacity.

Public-private participation will play a prominent role in

achieving the targets.

Changing composition of GDP; reduced dependence on

agriculture and growing industrial and services sectors

Strong outsourcing growth momentum – IT and financial

services, healthcare and manufacturing

Strong improvement in the external sector and a gradual fiscal

deficit correction

Strong Economic Growth (graph see right side)

The above graph depicts the average annual growth rate between

2001 and 2005. This strong economic growth in India needs

provision of quality and efficient infrastructure services to realise its

full potential. An investment of Rs. 14,500,000 million or about US$

320 billion is envisaged in the infrastructure sector during the

Eleventh Five Year Plan, comprising 26 per cent of the planned

spending. This sector accounts for a 27 per cent weightage in the

Index of Industrial Production (IIP). Infrastructure activities

registered a growth of 8.3 per cent during April-December 2006,

which was higher than the 5.5 per cent registered during the same

period in the previous year.

Strong Economic Growth (%)

GDP Growth Rate1

Source: World Bank


6160

Industry segment

Buildings and housing overviewOptimism Construction spending for urban infrastructure expected

to amount to Rs. 827 bn (US$ 18.8 bn) i.e. 23 per cent of

total construction spending in the Tenth Five Year Plan.

Key drivers include growing Indian industry and

economy, increasing urbanisation and household growth

The growing demand for building and housing

construction is on account of strong growth in the

industrial, manufacturing and real estate sectors.

Entertainment spending -malls, multiplexes and

auditoriums are bound to rise in major cities,

strengthening the demand for construction activity.

Key developmentsIn 2006, IT/ITES companies absorbed office space of

around 22 million sq. ft. across five major cities.

Currently 360 malls are being built

The Government of India sanctioned 200 SEZs ranging

from IT to textiles to engineering. Around 50,000

hectares is proposed to be developed in these SEZs

which provide tax benefits and competitive infrastructure.

With tourist footfalls growing at 15 per cent, the Indian

hospitality sector earned US$ 44 million in foreign

exchange. The nationwide hotel boom is expected to add

another 50,000 hotel rooms.

OutlookThe construction industry in India is worth around US$

51 billion and US$ 450 billion is expected to be spent on

construction between now and 2010.

The real estate sector is expected to add another 60-

80 million sq. ft. by 2010.

Mall space will occupy 110 million sq. ft. by 2010.

The demand for offices is estimated to grow at an

annual 20-25 per cent over the next 10 years, resulting in

500-650 million square feet.

The government will construct around 32 million units

of urban houses during the Eleventh Plan. The country is

already facing a shortage of 24.7 million houses in urban

areas warranting an investment of Rs. 1,471,950 million.

According to government estimates, the shortage is likely

to increase to 26.53 million houses by 2012.

Industry segment

Water and environmentOptimism

Expected to account for over Rs. 528 bn (US$ 12 bn),

close to 60 per cent of the total allocation for urban

infrastructure in the 10th Five Year Plan

Growing population and urbanization are driving the

growth

The increasing involvement of private sector players is

expected to continue

To bridge the gap between demand and supply of urban

infrastructure, the Government of India introduced

policies aiding public-private participation (PPPs).

Urbanization is the inevitable outcome and it is expected

that over the next 10 to 15 years, about 40 percent of

India’s population could well live in urban areas.

Key developments, 2006-07Over Rs. 528 bn was allocated for water supply and

sanitation in the Tenth Five Year Plan.

Under Bharat Nirman, the Government is expected to

fund Rs. 40,500 million for safe drinking water supply in

rural areas.

A provision of 45,950 million in 2006-07 and Rs.49,

870 million in 2007-08 have been agreed as Central

Assistance for Jawaharlal Nehru National Urban Renewal

Mission (JNNURM).

An amount of Rs. 25,000 million under JNNURM has

been provided for in 2006-07 for the submission on

Urban Infrastructure and Governance

Projects worth Rs. 116,480 million have been

sanctioned by the Central Sanctioning and Monitoring

Committee of the Ministry of Urban Development.

Allocation under the Rajiv Gandhi Drinking Mission

stepped up from Rs. 46,800 million in 2006-07 to Rs.

58,500 million in 2007-08

Duty on lift irrigation equipment declined from 7.5 per

cent to 5 per cent in 2006-07.

The National Rainfed Area Authority was established

to coordinate all schemes relating to watershed

development and other aspects of land use. An allocation

of Rs.1, 000 million for the new Rainfed Area

Development Programme was also made.

An additional central assistance of Rs. 55,830 million

was committed for urban infrastructure.

OutlookThe municipal bodies of the respective states give

management contracts to private initiatives to increase

efficiency in water supply and solid waste management.

Municipal tax-free bonds have been introduced to

raise capital for funding urban infrastructure without

causing a fiscal strain on the Centre.

The Central Public Health Engineering (CPHEEO)

estimated the requirement of funds for 100 percent

coverage of the urban population under safe water

supply and sanitation services by 2021 at Rs.172,9050

million

The World Bank signed a loan agreement with Tamil

Nadu for Rs.21820 million to restore 5,763 water bodies

with a command area of 400,000 hectares. An agreement

for Andhra Pradesh is expected to be concluded in March

2007 and will cover 3,000 water bodies with a command

area of 250,000 hectares.

The preparation of similar projects for Karnataka, Orissa

and West Bengal are at different stages and at least two

more agreements are likely to be concluded before June

2007. Other states will also be covered within the next

two years.

Industry segment

Irrigation

Optimism Irrigation represents 84 per cent of total water use in

India.

Construction investment in the sector is expected to

be Rs. 871 bn in the Tenth Five Year Plan.

Construction investment in the hydropower sector is

expected to be around US$ 6.9 billion during Tenth Five

Year Plan; 57 per cent of total investment in the power

sector. Increasing importance is being given to hydro-

power that are construction-intensive in nature

The national river linking plan has offered a threefold

solution to the country’s water problem. One, interlinking

will lead to a permanent drought-proofing of the country

by raising the irrigation potential to equal the current net

sown area of about 150 million hectares. Two, it will

mitigate the annual floods in Ganga and Brahmaputra.

Three, it will add 34,000 MW of hydropower to the

national pool.

Key developments, 2006-07The Union Budget 2007-08 provided for an additional

irrigation potential of 24,00,000 hectares. This includes

900,000 hectares under Accelerated Irrigation Benefit

Programme.

35 projects are likely to be completed in 2006-07 and

an additional irrigation potential of 900,000 hectares will

be created

An increase in outlay from Rs.71,210 million to

6362

Rs.110000 million is envisioned for the sector

The Ministry has identified the major and medium

irrigation projects amounting to 4 million hectares which

could be completed as well as 2.8 million hectares that

can come from minor irrigation.

The effort under Bharat Nirman is to identify all such

projects and target their completion to create 10 million

hectares of additional irrigation capacity.

The NWDA Plan has divided the project into two broad

'components' - the Himalayan part with 14 river links

estimated at Rs. 3750000 million and the peninsular

component with 17 river links estimated at Rs. 1850000

million. The total cost of the project is estimated to be

Rs. 560,000.

OutlookThe target for hydel power generation during the

Eleventh Plan has been raised to 17,000 MW. As a result,

construction activity in the sector will increase to meet

the target.

The growth in the agricultural sector has not been able

to meet the target growth rate of 4 per cent. In order to

accomplish this, private investments irrigation facilities

are being encouraged.

The NWDA Plan requires a vast amount of resources

which will cause a strain on the Central economy. As

such, private partnership is envisaged to achieve the

target of river interlinking.

Industry segment

Electricals

Optimism Indian power supply needs to grow at approximately

12 per cent annually to keep pace with the average GDP

growth rate of 8 per cent per annum.

The Central government introduced schemes which

include Accelerated Power Development and Reform

Programme (APDRP) for improving the transmission and

distribution network across states.

The Government of India’s ambitious mission of ‘Power

for all by 2012’ requires that India’s installed generation

capacity should be at least 2,00,000 MW by 2012 from

the present level of 1,14,000 MW. Currently, the

transmission capacity in the country is inadequate to

meet power flow needs. Thus, an expansion of the

regional transmission network and inter-regional capacity

to transmit power is essential.

Certain provisions have been made in the Electricity Act

2003 such as open access to the transmission and

distribution network, recognition of power trading as a

distinct activity, the liberal definition of a captive

generating plant and provision for supply in rural areas to

encourage competition in the electricity sector. These

measures on the generation, transmission and

distribution front will result in the formation of a robust

electricity grid in the country.

Highlights, 2006-07The present power scenario is enumerated below:

Installed capacity has increased from 1362 MW in year

1947 to 126839 MW in 2006.

The gross electricity generation for 2006 exceeded

600 billion KWh.

There was a hike in budgetary support for APDRP

from Rs. 6.5 bn to Rs. 8 bn . In addition, the APDRP

scheme was extended to district headquarters and towns

with a population of more than 50,000.

There was an increase in allocation for Rajiv Gandhi

Grameen Vidyutikaran Yojana (RGGVY) from Rs. 30 bn to

Rs. 40 bn

Two ultra mega power projects (UMPPs) were

awarded and seven are under process

A National Power Grid is expected to materialize by

2007; public-private participation of around Rs. 200,000

million is expected for the development of the National

Grid.

Private sector participation in transmission projects is

likely to lead to higher spending and a faster creation of

transmission infrastructure

Industry segment

Real estate

Optimism The volume of business in the real estate industry is

estimated to be around Rs. 528 bn (US$ 12 bn), growing

at 30 per cent per annum for the past few years

Almost 80 per cent of real estate developed in India is

residential; the rest comprises office, shopping malls,

hotels and hospitals

The demand for residential space has grown by 30 per

cent per annum for the past five years led by a host of

reasons:

Population of 1.1 bn growing at 2 per cent per annum

Shift from joint to nuclear families creating a demand

for new homes

Rise in the urban middle class

Easy availability of finance; banks have been

increasing their lending to consumers. Borrowers can

borrow up to 75 per cent of the property value.

Consequently, bank credit in India as a percentage of

GDP has grown from 25 per cent in 2001 to 44 per cent

in 2006.

Rising income and affordability levels; incomes have

grown by 50 – 100 per cent over the last two years,

primarily due to GDP growth of more than 7 per cent and

benefits of global off-shoring. However, the maximum

percentage increase is in the highest income group.

Apart from this, there has also been an attitudinal shift

from saving to that of saving-spending. India is gradually

becoming a consumption-oriented nation.

Low interest rates; the effective rate (post-tax) of

interest on home loans declined from 11.73 per cent in

2000 to 5.93 per cent in 2006, thanks to the tax

deductions available on interest and principal

repayments.

The existing shortage of 22 mn housing units and an

annual incremental demand of 4.7 mn units

Highlights, 2006-07

The real estate sector will receive funds of US$ 10

billion through foreign direct investment in the current

year.

Property prices have risen by 30-35 per cent on an

average in the past one year and by 60-70 per cent over

the past two years in Mumbai, Delhi, Bangalore, Chennai

and Hyderabad.

OutlookA forecast of 4-6 billion square feet of new residential

housing by 2015 has been made by UBS Research

Various studies have indicated that India could have a

demand-supply gap of 17.9 million housing units by

2010. The Tenth Five-Year Plan says that out of the total

shortage of 22.4 million dwelling units, over 70 per cent

is for the middle- and low-income brackets. The

additional requirement of housing per year during the

Plan period of 2002-2007 has been put at 4.5 million units

per year.

100 per cent FDI has been allowed in the urban

housing and transport sectors.

Subsidies are being given in accordance to the project

being handled by the private venture.

Merrill Lynch forecasts that the Indian realty sector will

grow from US$ 12 billion in 2005 to US$ 90 billion by

2015.


Directors’ Report

Your Directors take pleasure in presenting the 17th Annual Report together with the Audited Statement of Accounts for

the year ended March 31, 2007.

Financial results

(Rs. in million)

2006-2007 2005-2006

Gross income 29,002.31 18424.65

Profit before interest and depreciation 2,989.34 1660.90

Less: Interest and financial charges 503.94 216.95

Profit before depreciation 2,485.40 1443.95

Less: Depreciation 298.95 181.57

Profit before tax 2,186.45 1262.38

Provision for tax 667.31 223.34

Profit after tax 1519.14 1039.04

Less: Prior year taxes 362.53 –

Profit after prior year taxation 1156.61 1039.04

Profit brought forward 710.51 479.95

Profit available for appropriation 1867.12 1518.99

Appropriations:

Dividend @ 60% (including Interim Dividend of 40%) 249.44 165.30

Dividend tax 37.45 23.18

Transfer to General Reserve 700.00 600.00

Transfer to Contingency Reserve 20.00 20.00

Balance carried forward 860.23 710.51

Paid-up capital 417.02 206.62

Reserves and Surplus 9914.31 9212.31

64 65

Operational performanceYou will be glad to note that your Company has achieved a

turnover of Rs. 29,002.31 million – up from last year’s

Rs. 18,424.65 million, registering a 57 per cent increase.

The Company has earned a gross profit of Rs. 2,989.34

million before interest and depreciation as against

Rs.1,660.90 million last year. After deducting an interest of

Rs.503.94 million, providing a sum of Rs. 298.95 million

towards depreciation, and income tax provision of

Rs.667.31 million, the operations resulted in a net profit

of Rs. 1,519.14 million as against Rs. 1,039.04 million in

2005-06, recording a growth of 46 per cent.

Prior year income taxBased on the legal opinion, the Company had claimed

deduction U/s 80 IA of the Income Tax Act, 1961 in respect

of some of the projects executed by the Company upto the

Financial Year 2005-06.The claim of the Company is

pending before the various Income Tax Authorities.

Consequent to the insertion of Explanation to Section

80 IA vide the Finance Act, 2007, the Company has

reviewed all the claims made so far and as a measure of

prudence, made a provision of Rs.362.53 million relating

to earlier years and Rs.259.90 million for the year under

review. However, as the subject matter is subjudice before

the appellate authorities, not withstanding the provisions

made in the books of accounts, the Company will continue

to pursue the appeals pending before the various

authorities.

Major ProjectsYou will be glad to note that during the year under review,

your Company along with other consortium/joint venture

members has secured the following major projects:

a. The Consortium comprising of Tishman Speyer of the

US, ICICI Venture and your Company bagged the 400 acre

Integrated Township Project at Tellapur near Hyderabad.

The full potential development value of this project is

estimated to be around Rs.85 billion.

b. The Joint Venture comprising of M/s. Maytas Infra Ltd.,

M/.s Srei Infrastructure Finance Ltd., and your Company

was awarded the Deep Water All-Weather Port Project at

Machilipatnam on BOOT basis. The project cost is

estimated to be around Rs. 15 billion.

c. The Joint Venture formed between M/s. Maytas Infra

Ltd., and your Company was awarded the Pondicherry-

Tindivanam Section Road Project on NH-66 in Tamil Nadu

on BOT basis. The total project cost is estimated to be

around Rs. 3 billion.

During the year under review, the Company has in all

bagged new orders valued around Rs.47,108 million and

had executed projects worth Rs.28,384 million. The Order

Book position as on March 31, 2007 stood at Rs.73,006

million.

DividendYour Directors take the pleasure in recommending final

dividend of 20 per cent (Rs. 0.4 per share of Rs. 2 face

value) on the paid-up equity share capital for the approval

of the members. The members are aware that the Board of

Directors at its meeting held on March 21, 2007, had

declared interim dividend of 40 per cent on the enhanced

paid-up equity capital consequent to the bonus issue made

by the Company in September, 2006. The final dividend, if

approved at the 17th Annual General Meeting by the

members, will be paid to all those equity shareholders

whose names appear in the register of members as on July

21, 2007, and also to those whose names appear as

beneficial owners are furnished by the National Securities

Depository Limited and the Central Depository Services

(India) Limited.

Preferential issue of warrantsAs approved by the members at the Extraordinary General

Meeting held on February 26, 2007, the Company has

issued 25,00,000 convertible warrants of Rs. 217 each to

M/s. A V S R Holdings Pvt. Ltd., an investment outfit

belonging to the promoters of the Company and each

warrant is convertible into one equity share of Rs. 2 each at

a premium of Rs. 215 on the exercise of option by the

aforesaid allottee of warrants within a period of 18 months

from the date of allotment.

Future outlookThe future outlook of the construction industry continues to

be bright and challenging. Your Company proposes to

continue to concentrate its efforts in executing large

infrastructure projects such as roads, flyovers, irrigation

projects, power projects, hydro electric projects, water

supply and sewerage pipelines, electrical transmission

lines and other infrastructure projects. Keeping in view the

potential for growth, the Company has set-up separate

divisions in the upcoming areas of Power, Oil & Gas, Metals

etc. This will help the Company in reducing dependence

on any particular division.

Directors’ Responsibility StatementPursuant to the provisions of Section 217 (2AA) of the

Companies Act, 1956, the Directors’ Responsibility

Statement is given in Annexure - A which forms part of this

report.

DisclosuresDepositsDuring the year under review the Company has not

accepted any public deposits.

Conservation of energy, technologyabsorption and foreign exchange earningsand outgoA) Conservation of energy

Even though the Company’s core activity at present is civil

construction, which is not power intensive, the Company is

making every effort to conserve the usage of power.

B) Foreign exchange earnings and outgo

Foreign Exchange earnings – Nil

Foreign Exchange outgo towards

a) Travel – Rs. 1.11 million.

b) Import of capital goods – Rs. 251.38 million

Particulars of Employees’Details in respect of remuneration paid to employees as

required under Section 217 (2A) of the Companies Act,

1956, read with the Companies (Particulars of Employees’)

Rules, 1975, as amended forms part of this report.

However, in pursuance of the provisions of Section

219(1)(b)(iv) of the Companies Act, 1956, this report is

being sent to all members of the Company, excluding the

aforesaid information and the said details are made

available at the Registered Office of the Company. The

members interested in obtaining such details may write to

the Company Secretary at the Registered Office of the

Company.

DirectorsDuring the year, Mr. R.V. Shastri has been appointed as an

Additional Director by the Board on October 30, 2006 and

holds office up to the date of the ensuing Annual General

Meeting and is eligible for appointment as per the terms

set out in the notice of the 17th Annual General Meeting.

Mr. Shastri is a former Chairman and Managing Director of

Canara Bank and Indian Overseas Bank. He holds a

masters degree in economics. He served in various banks

in top executive posts and has gained a rich and varied

experience in finance, banking and other related areas.

Mr. N.R. Alluri, Director of the Company, ceased to be a

Whole-Time Director of the Company with effect from

March 31, 2007 and is continuing as a Director on the

Board. Mr. Alluri has been appointed as Managing Director

of NCC Urban Infrastructure Ltd w.e.f. April 1, 2007.

Mr. S. Venkatachalam, Mr. Rakesh Jhunjhunwala and Mr.

P.C. Laha, Directors, retire by rotation at the 17th Annual

General Meeting and being eligible, offer themselves for

re-appointment.

NCC ESOP 2004In pursuance of the approval accorded by the members of

the Company at the Extraordinary General Meeting held on

November 16, 2004, the Company has formulated NCC

66 67

Employees Stock Option Plan 2004 and has during the year

under review, granted 94,110 options of Rs. 2 each to

eligible employees in accordance with terms specified by

the HR and Compensation Committee of the Board.

Pursuant to the provisions of Clause 12 of the SEBI

(Employee Stock Option Scheme and Employee Stock

Purchase Scheme) Guidelines, 1999, as amended, the

required disclosures form part as Annexure B to this report.

NCC ESOP 2007With a view to encourage the employees to participate in

the growth of the Company, subject to your approval, the

Company proposes to issue 40,00,000 Equity Shares of

Rs.2/- each to the employees under NCC Employees Stock

Option Plan 2007 to be formulated in this regard. NCC-

ESOP-2007 is also proposed to be extended to the

employees of the Company’s Subsidiaries.

Employee relationsThe relations with the employees have been cordial

throughout the year. Your Directors place on record their

sincere appreciation in respect of the services rendered by

the employees of the Company at all levels.

AuditorsThe joint statutory auditors of the Company, M/s. M.

Bhaskara Rao & Co., Chartered Accountants, and M/s.

Deloitte Haskins and Sells, Chartered Accountants retire at

the conclusion of the 17th Annual General Meeting and

being eligible have offered themselves for reappointment

to hold office from the conclusion of the 17th Annual

General Meeting up to the conclusion of the 18th Annual

General Meeting.

Subsidiary companiesA brief description of the activities pertaining to the

subsidiaries of the Company is highlighted hereunder.

a) Indian Subsidiaries

NCC Infrastructure Holdings Ltd., (NCCIHL) was formed as

a wholly owned subsidiary for undertaking investments in

BOT road projects and power projects awarded to the

Company and to the joint ventures with which the

Company is associated. The Company has invested

Rs.586.73 million in the equity of NCCIHL. The said

subsidiary has during the year under review invested in the

equity of Western UP Tollway Limited and Bangalore

Elevated Tollway Ltd., which are executing the road

projects awarded by the National Highways Authority of

India.

NCC-Vizag Urban Infrastructure Ltd. (NCCVUIL) was

incorporated as a wholly owned subsidiary for executing a

Modern Township Project at Madhurawada near

Vishakapatnam. The project was awarded by the AP

Housing Board, Government of Andhra Pradesh. The

Company has invested Rs. 476.49 million in the equity of

NCCVUIL.

M/s. OB Infrastructure Limited (OBIL), a subsidiary of your

Company, has been formed for executing the Orai –

Bhognipur Section of the National Highway, awarded by

the National Highways Authority of India to M/s. NCC-KMC

Consortium. The Company has invested Rs. 467.87 million

in the equity of OBIL.

M/s. Patnitop Ropeway & Resorts Ltd. (PRRL), which is a

wholly owned subsidiary of your Company, was formed

during the year for executing the Ropeway Project at

Patnitop, Jammu, awarded by the Patnitop Development

Authority. The Company has invested Rs. 0.5 million in the

equity of PRRL.

NCC Urban Infrastructure Ltd. (NCCUIL) which is a

subsidiary of your Company is engaged in the execution of

the National Games Housing Complex Project and other

real estate projects in Andhra Pradesh, Tamil Nadu,

Karnataka, Goa and Kerala. As on March 31, 2007, the

Company has invested Rs.1200 million in the Equity of

NCCUIL.

As on 31st March, 2007, NCCUIL has twenty one Wholly

Owned Indian Subsidiaries which are engaged in Real

Estate activities.

In March 2007, NCCUIL has floated a wholly owned

Subsidiary, NCC Urban Lanka Pvt. Ltd., in Colombo, Sri

Lanka, for undertaking real estate activities in the island

nation. The first financial year of NCC Urban Lanka Pvt. Ltd.

will close in March 2008 and, therefore, no accounts of this

Company have been prepared.

Foreign subsidiaries

Nagarjuna Construction Company Limited & Partners LLC,


Pursuant to the provisions of Section 217(2AA) of theCompanies Act, 1956, the Board of Directors hereby statethat

a) in the preparation of the annual accounts for the yearended March 31, 2007, the applicable accountingstandards have been followed along with properexplanations relating to material departures;

b) we have selected such accounting policies and appliedthem consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair

view of the state of affairs of the Company as at March 31,2007 and of the profit for the year ended on that date;

c) we have taken proper and sufficient care for themaintenance of adequate accounting records inaccordance with the provisions of the Companies Act,1956 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities and

d) the accounts for the year ended March 31, 2007 havebeen prepared on a going concern basis.

Annexure - A

Annexure - BNCC Employees Stock Option Plan, 2004 (ESOP)

The details of ESOP are given below.

Directors’ Responsibility Statement

(a) No. of options granted 13,43,600 options granted on 31-01-2005 – I Grant.

1,00,560 options granted on 28-01-2006 – II Grant

94,110 options granted on 31-01-2007 – III Grant

(b) The pricing formula Options granted shall be exercisable at a price of Rs.22 per share.

(c) Options vested 10,27,560 options of Rs.2/- each were vested during theyear 2006-2007.

(d) Options exercised *18,30,710 options of Rs.2/- each were exercised during the year2006-07 against which 18,30,710 shares were allotted.

(e) The total number of shares arising as a One share per each option exercised and number of shares arisingresult of exercise of options upon exercise of options equals the number of options exercised.

(f) Options lapsed 90770 options of Rs.2/- each have lapsed during the year 2006-07consequent to resignation of the concerned employees from theservices of the Company.

(g) Variation of terms of options Grant of options to employees who have crossed the age of58 years has been examined on case to case basis depending onthe physical state of health, the nature of services which he or sheis rendering.

(h) Money realised by exercise of options Rs.2,07,63,380

(i) Total number of options in force 3,44,740

* Pre Bonus Options : 56,870

* Post Bonus Options : 17,73,840

68 69

Sultanate of Oman, was formed in May 2005 mainly for

bidding for and executing projects in the Sultanate of

Oman. The Company has invested Rs. 17.01 million in the

equity of NCCL & Partners LLC.

Nagarjuna Construction Company International LLC

(NCCILLC), Sultanate of Oman, was formed as a wholly

owned subsidiary during the year under review to be

eligible for projects awarded to local companies. The

Company has invested Rs. 112 million in the equity of

NCCILLC.

NCC Infrastructure Holdings Mauritius Pte Ltd.

(NCCIHMPL), Mauritius, has been formed as a wholly

owned subsidiary keeping in view the growing

opportunities for investment in global corporate entities

engaged in construction, development of infrastructure

projects, power generation projects, etc. The Company has

invested Rs. 853.19 million in the equity of NCCIHMPL.

During the year, the NCCIHMPL has acquired the entire

equity in M/s Liquidity Limited based in Mauritius. As a

result of the aforesaid acquisition, M/s Liquidity Limited

has become a step down subsidiary of the Company.

The Ministry of Company Affairs, Government of India, has,

vide its letter bearing No.47/181/2007-CL-III dated

24.04.2007, accorded approval under Section 212(8) of the

Companies Act, 1956, exempting the Company from

attaching the annual accounts of the subsidiary companies

for the year ended March 31, 2007.

Statement pursuant to Section 212(8) of the Companies

Act, 1956 containing the details of the subsidiaries of the

Company forms part of the annual report.

Consolidated financial statementsIn accordance with the Accounting Standards AS-21 and

AS-27 on consolidated financial statements read with the

Accounting Standard AS-23 on accounting for investments

in associates, your Directors have pleasure in attaching the

consolidated financial statements for the financial year

ended March 31, 2007, which forms part of the annual

report and accounts. The Company will make available the

annual accounts of the aforesaid subsidiaries upon request

by any member/investor of the Company/subsidiary

Company. Further, the annual accounts of the subsidiary

Companies will also be kept open for inspection by any

member/investor at the Company’s registered office and

that of the subsidiaries concerned.

Corporate GovernanceIn pursuance of Clause 49 of the Listing Agreement

entered into with the stock exchanges, a separate section

on Corporate Governance has been incorporated in the

annual report for the information of shareholders. A

certificate from the auditors of the Company regarding

compliance with the conditions of Corporate Governance

as stipulated under Clause 49 also forms part of the annual

report.

AcknowledgementsYour Directors wish to place on record their sincere

appreciation and thanks for the valuable co-operation and

support received from the Company’s bankers, financial

institutions, central and state government authorities, joint

venture partners, clients, consultants, suppliers and

members of the Company and look forward for the same

in greater measure in the coming years.

For and on behalf of the Board

A.V.S. Raju

Chairman

Place: Hyderabad

Date: May 28, 2007

Statement pursuant to the exemption granted under Section 212(8) of the Companies Act,1956 relating to Subsidiary Companies (Rs. million)

Notes:1) Exchange Rate as on 31.03.2007 : * Rial Omani = Rs.111.998, # US$ = Rs.43.12

2) The Ministry of Company Affairs vide their letter dated 24 April, 2007 granted exemption to the Company from the applicability of the provisions of sub-section (1) of section 212 of the Companies Act,1956.

3) The Company will make available the annual accounts of the subsidiary companies and the related detailed information sought by the members of theCompany or its subsidiaries.Further, the annual accounts of the subsidiary companies will also be kept for inspection by any member of the Company or itssubsidiary at the registered office of the Company and that of the subsidiary companies concerned.


A.V.S. Raju

Chairman

Place: Hyderabad

Date: May 28, 2007

(j) Employee-wise details of options granted to (i) Senior Management personnel

Sr. Name of the Designation No. of Options of Rs.2/- each

No. Sr. Management Executive granted in the Financial Year ended

31st March, 2007

1. Sri M G S Krishna Chief General Manager (HRD) 2080

2. Sri A R Babu Jt. General Manager (Taxation) 1010

(ii) Any other employee who receives a grant in any one year of NIL

options amounting to 5% or more of options granted during the year.

(iii) Identified employees who were granted options, during any one NIL

year, equal to or exceeding 1% of the issued capital

(excluding outstanding warrants and conversions)

of the Company at the time of grant

(k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on Rs.5.55

exercise of option calculated in accordance with Accounting Standard

(AS 20) “Earning Per Share”

(l) a) The difference between the employee compensation cost calculated Difference = Rs. 1.92 million

using the intrinsic value of the stock options and the employee (Net after Tax)

compensation cost that would have been recognised if it had used

the fair value of the options.

b) The impact of this difference on the profits and on the Profits for the year would have been

EPS of the Company. lower by Rs. 1.28 million

There is no impact on the Basic EPS

of the Company.

(m)Weighted average exercise prices and weighted average fair values Weighted Average Exercise Price = Rs.22

of options disclosed separately for options whose exercise price Weighted Average Fair Value = Rs.220.73

either equals or exceeds or is less than the market price of the stock.

(n) A description of the method and significant assumptions used The Company has opted intrinsic value

during the year to estimate the fair values of options, including method for accounting of compensation

the following weighted average information: cost arising out of ESOP. However, for

disclosure in para (l) above the following

assumptions have been made.

i) risk-free interest rate 5.85% – 7.01%

ii) expected life 11/2 years to 31/2 years

iii) expected volatility 52% - 54%

iv) expected dividends, and 0.72% - 2.21%

v) the price of the underlying share in market at the Rs.88.69 per share – I Grant

time of option grant Rs.322.05 per share – II Grant

Rs.210 per share – III Grant

Sl. Name of the Issued and Reserves Total Total Investments Turnover Profit/(Loss) Provision Profit/(Loss) ProposedNo. Subsidiary Subscribed Assets Liabilities (except before for after dividend

Share Capital investment in taxation taxation taxationsubsidiaries)

1. NCC Infrastructure 586.73 1.10 587.83 0.00 518.02 5.35 1.46 0.50 0.96 –Holdings Ltd.

2. NCC Urban 1500.00 (1.33) 2259.83 761.16 – 7.26 0.10 0.09 0.01 –Infrastructure Ltd.

3. NCC Vizag Urban 476.49 – 764.70 288.21 – – (2.34) – (2.34) –Infrastructure Ltd.

4. OB Infrastructure Ltd. 74.46 656.58 772.03 40.99 – – – – – –5. NCCL & Partners 16.80 16.67 84.59 51.12 – 580.98 21.41 0.70 20.71 –

LLC, Oman *6. Nagarjuna Construction 112.00 (0.96) 111.04 0.00 – – (1.12) – (1.12) –

Co. InternationalLLC, Oman *

7. Patnitop Ropeway 0.50 0.00 0.50 0.00 – – – – – –& Resorts Ltd.

8. NCC Infrastructure 824.24 (0.52) 823.72 0.00 108.61 – (0.54) – (0.54) –Holdings MauritiusPte. Ltd. #

9. Dhatri Developers 1.00 – 63.94 62.94 – – (0.04) – (0.04) –& Projects (P) Ltd.

10. Sushanti Avenues 1.00 – 46.63 45.63 – – – – – –(P) Ltd.

11. Sushruta Real Estates 1.00 – 17.73 16.73 – – – – – –(P) Ltd.

12. PRG Estates (P) Ltd. 0.10 34.00 53.60 19.50 – – – – – –13. Thrilekya Real Estates 1.15 26.41 43.72 16.16 – – (0.04) – (0.04) –

(P) Ltd.14. Varma Infrastructure 0.10 49.63 65.63 15.90 – – (0.02) – (0.02) –

(P) Ltd.15. Nandyala Real Estates 1.16 26.37 56.46 28.93 -– – (0.04) – (0.04) –

(P) Ltd.16. Kedarnath Real Estates 1.71 31.75 48.02 14.56 – – (0.02) – (0.02) –

(P) Ltd.17. AKHS Homes (P) Ltd. 0.50 – 31.53 31.03 – – – – – –18. JIC Homes (P) Ltd. 0.50 – 18.72 18.22 – – – – – –19. Sushanthi Housing 0.50 – 17.84 17.34 – – – – – –

(P) Ltd.20. CSVS Property 0.50 – 18.72 18.22 – – – – – –

Developers (P) Ltd.21. Vera Avenues (P) Ltd. 0.50 – 14.50 14.00 – – – – – –22. Sri Raga Nivas Property 0.50 – 19.73 19.23 – – – – – –

Developers (P) Ltd.23. VSN Property 0.50 – 34.02 33.52 – – – – – –

Developers (P) Ltd.24. M A Property 0.50 – 17.84 17.34 – – – – – –

Developers (P) Ltd.25. Vara Infrastructure 0.50 – 0.52 0.02 – – – – – –

(P) Ltd.26. Sri Raga Nivas 0.50 – 0.52 0.02 – – – – – –

Ventures (P) Ltd.27. Mallelavanam Property 0.50 – 0.52 0.02 – – – – – –

Developers (P) Ltd.28. Varaprada Real 0.50 – 0.52 0.02 – – – – – –

Estates (P) Ltd.29. Sradha Real 0.50 – 0.52 0.02 – – – – – –

Estates (P) Ltd.30. Liquidity Ltd. # 5.47 (0.92) 4.80 0.25 5.15 – (0.95) – (0.95) –

70 71


72 73

Statement pursuant to Section 212 of the Companies Act, 1956 relating to SubsidiaryCompaniesName of the Financial Date of Number of Extent of The net aggregate amount of Subsidiary year of the becoming shares in the interest of the subsidiary Companies Company subsidiary Subsidiary subsidiary Holding Profit/(loss) so far as it concerns

company company held Company the members of the Holding Companyended on by Nagarjuna as on 31st i) Dealt with in (ii) Not dealt with

Construction March, 2007 the accounts of in the accounts of Co. Ltd., and / Nagarjuna Nagarjunaor its nominees Construction Construction Co. Ltd.,as on 31.03.2007 Co. Ltd.,

(a) for the (a) for thesubsidiary’s subsidiary’sfinancial year financial yearended 31st ended 31stMarch, 2007 March, 2007

(b) for previous (b) for previous financial years of financial yearsthe subsidiary of the subsidiarysince it became since it becamesubsidiary of subsidiary ofNagarjuna NagarjunaConstruction ConstructionCo. Ltd., Co. Ltd.,

A: (I) INDIAN SUBSIDIARIES

NCC Infrastructure 31.03.2007 27.05.2005 5,86,73,300 Equity Shares 100% a) Nil a) Rs.0.96 million Holdings Ltd of Rs.10/- each b) Nil b) Rs.0.14 million

NCC Urban -do- 08.12.2005 12,00,00,000 000 Equity 80% a) Nil a) Rs.0.01 millionInfrastructure Ltd Shares of Rs.10/- each b) Nil b) Rs.(1.34) million

NCC Vizag Urban -do- 25.01.2006 4,76,49,000 Equity 100% a) Nil a) Rs.(2.34) millionInfrastructure Ltd Shares of Rs.10/- each b) Nil b) Rs.(1.13) million

O B Infrastructure Ltd -do- 17.10.2006 47,69,090 Equity Shares 64% a) Nil a) Nilof Rs.10/- each b) Nil b) Nil

Patnitop Ropeway -do- 13.02.2007 50,000 Equity Shares 100% a) Nil a) Nil& Resorts Ltd of Rs.10/- each b) NA b) NA

(II) Step Down Subsidiaries (Subsidiaries of NCC Urban Infrastructure Ltd.)

Dhatri Developers & -do- 13.02.2006 1,00,000 Equity 100% a) Nil a) Rs.(0.04) millionProjects Pvt Ltd Shares of Rs.10/- each b) Nil b) Rs.(0.01) million

Sushanti Avenues -do- 13.02.2006 1,00,000 Equity Shares 100% a) Nil a) NilPvt Ltd of Rs.10/- each b) Nil b) Nil

Sushruta Real -do- 13.02.2006 1,00,000 Equity 100% a) Nil a) NilEstates Pvt Ltd Shares of Rs.10/- each b) Nil b) Nil

PRG Estates -do- 19.12.2006 1,00,000 Equity Shares 100% a) Nil a) Nil Pvt. Ltd. of Rs.10/- each b) NA b) NA

Thrilekya Real -do- 1.12.2006 1,30,000 Equity Shares 100% a) Nil a) Rs.(0.04) millionEstates Pvt. Ltd., of Rs.10/- each b) NA b) NA

and 20,000 9% Redeemable Preference Shares of Rs.10/- each

Varma Infrastructures -do- 1.12.2006 1,00,000 Equity Shares 100% a) Nil a) Rs.(0.02) millionPvt. Ltd of Rs.10/- each b) NA b) NA

Nandyala Real Estates -do- 1.12.2006 1,30,000 Equity Shares 100% a) Nil a) Rs.(0.04) millionPvt. Ltd of Rs.10/- each and 20,000 b) NA b) NA

9% Redeemable Preference Shares of Rs.10/- each

Kedarnath Real -do- 28.12.2006 1,80,000/- Equity Shares 100% a) Nil a) Rs.(0.02) millionEstates Pvt. Ltd of Rs.10/- each and 20,000 b) NA b) NA

9% Redeemable PreferenceShares of Rs.10/- each

AKHS Homes -do- 12.02.2007 50,000 Equity Shares of 100% a) Nil a) NilPrivate Ltd Rs.10/- each b) NA b) NA

JIC Homes -do- 12.02.2007 -do- 100% a) Nil a) NilPrivate Ltd b) NA b) NA

Name of the Financial Date of Number of Extent of The net aggregate amount of Subsidiary year of the becoming shares in the interest of the subsidiary Companies Company subsidiary Subsidiary subsidiary Holding Profit/(loss) so far as it concerns

company company held Company the members of the Holding Companyended on by Nagarjuna as on 31st i) Dealt with in (ii) Not dealt with

Construction March, 2007 the accounts of in the accounts of Co. Ltd., and / Nagarjuna Nagarjunaor its nominees Construction Construction Co. Ltd.,as on 31.03.2007 Co. Ltd.,

(a) for the (a) for thesubsidiary’s subsidiary’sfinancial year financial yearended 31st ended 31stMarch, 2007 March, 2007

(b) for previous (b) for previous financial years of financial yearsthe subsidiary of the subsidiarysince it became since it becamesubsidiary of subsidiary ofNagarjuna NagarjunaConstruction ConstructionCo. Ltd., Co. Ltd.,

Sushanti Housing 31.03.2007 12.02.2007 50,000 equity shares 100% a) Nil a) NilPrivate Ltd of Rs. 10/- each b) NA b) NA

CSVS Property -do- 13.02.2007 -do- 100% a) Nil a) NilDevelopers Private Ltd b) NA b) NA

Vera Avenues -do- 13.02.2007 -do- 100% a) Nil a) NilPrivate Ltd b) NA b) NA

Sri Raga Nivas -do- 17.02.2007 -do- 100% a) Nil a) NilProperty Developers b) NA b) NA Private Ltd

VSN Property -do- 17.02.2007 -do- 100% a) Nil a) NilDevelopers b) NA b) NAprivate Ltd

M.A. Property -do- 17.02.2007 -do- 100% a) Nil a) NilDevelopers b) NA b) NAPrivate Ltd

Sri Raga Nivas -do- 07.03.2007 -do- 100% a) Nil a) NilVentures Private Ltd b) NA b) NA

Vara Infrastructure -do- 09.03.2007 -do- 100% a) Nil a) NilPrivate Ltd b) NA b) NA

Mallelavanam -do- 15.03.2007 -do- 100% a) Nil a) NilProperty Developers b) NA b) NAPrivate Ltd

Varapradha Real -do- 16.03.2007 -do- 100% a) Nil a) NilEstates Private Ltd b) NA b) NA

Sradha Real Estates -do- 16.03.2007 -do- 100% a) Nil a) Nil Private Ltd b) NA b) NA

B:(I) FOREIGN SUBSIDIARIES

Nagarjuna -do- 17.01.2007 1,000,000 Shares of 100% a) Nil a) Rs.(1.12) millionConstruction Omani Rials 1/- each b) NA b) NACompanyInternational LLC,

NCC Infrastructure -do- 27.04.2006 1,911,514 shares 100% a) Nil a) Rs.(0.54) millionHoldings Mauritius of USD 10/- each b) NA b) NAPTE Ltd

Nagarjuna -do- 11.05.2005 1,50,000 Shares of 100% a) Nil a) Rs.20.71 millionConstruction Omani Rials 1/- each b) NA b) NACompany Limited & Partners – LLC, Sultanate of Oman

(II) Step Down Subsidiary (Subsidiary of NCC Infrastructure Holdings Mauritius PTE Ltd)

Liquidity Limited -do- 20.06.2006 126,917 shares 100% a) Nil a) Rs.(0.95) millionof USD 1/- each b) NA b) NA

7574

Management Discussionand Analysis

A. Industry Structure And DevelopmentIndia’s GDP increased from 8.4% in 2005-06 to 9.4% in

2006-07, making it the fastest growing economy after

China for the following reasons:

Changing composition of GDP, reduced dependence on

agriculture and growing Industrial and services sectors.

Strong outsourcing growth momentum – IT and

Financial services, Health Care and Manufacturing.

Strong improvement in the external sector and a gradual

fiscal deficit correction.

The Indian construction industry is an integral part of the

Indian economy and an important portion of investments

into the development of the Indian Economy takes place

through the construction industry. The construction

industry is expected to grow with further economic

development, industrialization, urbanisation and

improvements in the standard of living.

According to Indian Infrastructure, the Indian construction

industry accounts for more than 5% of India’s GDP and is

the second largest employer after agriculture, employing

nearly 32 million people. In the course of liberlisation of

the Indian economy, the Government has placed a priority

on infrastructure development and emphasized the

involvement of private capital and management in order to

respond to the growing demand for new infrastructure

projects. Accordingly, the financing of infrastructure

development has largely shifted to the private sector,

primarily through the use of Public Private Partnership

(PPP), which are based on a partnership between the public

and the private sectors for the purpose of delivering a

project or service traditionally provided by the public sector.

According to the Indian Central Statistical Organisation,

investments in construction in India grew at a compounded

annual growth rate of 12% during the last ten years.

(For further information on the Indian construction industry,

please refer to the chapter on ‘Industry Overview’).

B. Opportunities and StrengthsAt present, the company has a presence across six

verticals comprising of buildings and housing,

transportation, water and environment, electricals,

irrigation and real estate. Out of these, the first three

verticals – buildings and housing, transportation and water

and environment together constitute 75% of the order

backlog as well as the turnover of the company. We expect

this trend to continue for the next two years as well. In

order to further broad base our business, we have recently

established new verticals – oil and gas, metals and power.

We have also instituted an international division to take

care of the business outside India.

During the last 28 years we executed various construction

projects all over the country. The client list includes reputed

organisations in the public and private sector domains. The

company has developed excellent engineering, planning

and project execution skills during this period. The

company is well recognised for its quality consciousness

and timely completion of projects without cost overrun.

The company’s track record and proven employee skills will

be useful in further improving its performance over the

years to come.

The company has also acquired state-of-the-art

construction equipment valued at Rs.5007 million as on

March 31, 2007.

During the year under review, the company has bagged

new orders valued at Rs.47.11 billion and executed

projects worth Rs.27.88 billion. The order book of the

company as on March 31, 2007 stood at Rs.73.02 billion.

Major Projects Received During the Year (Rs. Million)

S.No. Particulars Value

Buildings & Housing1 Office of the Executive Engineer, Building Const. Dept. Special Works Div. 1522.20

Construction of Mega Sports Complex, Package - II, at Hotwar, Ranchi.

2 The Times Of India Group - Mumbai, "Bennett Coleman & Co. Ltd" 1143.50

Civil & Allied works Time print City, Airoli

3 Central Public Works Dept., Outer Delhi Division, East Block-IV, New Delhi 860.40

Constn. of cabinet Secretariat Building at 5A, Lodhi Road, Delhi, including Water Supply,

Sanitary, installation Drainage, Electrical installations and Development works

4 National Games Housing Complex – Ranchi 2263.67

5 Govt. Of India Central Public Works Dept. Vigyan Bhavan Div. - NEW DELHI 970.90

Construction of Jawahar Lal Bhavan at Janapath New Delhi (SH: Civil & Electrical works)

6 Sahara India Commercial Corporation limited, Pune 650.00

Construction of 72nos of villas at various locations within Aamby Valley City

7 Punjab Cricket Association – Mohali 740.70

Construction of Cricket Stadium for PCA at Mohali

Transportation 1 Director, P.I.U., A.D.B. Project, - Raipur, Chhattisgarh 651.50

Rehabilitation and Upgrading of Rajnandgaon to Mohali section in Chhattisgarh.

2 Karnataka Road Development Corporation Limited - Bangalore 562.30

Widening & Improvements to existing Road from Yadgir to Shahpur for a length of 34.80 km

Water & Environment1 Maharashtra Airport Development Company (MADC) - MUMBAI 2019.79

Designing, Providing and Constructing Water Supply and underground Sewerage System

2 Govt. of West Bengal, Directorate of Public Health Engineering - Kolkata 2461.60

Surveying, Planning, Designing, Delivery, Erection and Construction of all Civil,

Electrical, Mechanical works for the surface water based water supply scheme.

3 GLIS PHASE II Project - Warangal (Janagam) 750.00

4 Addl. Chief Engineer, PHED, Ajmer. 2821.28

Execution of Advancement part of Bilaspur Water Supply project, Phase II , Ajmer.

5 Rajasthan Rajya Vidyut Utpadan Nigam Ltd., - Jaipur 419.10

Engineering procurement & construction on turnkey basis of all civil, mechanical, electrical

and design for water intake system including raw water reservoir with pump house Chhabra

Thermal Power Project Chhabra Dist. - Baran

Electricals1 Maharashtra State Electricity Distribution Co. Ltd., - Mumbai 1369.90

Turnkey execution of electrical works for Lathur Zone, Maharashtra

2 Maharashtra State Electricity Distribution Co. Ltd., - Mumbai 1329.70

Turnkey execution of electrical works for Solapur & Pune Zone

3 Jharkhand State Electricity Board, Engineering B'LDG, HEC, Dhurwa-Ranchi 1306.00

Execution of Rural electrification work under RGGVY scheme in Singhbhum (W) Dist.


7776

Irrigation Value

1 Govt. Of Andhra Pradesh, Irrigation & CAD (PW) Department 1289.25

Investigation, Designs and Execution of widening of SRBC main canal from KM. 25.067

to KM 56.775 and Construction of additional structures/Improvements and alteration to

CM & CD works.

2 Govt. of A.P, Irrigation & CAD (PW) Dept. - MAYTAS - NCC JV - 50% Share 858.15

Investigation, design and excavation of GNSS flood flow canal (Gorakallu Reservoir

to Owk Reservoir)

Oil & Gas

1 Naftogaz India Private Limited - Noida 3552.80

IOCL Refinery marketing terminal at Panipat, Hariyana

International Division

1 Sultanate of Oman, Diwan of Royal Court, Office of the head of Muscat Municipality 7200.00

Dualisation and Realignment of AI Amerat-Quariyat Road

2 Muscat Municipality, Sultanate of Oman 1200.00

Pipe line Project, Sohar Net work Phase I

(Rs. Million)

(Rs. Million)

Major Projects Completed During the YearYour Company is continuing its efforts to complete the projects within the time schedule. Some of the major projects

completed during the year are listed below:

S.No. Project Value of Work Incl. Escalation

1. SEA BIRD - KARWAR (PKG - IV) 561.30

Cons. of Logistic facilities and Hospital Complex

2 SPPL , SAMRUDDHI., K.HALLI , B'LORE 614.93

Constn. Of Multi-storied apartments at K.Halli, Bangalore

3 PATNI COMPUTER SYSTEMS - MUMBAI 761.06

Civil works for IT Block at MIDC Knowledge Park

4 GUJARAT WATER SUPPLY & SEWERAGE (SSW - A - 2) 957.12

Design, Build & Operate Contract - Distbtn. network

5 GOVT. OF JARKHAND DRINKING WATER PROJECT 1206.46

Construction of intake channel, intake well and sanitation

6 ASSAM STATE ELECTRICITY BOARD - NAGAON, Phase -I& II 537.87

Turnkey execution of strengthening and improvement of Sub-Transmission

and Distribution Net Work

7 VELIGONDA, GUNDALAKAMMA RESERVOIR. 319.30

Formation of left earth dam including head sluice and spill way at

Gundlakamma reservoir

C. Risks and Concerns The increasing cost of inputs like steel, cement and diesel

is a major concern for the Company. However, in most of

the contracts, the company is protected by the escalation

clauses. But, this protection is not available for BOT

Projects. The Company was able to report decent increase

in profits despite increase of input costs.

As the Construction Industry is expanding rapidly, the

demand for talented and experienced manpower is also

going up rapidly in the recent past. The attrition rates

across various levels have gone-up. In order to attract,

retain and motivate talented employees, the Company has

started the Employees Stock Option Plant (ESOP) about

three years back and this has yielded good results.

(For further information on risks, please refer to Chapter on

Risk Management).

D. Internal Control SystemsThe Company has adequate system of Internal Controls to

ensure that all the assets are safeguarded and are

productive. Checks and balances are in place and are

reviewed at regular intervals to ensure that transactions are

properly authorised and reported correctly. The Internal

Control Systems are reviewed at regular intervals by the

Audit Committee in consultation with the Internal Auditors

and corrective action(s) are initiated wherever deemed

necessary.

E. Financial Performance (NCCL Stand alone)1) Turnover: During the year under review, the Company

has achieved a turnover of Rs. 28710 million – up from last

year’s Rs.18404 million, registering a growth of 56%.

The turnover comprises Rs.27878 million from project

division, Rs.816 million from the real estate division, while

small miscellaneous jobs contributed the remaining

Rs.16 million.

2) Share capital: The Company’s share capital increased

from Rs.207 million to Rs.417 million in 2006-07 – primarily

due to a 1:1 bonus issue made by the Company.

3) Reserves and surplus: The reserves and surplus of the

Company has gone up from Rs.9212 million to

Rs.9914 million in 2006-07 and the increase was mainly on

account of profits made in 2006-07

4) Net worth: The Company’s net worth increased from

Rs. 9430 million to Rs. 10380 million, primarily because of

internal generation of profits.

5) Secured loans: There was an increase in secured loans

from Rs.1779 million to Rs.3820 million. The increase was

partly due to term-loan borrowings for procurement of

machinery and partly due to working capital needs.

6) Unsecured loans: Unsecured loans represent mostly

mobilisation advances from clients that increased from last

year’s Rs.2850 million to Rs.5034 million in line with the

growth in new orders.

7) Fixed assets: The Company’s fixed assets (gross block)

increased by Rs.2438 million in 2006-07 – from Rs.2569

million to Rs.5007 million – mainly on account of additional

machinery purchased for its major road development

projects, including the one in Muscat.

8) Current assets

a) Inventories: The Company’s inventories have gone up

slightly from Rs.3893 million to Rs.4041 million.

The Company’s net worth increased from Rs. 9430 million to Rs. 10380 million, primarily because of internal generation of profits

7978

b) Sundry debtors: There has been an increase in sundry

debtors, translating into a rise in the outstandings from

Rs.3017 million to Rs.5817 million and the collection period

increased from 61 to 73 days.

c) Loans and advances: Loans and advances increased

from Rs.5921 million to Rs. 8579 million during the year

under review. The increase represents the advances made

to subsidiaries besides increase in advances to suppliers,

sub-contractors, deposits with clients and advance taxes

which, in turn, were due to increase in the volume of

activity.

F. Operational Performance:a) Income: There has been an increase in the gross income

of the Company from Rs.18425 million to Rs.29002 million,

registering a substantial 57% growth over the previous

year.

b) Direct cost: The direct cost for the year under review

works out to 84.73% of the turnover as against 85.77% last

year.

c) Overheads: Overheads, comprising salaries and

administrative expenses, work out to Rs.1441 million for

the year under review as against Rs.960 million in the

previous year. The increase was partly due to a rise in

salaries in the market and partly due to increase in activity.

d) Interest cost: The interest cost is stated after adjusting

interest income. During the year under review, there was

an increase in the interest cost from Rs.217 million to

Rs.504 million. As compared with the volume of activity,

the interest cost has gone up from 1.18% to 1.74%. The

increase was partly due to increase in interest rates and

partly on account of an increase in the quantum of loans.

e) Depreciation: The Company’s depreciation for the year

was Rs.299 million, up from Rs.182 million during the

previous year. Compared with the business activity,

depreciation cost has marginally increased from 0.99% to

1.03%.

f) Provision for tax: The Company has provided for a sum

of Rs.592 million as current tax and Rs.64 million as

deferred tax liability for the year. The Company has also

provided Rs.12 million as fringe benefit tax for the year.

g) Net profit: The Company’s operations during the year

under review have resulted in a net profit of Rs.1519 million

as against Rs.1039 million in 2005-06, registering an

increase of 46.20%.

h) Dividend: The Company has paid 40% interim dividend

and the Board of Directors have recommended a final

dividend of 20% and the total payout works out to Rs.249

million as against Rs.165 million last year.

G. Human Resources & Industrial RelationsHuman resources continued to be one of the biggest

assets of the Company. The management has been paying

special attention to various aspects like training, welfare

and safety and thereby further strengthening the human

resources. Relations with the employees remained cordial

throughout the year. The total employee strength as of

31st March, 2007 stood at 3245.

The Company ’s operations during the year under reviewhave resulted in a net profit of Rs.1519 mill ion as againstRs.1039 mil l ion in 2005-06, registering an increase of46.20%.

Nagarjuna ConstructionCompany Limited is the only Indianconstruction Companyto figure in ForbesAsia’s 200 ‘Best undera billion’ companies inthe Asia Pacific


81

Name Category Designation No. of Board No. of Board No. of memberships Attendance

meetings held meetings in Boards of other of each

during the attended public companies Director

financial Year at last AGM

Boards Committees

(**) Mr. N.R. Alluri Promoter/Non- Director 6 1 4 1 No

Executive Director

Mr. J.V. Promoter/ Whole-Time 6 2 1 Nil No

Ranga Raju Executive Director Director

Mr. A.V.N. Raju Promoter/ Whole-Time 6 4 3 2 Yes

Executive Director Director

Mr. A.G.K. Raju Promoter/ Executive 6 5 8 5 Yes


Mr. A.A.V. Promoter/ Managing 6 6 6 2 Yes

Ranga Raju Executive Director Director

Smt Bala Non Executive and Nominee 6 3 9 17 No

Deshpande Independent Director

Director

Prof V.S. Raju Non-Executive Director 6 5 2 2 Yes

and Independent

Director

Mr. P. Abraham Non-Executive Director 6 5 8 Nil Yes

and Independent

Director

** Mr. R.V. Non-Executive Additional 6 2 1 3 No

Shastri and Independent Director

Director

* Mr. Samarapungavan resigned as a Director with effect from 30th October, 2006.

** Mr. N R Alluri, ceased to be a Whole-Time Director w.e.f. March 31, 2007.

*** Mr. R.V. Shastri was appointed as an Additional Director w.e.f. October 30,2006.

The Meetings of the Board of Directors of the Company

were held on the following dates:

May 29, 2006, July 31, August 31, October 30, January 31,

2007, and March 21.

As mandated by the revised Clause 49, the Independent

Directors on the Company’s Board:

Apart from receiving sitting fee for attending meetings,

the Independent Directors do not have any material

pecuniary relationships or transactions with the Company,

its promoters, Directors, senior management or its holding

company, subsidiaries and associates which may affect the

independence of the Director.

The Independent Directors are not related to the

promoters or persons occupying management positions at

the Board level or at one level below the Board.

The Independent Directors have not been executives of

the Company in the immediately preceding three financial

years.

80

Report On CorporateGovernanceIn compliance with Clause 49 of the Listing Agreement

entered into with stock exchanges, the Company hereby

submits a report on the matters as mentioned in the said

clause and practices followed by the Company.

1. Philosophy of the Company on the codeof governance:The Company aims at achieving transparency,

accountability and equity in all facets of its operations, and

in all interactions with stakeholders, including

shareholders, employees, government, lenders and other

constituents, while fulfilling the role of a responsible

corporate representative committed to good corporate

practices. The Company is committed to achieve the good

standards of Corporate Governance on continuous basis

by laying emphasis on ethical corporate citizenship and

establishment of good corporate culture which aims at true

Corporate Governance.

The Company believes that all its operations and actions

must result in enhancement of the overall shareholder

value in terms of maximisation of shareholder’s benefits,

etc. over a sustained period of time.

2. Board of Directors: The Company’s Board of Directors consists of 15 Directors.

The details of the composition and category of Directors,

number of Board meetings held during the year,

attendance of the Directors at the meetings and other

Directorships held by them are as follows:

Name Category Designation No. of Board No. of Board No. of memberships Attendance

meetings held meetings in Boards of other of each

during the attended public companies Director

financial Year at last AGM

Boards Committees

Mr. A.V.S. Raju Promoter/ Chairman 6 6 2 Nil Yes

Non- Executive

Director

*Mr. Non-Executive Director 6 3 Nil Nil Yes

Samarapungavan and Independent

Director

Mr. Non-Executive Director 6 3 1 Nil No

Venkatachalam and Independent

Director

Mr. P.C. Laha Non-Executive Director 6 6 Nil Nil Yes

and Independent

Director

Mr. Rakesh Non-Executive Director 6 1 11 2 No

R. Jhunjhunwala and non-

Independent

Director

Mr. R.N. Raju Promoter/ Whole-Time 6 4 NIL NIL No


Mr. A.S.N. Raju Promoter/ Whole-Time 6 3 3 2 Yes


They are not partners or executives or were not so during

the preceding three years of the

– Statutory audit firm or the internal audit firm associated

with the Company.

– Legal firm(s) and consulting firm(s) that have a material

association with the Company.

The Independent Directors are not material suppliers,

service providers or customers or lessors or lessees of the

Company, which may affect their independence.

They are not substantial shareholders of the Company i.e.

do not own 2 per cent or more of the block of voting

shares.

Information supplied to the BoardAs a policy measure, all the major decisions which involve

new investments and capital expenditure, in addition to the

matters which statutorily require Board approval, are put

up for consideration of the Board. Inter alia, the following

information is regularly provided to the Board as part of the

agenda papers well in advance of the Board meetings or is

tabled at the Board meeting.

Annual operating plans, budgets and any updates.

Capital budgets and any updates.

Quarterly, half yearly and annual results of the Company

and its operating divisions and minutes/financial

statements of the un-listed subsidiary Companies.

Minutes of the meetings of the Audit Committee and

other committees of the Board.

Show cause, demand, prosecution notices and penalty

notices which are materially important.

Fatal or serious accidents, dangerous occurrences, any

material effluent or pollution problems.

Any material default in financial obligations to and by the

Company, or substantial non-payment by clients.

Any issue, which involves possible public or product

liability claims of substantial nature, including any judgment

or order, which may have passed strictures on the conduct

of the Company or taken an adverse view regarding

another enterprise that can have negative implications on

the Company.

Details of any joint venture or collaboration agreement.

Non-compliance with any regulatory, statutory or listing

requirement and shareholders service such as non-

payment of dividend, delay in share transfer etc.

The Board also periodically reviews compliance reports of

all laws applicable to the Company, prepared by it as well

as steps taken to rectify instances of non-compliance.

Code of ConductThe Board of Directors of the Company has laid a code of

conduct for Directors and the senior management. The

code of conduct is posted on the Company’s website,

www.nccltd.com. All Directors and designated personnel

in the senior management have affirmed compliance with

the code for the year under review. The declaration to this

effect which is signed by Mr. A.A.V. Ranga Raju, Managing

Director, is annexed to this report.

3. Audit Committee of the BoardIn terms of Clause 49 of the Listing Agreement, the Audit

Committee constituted by the Board consists of five Non-

Executive and Independent Directors - Mr. R.V. Shastri,

Chairman of the committee, Mr. P.C. Laha , Mr. S.

Venkatachalam, Ms. Bala Deshpande, Nominee Director of

ICICI Venture Funds, and Prof. V.S. Raju, Director.

The committee had met four times - on May 29, 2006, July

31, October 30 and on January 31, 2007. Ms. Bala

Deshpande was present for the meeting held on May 29,

2006. She was not present for the remaining three

meetings. Mr. S. Venkatachalam and Prof. V.S. Raju were

present for the meetings held on July 31, 2006, October

30, 2006 and January 31, 2007. Mr. P.C. Laha was present

for all the four meetings. Mr. R.V. Shastri, who is also

an Additional Director, did not attend any meeting of

the Audit Committee since being appointed as a member

82 83

of the committee from January 31, 2007.

Mr. S. Samarapungavan, who resigned w.e.f. October 30,

2006, was present for two meetings (May 29, 2006 and

October 30, 2006).

The terms of reference as stipulated by the Board to the

Audit Committee include:

a. Oversight of the Company’s financial reporting process

and disclosure of its financial information.

b. Recommending the appointment and removal of

external auditors, fixation of audit fee and also approval for

payment for any other services.

c. Reviewing with the management the annual financial

statements before submission to the Board, focusing

primarily on

(i) Any changes in accounting policies and practices

(ii) Major accounting entries based on exercise on

judgment by the management

(iii) Qualifications in the draft audit report

(iv) Significant adjustments arising out of audit

(v) The going concern assumption

(vi) Compliance with accounting standards

(vii) Compliance with stock exchange and legal

requirements concerning financial statements

(viii) Disclosure of any related party transactions.

d. Reviewing with the management, external and internal

auditors, and the adequacy of internal control systems.

e. Reviewing, with the management, the quarterly financial

statements before submission to the Board for approval.

f. Discussion with internal auditors any significant findings

and follow up there on.

g. Reviewing the findings of any internal investigations by

the internal auditors into matters where there is suspected

fraud or irregularity or failure of internal control systems of

a material nature and reporting the matter to the Board.

h. Discussion with statutory auditors before the audit

commences, about the nature and scope of audit as well

as post-audit discussion to ascertain any area of concern.

i. Carrying out any other function as is mentioned in the

terms of reference of the Audit Committee.

Mr. M.V. Srinivasa Murthy, Company Secretary and Chief

General Manager (Legal) is the Secretary to the Audit

Committee.

4. HR and Compensation Committee:The Company’s Board has constituted the HR and

Compensation Committee, comprising four Non-Executive

Independent Directors – Prof. V.S. Raju, Chairman of the

committee, Mr. P.C. Laha, Mr. S. Venkatachalam and

Ms. Bala Deshpande. The committee has been constituted

to recommend/review the remuneration package of the

Managing/Whole-Time Directors apart from deciding other

matters such as framing and implementation of stock

option plans to employees, etc. The remuneration policy is

directed towards rewarding performance, based on review

of achievements on a periodical basis. The remuneration

policy is to be in consonance with the existing industry

practices.

The committee also considers and approves issues relating

to manpower planning, attrition, training and review of

appraisal norms in relation to employees, etc. The

committee had met five times - on May 29, 2006, July 31,

October 30, January 31, 2007 and March 21, 2007. Ms.

Bala Deshpande was present for the meetings held on May

29, 2006 and on March 21, 2007. Mr. P.C. Laha was present

for all the meetings. Mr. S. Venkatachalam was present for

three meetings held on July 31, 2006, October 30 and

January 31, 2007. Prof. V.S. Raju was present for the

meetings held on July 31, 2006, October 30, January 31,

2007 and March 21, 2007. Mr. Samarapunagavan was

present for the meetings held on May 29, 2006 and

October 30, 2006.

Details of remuneration paid to the Directors for the year:

The details of amounts of salary, commission and other

benefits paid for the year ended March 31, 2007 to the

Chairman, Managing Director, Executive Director and the

Whole-Time Directors of the Company are as follows:


8584

Besides the above remuneration, the Managing Director,

Executive Director and the Whole-Time Directors are also

eligible for gratuity and encashment of leave at the end of

their respective tenures as per the rules of the Company.

The Company had paid sitting fees to all the Non-Executive

Directors at the rate of Rs. 5,000 per Board Meeting and

Rs. 3,000 per committee meeting. The details of aggregate

amount of Sitting Fees paid to each of the Non-Executive

Directors during the year ended March 31, 2007 are as

follows:

Mr. P.C. Laha - Rs. 69,000

Mr. S. Venkatachalam - Rs. 42,000

Mr. Samarapungavan - Rs. 27,000

Ms. Bala Deshpande - Rs. 24,000

(ICICI Venture Funds )

Mr. Rakesh Jhunjhunwala - Rs. 5,000

Prof. V.S. Raju - Rs. 46,000

Mr. P. Abraham - Rs. 25,000

Mr. R.V. Shastri - Rs.10,000

Details of shareholding of Non-Executive Directors as on

March 31, 2007

Name No. of shares of Rs. 2 each

Mr. S. Venkatachalam 11,160

Mr. Rakesh Jhunjhunwala 52,50,000

5. Shareholders’/Investors’ GrievanceCommitteeThe Board of the Company constituted a

Shareholders’/Investors’ Grievance Committee comprising

Mr. S. Venkatachalam, Chairman of the Committee, Mr. P.C.

Laha and Mr. A.G.K. Raju as its members.

The Committee, inter alia, approves the issue of duplicate

share certificates and oversees and reviews all matters

connected with servicing of investors. The Committee

oversees the performance of the Registrar and Transfer

Agents and recommends measures for overall

improvement in the quality of investor services. Mr. S.

Sreenivas, Assistant Company Secretary, has been

designated as the Compliance Officer.

The Company has received 75 complaints during the year.

All the complaints have been promptly attended to and

outstanding complaints as on March 31, 2007 were nil. The

Company has received 120 requests for transfers and 465

requests for dematerialisation during the year. All the

requests have been approved and dealt with and there

were no pending requests as on March 31, 2007.

6. Initiatives on prevention of insider tradingpractices:In compliance with the SEBI regulations on prevention of

insider trading, the Company has instituted a

comprehensive code of conduct for its directors and

designated employees. The code lays down guidelines,

which advises the directors and the designated employees

on the procedures to be followed and disclosures to be

made, while dealing with shares of the Company and

cautions them on consequences of violations.

Name of the Director Annual Salary Other Benefits Commission Total

and Designation Rs. (including perquisites Rs Rs

and Allowances) Rs

Mr. A.V.S.Raju – – 20,400,000 20,400,000

– Chairman

Mr. A.A.V. Ranga Raju 4,800,000 1,296,000 20,400,000 26,496,000

– Managing Director

Mr. A.G.K. Raju 2,400,000 2,088,000 10,166,667 14,654,667

– Executive Director

Mr. A.S.N. Raju 2,400,000 2,088,000 10,166,667 14,654,667

– Whole-Time Director

Mr. R.N. Raju 2,400,000 2,088,000 – 4,488,000


Mr. J.V. Ranga Raju 2,400,000 2,088,000 – 4,488,000


Mr. .A.V.N. Raju, 2,000,000 1,096,000 8,500,000 11,596,000

Whole-Time Director

Mr. N.R. Alluri 2,400,000 2,088,000 10,166,666 14,654,666

–Whole-Time Director

Total 18,800,000 12,832,000 79,800,000 111,432,000

7. General Body Meetings

Year Description of the meeting Location Date Time

2003-04 AGM Bharatiya Vidya Bhavan, 25-09-2004 11 am

5-9-1105, Basheerbagh,

King Koti,Hyderabad-500029

2004 EGM Bharatiya Vidya Bhavan, 16-11-2004 11 am.



2005 EGM “Bhaskara Auditorium”, 22-1-2005 11 am

B M Birla Science Centre,

Near Birla Mandir, Adarsh Nagar,

Hyderabad-500063.

2004-05 AGM Bharatiya Vidya Bhavan, 30-07-2005 3 pm



2005 EGM The Federation of Andhra Pradesh 03-10-2005 11.30 am

Chambers of Commerce

and Industry, 11-6-841, Red Hills,

Hyderabad-500004

2005-06 AGM Sri Satya Sai Nigamagamam, 31-08-2006 3 pm

8-3-987/2, Srinagar Colony,

Hyderabad-500073

2007 EGM KLN Prasad Auditorium, 26-02-2007 11 am

The Federation of Andhra

Pradesh Chambers of Commerce

and Industry, 11-6-841, Red Hills,

Hyderabad - 500004

8786

Postal ballot: There are/were no items of business requiring passing of resolution through postal ballot. Details of

special resolutions passed in Annual/Extraordinary General Meetings held during the last three years:

EGM on 26.02.2007 Approval for issue and allotment of Warrants on Preferential Basis to M/s. A.V.S.R.

Holdings Private Ltd, an investment Company belonging to the Promoters of Nagarjuna

Construction Company Ltd.

Approval for raising funds by issuing equity shares to qualified institutional buyers in

accordance with Chapter XIII-A of SEBI (Disclosure and Investor Protection) Guidelines as

amended and/or by the issue of GDRs /FCCBs/other permitted securities.

Investment by FIIs, etc.

Amendment of Capital Clause contained in the Articles of Association.

16TH AGM on 31-08-2006 Amendment of Capital Clause contained in the Articles of Association.

Increase in investment limit by FIIs.

Appointment of Mr. A.V.N. Raju as a Whole-Time Director

EGM on 03-10-2005 Issue of global depository receipts/foreign currency convertible bonds, etc.

Alteration of the authorised share capital clause contained in the Articles of Association.

15th AGM on 30-07-2005 Enhancement in the Remuneration payable to Working Directors.

Sub-Division of equity shares of the Company

NCC Employees Stock Option Plan 2004 - Disclosures to listed stock exchanges.

EGM on 22-01-2005 Approval for effecting alterations in the Articles of Association of the Company.

EGM on 16-11-2004 Approval for issue and allotment of equity shares on preferential basis to select investors.

Approval for issue and allotment of warrants on preferential basis to select investors and

to promoters of the Company.

Employee stock option plan.

Amendment of Capital Clause contained in the Articles of Association.

14th AGM on 25-09-2004 Special resolutions for re-appointment of Mr. A.S.N. Raju as Whole-Time Director and Mr.

R.N. Raju as Whole-Time Director.

Special resolutions for revision in the remuneration payable to Mr. A.A.V. Ranga Raju,

Managing Director, Mr. A.G.K. Raju, Executive Director, Mr. J.V. Ranga Raju, Whole-Time

Director, and Mr. N.R. Alluri, Whole-Time Director.

The resolutions were passed on show of hands with

requisite majority.

8. Disclosures:a. During the year under review, certain transactions have

been entered into with related parties. The details thereof

have been given under Note No. 14 forming part of Notes

on Accounts.

b. There have not been any occasion of non-compliance

by the Company and no penalties or strictures have been

imposed on the Company by stock exchanges or SEBI or

any other statutory authority on any matter related to

capital markets over the last three years.

9. Means of communication:The Company has a website, www.ncclimited.com. The

quarterly, half-yearly and annual financial results and press

releases and presentations made to analysts are posted

on the website for information of the shareholders.

Quarterly resultsThe quarterly results of the Company are published in

leading newspapers such as The Economic Times and

Eenadu (regional language) along with the official press

releases.

Dates of publication of quarterly results:

1st quarter ended : August 1, 2006

June 30, 2006

2nd quarter ended : October 31, 2006

September 30, 2006

3rd quarter ended : February 1, 2007

December 31, 2006

4th quarter ended : May 29, 2007

March 31, 2007

The Management Discussion and Analysis Report is a

part of the annual report.

10. General shareholders’ information17th Annual General Meeting: July 30, 2007 at 4.00 pm

Venue: Sri Satya Sai Nigamagamam, 8-3-987/2, Srinagar Colony, Hyderabad – 500073

Financial calendar : The tentative calendar of events for the financial year 2007-08 is given below:

Results for quarter ending June 30, 2007 - July 2007

Results for quarter ending Sept 30, 2007 - October 2007

Results for quarter ending Dec 31, 2007 - January 2008

Results for year ending March 31, 2008 - June 2008

Book closure dates : July 16, 2007 to July 21, 2007 (both days inclusive) for payment of dividend.

Dividend payment date : 4th August, 2007

Listing of equity shares : The Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd.

Listing fees for 2006-07 (up to March 31, 2007) has been paid to the exchanges.

Stock code : BSE Code : 500294

NSE Symbol : NAGARCONST

Demat ISIN Numbers in : ISIN NO : INE868B01028

NSDL & CDSL for equity shares


8988

Market price Data: The monthly high and low stock quotations during the last financial year and performance in

comparison to BSE and NSE are given below:

Month BSE SENSEX NSE NIFTY

& Year

High Rs. Low Rs. High Low High Rs. Low Rs. High Low

Apr-06 404.45 355.00 12102.00 11008.43 402.90 307.00 3598.95 3290.35

May-06 395.00 263.45 12671.11 9826.91 394.80 260.00 3774.15 2896.40

Jun-06 345.00 207.00 10626.84 8799.01 345.00 189.10 3134.15 2595.65

Jul-06 288.20 195.00 10940.45 9875.35 288.70 195.05 3208.85 2878.25

Aug-06 311.70 244.60 11794.43 10645.99 311.50 243.95 3452.30 3113.60

Sep-06* 322.00 148.25 12485.17 11444.18 321.90 141.55 3603.70 3328.45

Oct-06 183.80 158.00 13075.85 12178.83 183.40 158.00 3782.85 3508.65

Nov-06 222.90 174.25 13799.08 12937.30 223.00 175.00 3976.80 3737.00

Dec-06 225.70 180.20 14035.30 12801.65 225.70 180.15 4046.85 3657.65

Jan-07 236.00 206.00 14325.92 13303.22 236.80 206.10 4167.15 3833.60

Feb-07 224.00 150.15 14723.88 12800.91 223.40 149.05 4245.30 3674.85

Mar-07 169.20 139.00 13386.95 12316.10 170.00 139.50 3901.75 3554.50

* The Company has issued bonus shares of Rs. 2 each in the ratio of 1:1 to the equity shareholders as on record date i.e. September 21, 2006.

Performance in comparison to the Broad based indices such as NSE & BSE Sensex Distribution of shareholding as on March 31, 2007 As on March 31, 2007, the distribution of the Company’s shareholding was as follows:

Category (No of shares) Shareholders Shares

From To Number % of Total Number of % of Total

Shares of

Rs.2/- each

1 5,000 64503 97.19 13897846 6.67

5,001 10,000 994 1.50 3558489 1.71

10,001 20,000 420 0.63 3197156 1.53

20,001 30,000 106 0.16 1355777 0.65

30,001 40,000 63 0.09 1149126 0.55

40,001 50,000 26 0.04 589658 0.28

50001 1,00,000 60 0.09 2235694 1.07

1,00,001 And above 195 0.30 182527154 87.54

Total 66367 100 208510900 100(Post Bonus)

(Post Bonus)

9190

Shareholding pattern as on March 31, 2007:

Category No. of shares Percentage of

of Rs. 2 each held shareholding

Promoter’s holding

Promoters--- Indian promoters 51225814 24.57%

(including persons acting in concert)--- Foreign promoters --- ---

Sub total 51225814 24.57%

Non- Promoter’s Holding

Institutional investors

a. Mutual funds 29291439 14.05%

b. Banks, financial institutions, 1734723 0.83%Insurance companies

c. Central/state government 130454 0.06%

d. FIIs * 61382444 29.44%

Sub total 92539060 44.38%

Others

a. Private corporate bodies 11402014 5.47%

b. Indian public 45076339 21.62%

c. NRI s/OCB s 3490605 1.67%

d. Shares held by custodian against 4777068 2.29%which global depository receipts have been issued

Sub total 64746026 31.05%

Grand total 208510900 100.00%

* (FIIs holdings as on 31st March, 2007 includes 47,77,068 shares representing 47,77,068 GDRs)

GDR issue:During the financial year 2005-06, the Company made an international offering of Global Depository Receipts for an

aggregate amount of US$120 million. The Company allotted 20547940 GDRs of US$5.11 each (representing one equity

share each) on December 19, 2005, Green shoe portion of the 2935420 GDRs (representing one equity share each)

have been allotted by the Company on January 5, 2006.

Details of Global Depository Receipts issued by the Company:

Number of GDRs issued 23,483,360 (including Green Shoe portion of 2,935,420 GDRs)

(Each GDR representing one equity share each)

Issue price of each GDR : US$5.11 - Rs. 233.17per GDR

Total value of the issue US$120 million

Listing Underlying equity shares are listed on the Bombay Stock Exchange Ltd and

the National Stock Exchange of India Ltd. GDRs are listed on the

Luxembourg Stock Exchange and traded on the London Stock Exchange

and on portal platform of NASDAQ.

Outstanding GDRs as on March 31, 4777068 GDRs

2007, underlying equity shares forming

part of the existing equity capital

of the Company.

Share transfer system : The share transfers which were received in physical form were processed

and the share certificates returned within a period of 10 to 15 days from the

date of receipt, subject to the documents being found valid and complete in

all respects. The Company has appointed M/s Sathguru Management and

Consultants (Pvt.) Ltd. w.e.f. April 1, 2003 as the registrar and transfer agents

for dealing with all the activities connected with both physical and demat

segments pertaining to the share transactions of the Company.

Dematerialisation of shares : Over 98.26% (per cent) of outstanding shares have been dematerialised up

to March 31, 2007. Trading in equity shares of the Company is permitted only

in dematerialised form w.e.f. January 29, 2001 as per notification issued by

the Securities and Exchange Board of India (SEBI).

Investor’s correspondence M/s. Sathguru Management Consultants Pvt. Ltd.,

Physical/Electronic mode Plot No 15, Hindi Nagar, Punjagutta, Hyderabad – 500 034.

Ph. No’s 040- 23356507, Fax: 040-23354042

E-Mail: [email protected]

Shareholders general Secretarial Department

Correspondence 41, Nagarjuna Hills, Punjagutta, Hyderabad-500082

Tel : 040-23351753, Fax : 040-23350214

E-Mail:[email protected]

Compliance with Clause 49Mandatory requirementsThe Company has complied with all the applicable mandatory requirements of the revised Clause 49.

Non-mandatory requirements• The Company has constituted HR and Compensation Committee of the Board of Directors. Necessary details have

been provided under the section, HR and Compensation Committee of the Board.

• The Company has not adopted other non-mandatory requirements.

DECLARATION

The Board of Directors of the Company at their meeting held on December 31, 2005, have approved the code of conduct

for the Directors and senior management personnel. As stipulated under the provisions of sub-clause I(D) (ii) of Clause

49 of the Listing Agreement with stock exchanges, all the Directors and the designated personnel in the senior

management of the Company have affirmed compliance with the code for the financial year ended March 31, 2007.

For Nagarjuna Construction Co. Ltd.

Place: Hyderabad A.A.V.RANGA RAJU

Date: May 28, 2007 Managing Director


9392

Chief Executive Officer And Chief Financial Officer Certification Under Clause 49 Of TheListing Agreement With The Stock Exchanges

In relation to the Audited Financial Accounts of the

Company as at 31st March, 2007, we hereby certify that

a) We have reviewed financial statements and the cash

flow statement for the year and that to the best of our

knowledge and belief:

i) these statements do not contain any materially untrue

statement or omit any material fact or contain statements

that might be misleading;

ii) these statements together present a true and fair view

of the company’s affairs and are in compliance with the

existing accounting standards, applicable laws and

regulations.

b) There are to the best of our knowledge and belief, no

transactions entered into by the Company during the year

which are fraudulent, illegal or violative of the Company’s

Code of Conduct.

c) We accept responsibility for establishing and

maintaining internal controls for financial reporting and we

have evaluated the effectiveness of the internal control

systems of the company pertaining to financial reporting

and we have disclosed to the Auditors and the Audit

Committee, deficiencies in the design or operation of

internal controls, if any, of which we are aware and the

steps we have taken or propose to take to rectify these

deficiencies.

d) We have indicated to the Auditors and the Audit

Committee:

i) significant changes in internal control over financial

reporting during the year;

ii) significant changes in accounting policies during the

year and that the same have been disclosed in the notes

to the financial statements; and

iii) instances of significant fraud of which we have

become aware and the involvement therein, if any, of the

management or an employee having a significant role in

the Company’s internal control system over financial

reporting.

(A.A.V. Ranga Raju) (R S Raju)

Chief Executive Officer Chief Financial Officer

Dt: 28th May, 2007

Auditors’ Certificate on Corporate Governance

To The Members of Nagarjuna Construction Company Limited

We have examined the compliance of conditions of Corporate Governance by Nagarjuna Construction Company Limited,

for the year ended on March 31, 2007, as stipulated in Clause 49 of the Listing Agreement of the said Company with

stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management of the Company. Our

examination was limited to procedures and implementation thereof, adopted by the Company for ensuring compliance

with the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial

statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the

Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing

Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Company nor of the

efficiency or effectiveness with which the management has conducted the affairs of the Company.

for M. Bhaskara Rao & Co. for Deloitte Haskins & Sells

Chartered Accountants Chartered Accountants

M. Bhaskara Rao P.R.Ramesh

Partner Partner

Membership No. 5176 Membership No. 70928

Hyderabad, May 28, 2007

M. Bhaskara Rao & Co.


5D, Fifth floor

6-3-352, Somajiguda

Hyderabad – 500 082

Deloitte Haskins & Sells


Coromandel House,

1-2-10, S.P.Road,

Secunderabad – 500 003

95

Annexure to the Auditors’ Report

94

NAGARJUNA CONSTRUCTION COMPANY LIMITED

Auditors’ Report

i) In respect of its fixed assets:a) The Company has maintained proper records

showing full particulars, including quantitativedetails and situation of its fixed assets.

b) A major portion of the fixed assets has beenphysically verified during the year by themanagement in accordance with a programme ofverification, which, in our opinion, provides forphysical verification of all the fixed assets atreasonable intervals having regard to the size of theCompany and the nature of its assets. According tothe information and explanations given to us, thediscrepancies noticed on such verification were notmaterial and have been properly dealt with in thebooks of account.

c) The fixed assets disposed off during the year, in ouropinion, do not constitute substantial part of thefixed assets of the Company and such disposal has,in our opinion, not affected the going concern statusof the Company.

ii) In respect of its inventories:a) According to the information and explanations given

to us, the Management has physically verified theinventory during the year. In our opinion, havingregard to the nature of business and location ofstocks, the frequency of verification is reasonable.

b) In our opinion and according to the information andexplanations given to us, the procedures of physicalverification of inventories followed by themanagement are reasonable and adequate inrelation to the size of the Company and the nature ofits business.

c) In our opinion and according to the information andexplanations given to us, the Company hasmaintained proper records of its inventories. Thediscrepancies noticed on verification between thephysical stocks and the book records were notmaterial and have been properly dealt in the booksof account.

iii) a) According to the information and explanations givento us, the Company has granted unsecured loansrepayable on demand to six parties covered in theRegister maintained under Section 301 of theCompanies Act, 1956. The maximum amountinvolved during the year was Rs.1,302.10 million andthe year end balance of the loans granted to such

parties was Rs.1,272.10 million.

b) In our opinion and according to the informationgiven to us, the terms and conditions of such loansare prima facie not prejudicial to the interest of theCompany.

c) The receipts of principal amounts and interest havebeen regular during the year.

d) There is no overdue amount in respect of intercorporate loans.

e) According to the information and explanations givento us, the Company has not taken any loans,secured or unsecured from Companies, firms orother parties covered in the Register maintainedunder section 301 of the Companies Act, 1956.Accordingly, the provisions of clause 4(iii) (e), (f), and(g) of the Companies (Auditor's Report) Order, 2003are not applicable to the Company.

iv) In our opinion and according to the information andexplanations given to us, there are adequate internalcontrol systems commensurate with the size of theCompany and the nature of its business for the purchaseof inventory and fixed assets and for the sale of goodsand services and we have not observed any continuingfailure to correct major weaknesses in such internalcontrols.

v) In respect of contracts or arrangements entered in theregister maintained in pursuance of section 301 of theCompanies Act, 1956 to the best of our knowledge andbelief and according to the information and explanationsgiven to us:

a) The particulars of contracts or arrangementsreferred to in section 301 that need to be entered into the register, maintained under the said sectionhave been so entered.

b) In our opinion, the transactions (excluding loansreported under paragraph (iii) above) exceeding thevalue of Rs.5 lakhs in respect of any party during theyear have been made at prices which are prima faciereasonable having regard to the prevailing marketprices at the relevant time, where such marketprices are available.

vi) In our opinion and according to the information andexplanations given to us, the Company has not acceptedany deposits from the public. Accordingly, the provisionsof clause 4(vi) of the Companies (Auditor's Report )

(Referred to in paragraph 3 of our report of even date)

1. We have audited the attached Balance Sheet ofNagarjuna Construction Company Limited as at March31, 2007, the Profit and Loss Account for the year endedon that date and the Cash Flow Statement for the yearended on that date both annexed thereto in which areincorporated the returns from the Oman branch auditedby another auditor. These financial statements are theresponsibility of the Company's management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with the auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accountingprinciples used and significant estimates made by themanagement, as well as evaluating the overall financialstatement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order,2003 issued by the Central Government of India in termsof sub-section (4A) of section 227 of the Companies Act,1956, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to inparagraph 3 above, we report that:

a) we have obtained all the information andexplanations, which to the best of our knowledge andbelief were necessary for the purposes of our audit;

b) in our opinion, proper books of account as requiredby law have been kept by the Company so far as itappears from our examination of those books and

proper returns adequate for the purposes of our audithave been received from the Oman branch not visitedby us. The Branch Auditor's Report has beenforwarded to us and appropriately dealt with;

c) the Balance Sheet, Profit and Loss Account and CashFlow Statement dealt with by this report are inagreement with the books of account and with theaudited returns from the Branch;

d) in our opinion, the Balance Sheet, Profit and LossAccount and Cash Flow Statement dealt with by thisreport comply with the Accounting Standards referredto in sub-section (3C) of section 211 of theCompanies Act, 1956;

e) in our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by theCompanies Act, 1956, in the manner so required andgive a true and fair view in conformity with theaccounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state ofaffairs of the Company as at March 31, 2007;

(ii) in the case of the Profit and Loss Account, of theprofit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of thecash flows for the year ended on that date.

5. On the basis of written representations received from thedirectors, as on March 31, 2007 and taken on record bythe Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2007 from beingappointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

for M. Bhaskara Rao & Co. for Deloitte Haskins & SellsChartered Accountants Chartered Accountants

M. Bhaskara Rao P. R. RameshPartner PartnerMembership No. 5176 Membership No. 70928


The MembersNagarjuna Construction Company Limited


97

Annexure to the Auditors’ Report (Contd.)

96


Annexure to the Auditors’ Report (Contd.)

xv) In our opinion and according to the information andexplanations given to us, the terms and conditions ofthe guarantees given by the Company for loans takenby others from banks and financial institutions are notprima facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and accordingto the information and explanations given to us, in ouropinion, term loans availed by the Company were, primafacie, applied by the Company during the year for thepurposes for which the loans were obtained.

xvii) According to the information and explanations given tous, and on an overall examination of the balance sheetof the Company, funds raised on short-term basis have,prima facie, not been used for long-term investment.

xviii) According to the information and explanations given tous, the Company has made preferential allotment of

share warrants during the year to a company coveredin the register maintained under section 301 of theCompanies Act, 1956. The price at which the warrantshave been issued are not prejudicial to the interests ofthe company.

xix) According to the information and explanations given tous, no debentures have been issued by the Company.Accordingly the provisions of clause 4(xix) of theCompanies (Auditor's Report ) Order, 2003 are notapplicable to the Company.

xx) During the year covered by our audit report, thecompany has not raised any money by public issues.

xxi) To the best of our knowledge and belief and accordingto the information and explanations given to us, nofraud on or by the Company was noticed or reportedduring the year.


M. Bhaskara Rao P. R. RameshPartner PartnerMembership No. 5176 Membership No. 70928


Order, 2003 are not applicable to the Company.

vii) In our opinion, the internal audit functions carried outduring the year by firms of Chartered Accountantsappointed by the management have beencommensurate with the size of the company and thenature of its business.

viii) In our opinion and according to the information andexplanations given to us, the Central Government hasnot prescribed the maintenance of cost records for anyof the products or activity of the company.

ix) In respect of statutory duesa) According to the information and explanations given

to us, the Company has been generally regular in

depositing undisputed statutory dues includingProvident Fund, Investor Education and ProtectionFund, Employees' State Insurance, Income Tax,Wealth Tax, Sales Tax, Service Tax, Custom Duty,Excise Duty, Cess and any other material statutorydues applicable to it with the appropriate authoritiesduring the year.

b) According to the information and explanations givento us, details of disputed sales tax, income tax,customs duty, wealth tax, service tax, excise dutyand cess which have not been deposited as onMarch 31, 2007 on account of any dispute are givenbelow:

x) The Company does not have accumulated losses andhas not incurred cash losses during the financial yearcovered by our audit and the immediately precedingfinancial year.

xi) In our opinion and according to the information andexplanations given to us, the Company has notdefaulted in repayment of dues to financial institutionsand banks.

xii) In our opinion and according to the information andexplanations given to us, the Company has not grantedany loans and advances on the basis of security by wayof pledge of shares and debentures and othersecurities. Accordingly, the provisions of clause 4(xii) of

the Companies (Auditor's Report) Order, 2003 are notapplicable to the Company.

xiii) In our opinion, the Company is not a Chit Fund or a Nidhior Mutual Benefits Fund/Society. Accordingly, theprovisions of clause 4(xiii) of the Companies (Auditor'sReport ) Order, 2003 are not applicable to the Company.

xiv) In our opinion and according to the information andexplanations given to us, the Company does not deal ortrade in shares, securities, debentures and otherinvestments. Accordingly, the provisions of clause 4(xiv)of the Companies (Auditor's Report ) Order, 2003 are notapplicable to the Company.

Name of statute Nature of dues Rupees Period to which the Forum where in Million amount relates dispute is pending

APGST Act, 1957 Sales Tax 1.41 1993-94 Sales Tax Appellate TribunalSales Tax 3.25 1994-95 Sales Tax Appellate TribunalSales Tax 23.10 1998-99 Sales Tax Appellate TribunalSales Tax 32.22 2002-03 Appellate Deputy

CommissionerTamilnadu General Sales tax 3.59 1994-96 Sales Tax Appellate TribunalSales Tax Act, 1959Uttar Pradesh Trade Tax Sales Tax 0.52 2001-02 Joint Commissioner Act, 1948 (Appeals).

Sales Tax 3.33 2002-03 Joint Commissioner (Appeals).

Delhi Sales Tax on Sales Tax 4.22 2003-04 Additional Commissioner Works Contact Act, 1999 of Sales Tax (Appeals)The Central Excise Act, 1944 Excise Duty 28.23 2000-01 CESTAT, BangaloreFinance Act, 1961 Service Tax 2.48 2005-06 Hon’ble High Court of

Andhra Pradesh

9998

Profit and Loss Account for the year ended March 31, 2007


Balance Sheet as at March 31, 2007

(Rs. in million)Schedule As at As at

March 31, 2007 March 31, 2006

SOURCES OF FUNDSShareholders’ FundsShare Capital I 417.02 206.62 Employees Stock Options Outstanding II 4.76 31.51 Share Warrants - Advance Received (Refer Note 3 d of II of Schedule XI) 54.25 – Reserves and Surplus III 9,914.31 9,212.31 Share Application Money – 0.98

10,390.34 9,451.42 Loan FundsSecured Loans IV 3,819.57 1,779.27 Unsecured Loans V 7,583.56 2,849.47

11,403.13 4,628.74 Deferred Tax Liability (Net) 115.29 65.91 (Refer note 14 b of II of Schedule XI)Total 21,908.76 14,146.07 APPLICATION OF FUNDSFixed AssetsGross Block VI 5,006.67 2,569.40 Less : Depreciation 963.50 719.99 Net Block 4,043.17 1,849.41 Capital Work in Progress 185.68 87.55

4,228.85 1,936.96 Investments VII 4,767.63 877.06 Current Assets, Loans and Advances VIIIInventories 4,040.54 3,892.59 Sundry Debtors 5,816.84 3,016.56 Cash and Bank Balances 2,434.00 2,809.06 Other Current Assets 92.98 38.63 Loans and Advances 8,579.02 5,920.98

20,963.38 15,677.82 Less : Current Liabilities and Provisions IXLiabilities 6,816.85 3910.13Provisions 1,244.15 457.40

8,061.00 4,367.53 Net Current Assets 12,902.38 11,310.29 Miscellaneous Expenditure X 9.90 21.76 (To the extent not written off or adjusted)Total 21,908.76 14,146.07 Accounting Policies and Notes on Accounts XI

Schedules referred to above form an integral part of the accounts

As per our report of even date attached For and on behalf of the Board

For M. BHASKARA RAO & CO. For DELOITTE HASKINS & SELLSChartered Accountants Chartered Accountants

M. Bhaskara Rao P. R. Ramesh M. V. Srinivasa Murthy A. A. V. Ranga RajuPartner Partner Company Secretary & Managing Director

C.G.M. (Legal)

Place: Hyderabad R. S. Raju A. G. K. RajuDate: May 28, 2007 C.G.M.(F&A) Executive Director

(Rs. in million)Schedule Year ended Year ended

March 31, 2007 March 31, 2006

INCOME

Turnover A 28,710.52 18,404.40

Other Income B 291.79 20.25

29,002.31 18,424.65

EXPENDITURE

Construction and Other Expenses C 24,572.27 15,803.37

Establishment Expenses D 1,440.70 960.38

Interest and Financial Charges E 503.94 216.95

Depreciation VI 298.95 181.57

26,815.86 17,162.27

Profit Before Tax 2,186.45 1,262.38

Provision for Taxation – Current Tax 591.63 214.58

– Deferred Tax 63.95 (0.54)

– Fringe Benefit Tax 11.73 9.30

667.31 223.34

Profit Before Prior Year Tax 1,519.14 1,039.04

Less: Prior Year Tax 362.53 –

Profit After Prior Year Tax 1,156.61 1,039.04

Balance in Profit and Loss Account brought forward 710.51 479.95

Balance available for Appropriation 1,867.12 1,518.99

Appropriations

Interim Dividend 166.04 –

Proposed Dividend 83.40 165.30

Dividend Tax (Interim and Proposed) 37.45 23.18

Transfer to General Reserve 700.00 600.00

Transfer to Contingency Reserve 20.00 20.00

1,006.89 808.48

Balance carried to Balance Sheet 860.23 710.51

Earnings per share of face value of Rs. 2/- each.

Basic – Before Prior Year Tax 7.35 6.04

– After Prior Year Tax 5.59 –

Diluted – Before Prior Year Tax 7.29 5.96

– After Prior Year Tax 5.55 –

Accounting Policies and Notes on Accounts XI





C.G.M. (Legal)



101

Cash Flow Statement (Contd.) for the year ended March 31, 2007

100


Cash Flow Statement for the year ended March 31, 2007

(Rs. in million)

Year ended Year endedMarch 31, 2007 March 31, 2006

A) CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before tax 2,186.45 1,262.38

Adjustments for

Depreciation 298.95 181.57

Miscellaneous expenditure written off 11.86 11.94

Provision for doubtful advances 1.90 21.88

Provision for gratuity and leave encashment 84.55 11.92

Loss on Sale of Assets 6.05 9.91

Profit on Sale of assets (263.09) (0.88)

Interest and financial charges 503.94 216.95

Income from current investments (0.66) (2.21)

Employee Compensation Expense 50.62 43.28

Operating Profit before Working Capital Changes 2,880.57 1,756.74

Adjustments for changes in

Trade and Other Receivables (5,343.46) (3,665.93)

Inventories (147.95) (2,369.19)

Trade Payables and Other Liabilities 2,791.99 1,126.87

Cash generated from Operations 181.15 (3,151.51)

Taxes paid (720.66) (437.03)

Net Cash used in operating activities (539.51) (3,588.54)

B) CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets and other capital expenditure (2,641.08) (1,034.04)

Proceeds from sale of Fixed Assets 307.26 25.54

Investment in subsidiaries (3,396.94) (320.34)

Investment in other companies including share application money (85.79) (657.70)

Interest received 81.36 48.53

Income from current investments 0.66 2.21

Net Cash used in Investing Activities (5,734.53) (1,935.80)

(Rs. in million)


C) CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Issue of Shares 30.82 5,302.74

Long Term Funds borrowed / (Repaid) 2,040.30 1,131.16

Mobilisation advances received from customers 4,734.09 849.50

Interest paid (634.09) (280.85)

Dividend and Dividend Tax paid (245.35) (107.62)

Net Cash from Financing Activities 5,925.77 6,894.93

D) Net change in cash and cash equivalents (A+B+C) (348.27) 1,370.59

Cash and Cash Equivalents as at April 1 (Opening Balance) 2,809.06 1,438.47

Cash and Cash Equivalents as at March 31 (Closing Balance) 2,460.79 2,809.06

Net Cash Inflow (348.27) 1,370.59

Note: 1) The Cash Flow Statement is prepared in accordance with the indirect Method stated in Accounting Standard 3

on Cash Flow Statements and presents the cash flows by operating,investing and financing activities. Cash and

cash equivalents comprise the following:

Sl. No. Particulars 31.03.07 31.03.06

a) Cash on hand and Balances with banks 2,434.00 2,809.06

b) Effect of Exchange Rate changes 26.79 –

c) Cash and Cash Equivalents 2,460.79 2,809.06

2) Cash and Cash Equivalents consist of cash and bank balances which include Rs.385.07 million (31-3-2006:

Rs.384.27 million) in Margin money Deposits lodged with Banks against letters of guarantee issued and Rs.110.90

million (31.03.06 Rs.2.52 million) in Unclaimed Dividend Account.

3) Figures in brackets represent cash outflows.

4) Notes on accounts stated in Schedule XI form an integral part of the Cash Flow Statement.




C.G.M. (Legal)


103

Schedules forming part of the Balance Sheet as at March 31, 2007

102



(Rs. in million)As at As at

March 31, 2007 March 31, 2006

Authorised Capital30,00,00,000 Equity Shares of Rs.2/- each 600.00 250.00

(31.03.2006: 12,50,00,000 Shares of Rs. 2/- each)(Refer Note 3 a of II of Schedule XI)

Issued Capital20,87,60,900 Equity Shares of Rs.2/- each

(31.03.2006: 10,35,61,660 Equity Shares of Rs. 2/- each) 417.52 207.12

Subscribed and Paid up20,85,10,900 Equity Shares of Rs 2/- each fully paid up

(31.03.2006 : 10,33,11,660 Shares of Rs. 2/- each) 417.02 206.62 (Of the above(a) 10,00,000 Equity Shares of Rs.2/- each were allotted in

1990-91 as fully paid Shares pursuant to a contract for consideration other wise than in cash)

(b)10,33,68,530 Equity Shares of Rs.2 each were issued as fully paid Bonus shares in the ratio of 1:1 by capitalisation of Rs. 206.74 million from General Reserve) (Refer note 3 b of II of Schedule XI)

Total 417.02 206.62

Schedule – I Share Capital

(Rs. in million)

As at As at March 31, 2007 March 31, 2006

Capital ReserveAs per Last Balance Sheet 0.08 0.08Securities Premium As per last Balance Sheet 6,981.72 1,707.35 Add: Premium on shares allotted 94.48 5,352.36Less: Share Issue Expenses – 77.99

7,076.20 6,981.72Contingency ReserveAs per last Balance Sheet 120.00 100.00 Add: Transfer from Profit and Loss Account 20.00 20.00

140.00 120.00Foreign Currency Translation Reserve - Debit Balance (26.79) – General ReserveAs per last Balance Sheet 1,400.00 800.00 Add: Transfer from Profit and Loss Account 700.00 600.00 Less: Amount utilised for issue of Bonus Shares 206.74 – Less: Additional liability relating to employee benefits adjusted in Accounts - Transitional Provision as per AS-15 (Revised) 28.67 – (Net of Deferred Tax of Rs.14.55 mn)

1,864.59 1,400.00Profit and Loss Account - Balance 860.23 710.51Total 9,914.31 9,212.31

Schedule – III Reserves and Surplus

Employee Stock Options Outstanding 18.63 82.53 Less : Deferred Employee Compensation 13.87 51.02(Refer Note 4 of II of Schedule XI)

4.76 31.51 Total 4.76 31.51

Schedule – II Employee Stock Options Outstanding

From BanksTerm Loan – Rupee Loan 609.48 405.41

– Foreign Currency Loan 487.01 – (Refer Note 5 A(a) of II of Schedule XI)

Working Capital Demand Loan 1,973.40 532.00 Cash Credit 424.75 671.27(Refer Note 5 A(b) of II of Schedule XI)

3,494.64 1,608.68From OthersTerm Loan 296.67 147.07(Refer Note 5 A(a) of II of Schedule XI)Vehicle Loans 28.26 23.52(Refer Note 5 A(c) of II of Schedule XI)

324.93 170.59 Total 3,819.57 1,779.27 Installments falling due within next 12 months 410.46 301.51

Schedule – IV Secured Loans

From Banks (Short Term)(Refer Note 5 B of II of Schedule XI) 2,550.00 – From OthersMobilisation Advance 5,033.56 2,849.47 Total 7,583.56 2,849.47 Installments falling due within next 12 months 2,550.00 –

Schedule – V Unsecured Loans


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Nos. Rs. in million Nos. Rs. in million

In Trade Investments (Unquoted)In Subsidiaries

In Equity Shares of Rs. 10/- each, fully paid up NCC Infrastructure Holdings Limited 58673300 586.73 2809300 28.09NCC Urban Infrastructure Limited (Refer Note 1 below) 120000000 1,200.00 12000000 120.00NCC Vizag Urban Infrastructure Limited 47649000 476.49 15851000 158.51OB Infrastructure Limited (Refer Note 2 below) 4769090 467.87 – –Patnitop Ropeway & Resorts Limited 50000 0.50 – – In Shares of Omani Rials one each fully paid upNagarjuna Construction Company Limited and Partners LLC, Oman (Refer Note 3 below) 150000 17.01 105000 11.97Nagarjuna Construction Company International LLC, Oman 1000000 112.00 – – In Shares of US $ 10 each, fully paid upNCC Infrastructure Holdings Mauritius Pte. Ltd. 1911514 853.19 – –

In Other CompaniesIn Equity Shares of Rs. 10/- each, fully paid up (Unquoted)Gautami Power Limited (Refer Note 4 below) 41325000 413.26 38007571 380.08 Brindavan Infrastructure Company Limited (Refer Note 5 below) 9999725 100.00 9999725 100.00SNP Real Estates Private Limited 340000 3.40 250000 2.50SNP Infrastructures Private Limited 340000 3.40 250000 2.50SNP Developers and Projects Private Limited 340000 3.40 250000 2.50SNP Realtors Private Limited 340000 3.40 250000 2.50SNP Ventures Private Limited 340000 3.40 250000 2.50SNP Property Developers Private Limited 340000 3.40 250000 2.50NAC Infrastructure Equipment Limited 999900 10.00 999900 10.00 Akola Urban Co-operative Bank Limited 4040 0.10 4040 0.10 Himachal Sorang Power Private Limited 3400 0.03 3400 0.03Western UP Tollway Limited (Refer Note 6 below) 225000 2.25 – – Jubilee Hills Land Mark Projects Limited 2500000 25.00 – – Bangalore Elevated Tollway Limited (Refer Note 7 below) 80400 0.80 – – In Shares of 'AED' 1000 each fully paid up Nagarjuna Contracting Company Limited, LLC, Dubai 147 1.77 147 1.77 Nagarjuna Facilities Management Services, LLC, Dubai 147 1.72 – – In 9% Redeemable cumulative PreferenceShares of Rs. 100/- each fully paidupBrindavan Infrastructure Company Limited (Refer Note 5 below) 500000 50.00 500000 50.00 In 2% Redeemable Preference Shares of Rs. 100/- each fully paidupJubilee Hills Land Mark Projects Limited 4275000 427.50 – –

Other Investments (Quoted)In Equity Shares of Rs. 10/- each, fully paid up Andhra Bank 11262 1.01 11262 1.01 NCC Finance Limited 9 – 9 – In OthersIDBI Flexi Bonds of Rs. 5000/- each – – 100 0.50 Total 4,767.63 877.06

Aggregate amount of Quoted Investments 1.01 1.01Aggregate amount of Unquoted Investments 4,766.62 876.05Aggregate market value of Quoted Investments 0.86 0.91

Note:1) Of these, 3,600,000 equity shares aggregating in value to Rs. 36.00 million have been pledged to Bank of India for the term loan availed

by NCC Urban Infrastructure Limited. Further shares to the extent of 116,400,000 aggregating in value to Rs. 1164.00 million are subjectto non-disposal undertaking furnished and under lien with the bank.

2) The shares are subject to non-disposal undertaking furnished in favour of consortium of bankers' for term loans availed by OB InfrastructureLimited.

3) Of these, 45,000 are held by the joint venture partner under trust for Nagarjuna Construction Company Limited.4) The shares are subject to Non-Disposal undertaking furnished in favour of the Power Finance Corporation. Further, shares to the extent

of 26,212,652 have been pledged to the said Corporation for the term loan availed by Gautami Power Limited.5) The shares have been pledged in favour of Infrastructure Development Finance Company Limited and Corporation Bank for the term loan

availed by Brindavan Infrastructure Company Limited.6) Of these, 224,600 equity shares aggregating in value to Rs. 2.25 million have been pledged to the consortium of bankers for the term loan

availed by Western UP Tollway Limited.7) Of these, 80,000 equity shares aggregating in value to Rs. 0.80 million have been pledged to the consortium of bankers for the term loan

availed by Bangalore Elevated Tollway Limited.

Schedule – VII Investments Long Term (At cost)

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106




March 31, 2007 March 31, 2006

A. CURRENT ASSETSi) InventoriesMaterials 1,350.25 1,700.23 Finished Goods 0.13 0.07 Work-in-progress 2,402.75 1,806.77 Property Development Cost 287.41 385.52 (Refer Note 7 of II of Schedule XI)

a) 4,040.54 3,892.59 ii) Sundry Debtors (Unsecured)Over Six monthsConsidered Good 262.66 59.30 Considered Doubtful 0.52 8.48

263.18 67.78 Less : Provision for doubtful debts 0.52 8.48Others, Considered Good 5,554.18 2,957.26

b) 5,816.84 3,016.56 iii) Cash and Bank BalancesCash on hand 13.12 8.79 Bank BalanceIn Current AccountsWith Scheduled Banks 1,727.37 1,482.24 With Others (Refer Note 8 of II of Schedule XI) 41.81 – In Deposit AccountsWith Scheduled Banks Margin Money Deposits (Lodged with Banks against 385.07 384.27 guarantees / letters of credit issued)Fixed Deposits 266.63 933.76

c) 2,434.00 2,809.06 Other Current AssetsInterest Accrued on Deposits d) 92.98 38.63

B. LOANS AND ADVANCES(Unsecured and Considered good unless otherwise stated) Advances to

Subsidiaries 561.84 179.91 Associates 683.38 –

1,245.22 179.91 Advances to Suppliers, Sub-contractors and othersConsidered Good 3,263.65 2,487.53 Considered Doubtful 16.76 13.56

3,280.41 2,501.09Less : Provision for doubtful advances 16.76 13.56

3263.65 2487.53Advances recoverable in cash or in kind or for value to be received 336.60 109.83 Advance towards Share Application Money 124.88 532.72 Retention Money – Considered Good 2,000.74 1,582.25

– Considered Doubtful 0.59 0.59 2,001.32 1,582.84

Less : Provision for doubtful retention money 0.59 0.592,000.74 1,582.25

Deposits with Clients and Others 253.18 221.24 Prepaid Expenses 60.42 37.77 Advance Taxes and Tax Deducted at Source 1,294.33 769.73

e) 8,579.02 5,920.98 Total (a + b + c + d + e) 20,963.38 15,677.82

Schedule – VIII Current Assets, Loans and Advances


March 31, 2007 March 31, 2006

a) Current LiabilitiesSundry creditorsDues to Small Scale Industrial Undertakings 2.40 4.83 Dues to Others 4,216.23 2,507.98 Material Advance 619.98 579.43 Advances from Customers/Others 187.85 14.58 Liability towards Investor Education and Protection Fund 111.69 2.52 (Represents unclaimed dividend required to be transferred to the said fund on completion of seven years. No such amount is due as on the Balance Sheet date)Other Liabilities 1,669.23 796.88 Interest Accrued but not due on Loans 9.47 3.91

6,816.85 3,910.13 b) Provisions

Taxation 1,010.29 240.57 Proposed Dividend 83.40 165.30 Dividend Tax (interim and proposed) 37.45 23.18 Employee Benefits 111.99 27.44 Fringe Benefit Tax 1.02 0.91

1,244.15 457.40 Total 8,061.00 4,367.53

Schedule – IX Current Liabilities and Provisions

i) Share Issue Expenses 0.56 0.88Less: Amortized during the year 0.32 0.32

0.24 0.56ii) Project and Other Amenities 21.20 32.82

Less: Amortized / Adjusted during the year 11.54 11.62 9.66 21.20

Total 9.90 21.76

Schedule – X Miscellaneous Expenditure


109

Schedules forming part of Profit and Loss Account for the year ended March 31, 2007

108


Schedules forming part of Profit and Loss Account for the year ended March 31, 2007

(Rs. in million)Year ended Year ended

March 31, 2007 March 31, 2006

Project Division 27,878.06 17,926.66 Others 832.46 477.74Total 28,710.52 18,404.40

Schedule – ‘A’ Turnover


March 31, 2007 March 31, 2006

a) Employees Remuneration and BenefitsSalaries and Other Benefits 721.24 385.18 Contribution to Provident Fund and Other Funds 57.74 39.52 Staff Welfare Expenses 14.11 5.42 Employee Compensation Expense 50.62 43.28 Total (a) 843.71 473.40

b) Administrative ExpensesRent, Rates and Taxes 117.77 75.30 Office Maintenance 56.21 32.19 Electricity Charges 19.48 14.89 Postage, Telegrams and Telephones 32.56 23.68 Travelling and Conveyance 131.22 95.56 Printing and Stationery 22.32 13.74 Insurance 39.04 66.95 Advertisement 12.01 10.86 Tender Documents 9.88 22.50 Legal and Professional Charges 26.25 20.02 Miscellaneous Expenses 52.29 30.45Auditors' Remuneration 7.23 6.91 Directors' Sitting Fees 0.25 0.18 Bad Debts / Advances Written off 24.67 11.64 Provision for Doubtful Debts / Advances 1.90 21.88 Consultation Charges 20.71 15.98 Donations 5.29 2.40 Loss on Assets sold/discarded/written off 6.05 9.91 Miscellaneous Expenditure written offProject and Other Amenities 11.54 11.62 Share Issue Expenses 0.32 0.32 Total (b) 596.99 486.98 Total (a + b) 1440.70 960.38

Schedule – ‘D’ Establishment Expenses

Dividend from Current Investments 0.66 2.21 Profit on Sale of Fixed Assets 263.09 0.88 Miscellaneous Receipts 28.04 17.16 Total 291.79 20.25

Schedule – ‘B’ Other Income

Interest onTerm Loans 194.72 39.02 Working Capital Demand Loans / Cash Credit 157.72 65.15 Mobilisation Advance 135.79 51.36 Vehicle Loans 2.81 2.36 Others 35.05 39.52

526.09 197.41 Less: Gain on Foreign Exchange fluctuation – 27.42Less: Interest Income - from Bank and other Accounts 135.71 65.74(Gross of Tax Deducted at Source Rs. 26.49 million (2005-06 :Rs. 9.76 million))

390.38 104.25 Financial ChargesCommission on – Bank Guarantees 78.89 75.13

– Letters of Credit 17.89 24.88 Bank charges 16.78 12.69

113.56 112.70 Total 503.94 216.95

Schedule – ‘E’ Interest and Financial Charges

Material ConsumptionCement 1,018.34 486.97 Steel 5,257.43 4,453.60 Bitumen 565.94 202.50 Other Construction Material 3,139.23 2,338.26 LPG Steel and components – 16.57 Stores and Spares 159.27 86.65

10,140.21 7,584.55Power and Fuel 26.74 20.61 Sub-contractors Work Bills 9,512.29 6,252.28 Labour Charges 2,899.06 1,777.90 Transport Charges 478.75 206.14 Rates and Taxes Excise Duty 3.61 3.33 Sales Tax 51.71 104.22 Value Added Tax 649.42 261.81 Service Tax 81.68 22.81

786.42 392.17 Repairs and MaintenanceMachinery 293.76 138.53 Others 58.80 40.78

352.56 179.31 Hire Charges for Machinery and others 396.57 337.01 Technical Consultation 90.70 78.26 Royalties, Seigniorage and Cess 63.96 17.83 Watch and Ward 36.39 23.92 Property Development Cost 62.82 12.54 Other Expenses 321.79 114.17 Prior Year Expenses 0.05 10.43

972.28 594.16 (Increase) in Work-in-Progress / Finished GoodsOpening Balance 1,806.84 603.09 Closing Balance 2,402.88 1,806.84

(596.04) (1,203.75)Total 24,572.27 15,803.37

Schedule – ‘C’ Construction and Other Expenses

111

Schedules forming part of the Accounts

I. SIGNIFICANT ACCOUNTING POLICIESa) The Accounts have been prepared on accrual basis under historical cost convention in accordance with the Generally

Accepted Accounting Principles in India and the provisions of the Companies Act, 1956.

b) Fixed Assets and DepreciationFixed Assets are stated at cost of acquisition, less accumulated depreciation thereon. Depreciation is provided onstraight line method at the rates prescribed in Schedule XIV of the Companies Act, 1956 except for constructionaccessories and centering equipment which are depreciated at 20% p.a. based on useful life determined by theManagement. Leasehold improvements are amortised over the period of lease. Fixed assets in joint ventureoperations, which are accounted to the extent of the Company's interest in the venture, are depreciated on StraightLine Method / Written Down Value Method at the rates prescribed in Schedule XIV of the Companies Act, 1956 or athigher rates as stated below:

c) Borrowing CostsBorrowing Costs that are directly attributable to acquisition, construction or production of a qualifying asset arecapitalised as part of the cost of such asset. A qualifying asset is one that necessarily takes substantial period of timei.e., more than 12 months to get ready for its intended use. All other borrowing costs are charged to revenue.

d) Impairment of AssetsThe carrying amount of assets, other than inventories is reviewed at each balance sheet date to determine whetherthere is any indication of impairment. If any such indication exists, the recoverable amount of the assets is estimated.The recoverable amount is the greater of the asset's net selling price and value in use which is determined based onthe estimated future cash flow discounted to their present values. An impairment loss is recognised whenever thecarrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment loss is reversedif there has been a change in the estimates used to determine the recoverable amount.

e) InvestmentsInvestments are classified as long term and current investments. Long Term Investments are carried at cost lessprovision for permanent diminution, if any, in value of such investments. Current investments are carried at lower ofcost and fair value.

f) InventoriesRaw MaterialsRaw Materials, construction materials and stores & spares are valued at weighted average cost. Cost excludesrefundable duties and taxes.

Work in Progressi) Project Division: Work-in-Progress is valued at the contract rates less profit margin / estimates.

ii) Light Engineering Division: Work-in-Progress is valued at lower of cost and net realisable value.

iii) Property Development: Properties under development are valued at cost. Cost comprises all direct developmentexpenditure, administrative expenses and borrowing costs. Land held for resale is valued at lower of cost andnet realisable value.

Finished GoodsFinished goods of Light Engineering Division are valued at lower of cost and net realisable value.

g) Employee BenefitsLiability for employee benefits, both short and long term, for present and past services which are due as per the termsof employment are recorded in accordance with Accounting Standard (AS) 15 (Revised) “Employee Benefits" issuedby the Institute of Chartered Accountants of India.

i) GratuityIn accordance with the Payment of Gratuity Act, 1972 the Company provides for gratuity covering eligibleemployees.

Liability on account of gratuity is:- covered partially through a recognised Gratuity Fund managed by Life Insurance Corporation of India and

contributions are charged to revenue; and

- balance is provided on the basis of valuation of the liability by an independent actuary as at the year end.

ii) SuperannuationThe Company makes annual contribution to an approved superannuation fund covered by a policy with BirlaSunlife Insurance Company Limited. The Company has no further obligation beyond the annual contribution.

iii) Provident FundContribution to Provident fund (a defined contribution plan) made to Regional Provident Fund Commissioner arerecognised as expense.

iv) Compensated AbsencesLiability for leave is treated as a short term liability and is accounted for as and when earned by the employee.

h) Deferred Revenue ExpenditureProjects and Other amenities expenditure incurred upto March 31, 2005, the benefit of which is spread over morethan one year is grouped under Miscellaneous Expenditure and is amortised over the period in which benefits wouldbe derived.

i) Share Issue ExpensesShare issue expenses are written off over a period of 10 years.

j) Revenue Recognitioni) Project Division

Revenue from fixed price construction contracts is recognised by reference to the percentage of completion ofthe contract activity. The stage of completion is determined by survey of work performed and / or on completionof a physical proportion of the contract work, as the case may be, and acknowledged by the contractee. Futureexpected loss, if any, is recognised as expenditure.

ii) Property DevelopmentRevenue is recognised when the company enters into an agreement for sale with the buyer and all significantrisks and rewards have been transferred to the buyer and there is no uncertainty regarding realisability of the saleconsideration.

iii) Light Engineering DivisionRevenue is recognised on despatch of goods to customers.

k) Joint Venture Projectsi) In respect of Joint Venture Contracts in the nature of jointly controlled operations, the assets controlled, liabilities

incurred, the share of income and expenses incurred are recognized in the agreed proportions under respectiveheads in the financial statements.

ii) Assets, Liabilities and Expenditure arising out of contracts executed wholly by the Company pursuant to a joint

110



Schedule – XI Accounting Policies and Notes on Accounts Schedule – XI Accounting Policies and Notes on Accounts (Contd.)

Description Straight Line Method Written Down Value

1) Plant and Machinery 4.75% 15% - 25%2) Furniture and Fixtures 6.33% 10% - 15%3) Office Equipments 4.75% 15% - 25%4) Computers 16.21% 60%5) Tools and Equipments 4.75% 15% - 25%6) Construction Vehicles – 15% - 25%7) Construction Accessories 20% 15% - 25%8) Office Vehicles 9.50% 15% - 25%


113


112



Schedule – XI Accounting Policies and Notes on Accounts (Contd.) Schedule – XI Accounting Policies and Notes on Accounts (Contd.)

venture contract are recognised under respective heads in the financial statements. Income from the contractis accounted net of joint venturer's share under turnover in these financial statements.

iii) Share of turnover attributable to the Company in respect of contracts executed by the other joint venture partnerspursuant to Joint Venture Agreement, is accounted under Turnover in these financial statements.

l) Foreign exchange translation and foreign currency transactionsMonetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year aretranslated at year end rates. The difference in translation of monetary assets and liabilities and realised gains andlosses on foreign exchange transactions other than those relating to fixed assets acquired from outside India arerecognised in the Profit and Loss Account.

Foreign branches are classified as non-integral foreign operations. Assets and Liabilities (both monetary and non-monetary) are translated at the closing rate at the year end. Income and expenses are translated at the monthlyaverage rate at the end of the respective month. All resulting exchange differences are accumulated in a separateaccount 'Foreign Currency Translation Reserve' till the disposal of the net investments.

m) LeasesThe Company's significant leasing arrangements are in respect of operating leases for premises and constructionequipment. The leasing arrangements range from 11 months to 5 years generally and are usually cancellable/renewable by mutual consent on agreed terms. The aggregate lease rents payable are charged as rent in the Profitand Loss Account.

n) Taxesi) Current Tax

Provision for Current Tax is made based on taxable income computed for the year under the Income Tax Act, 1961.

ii) Deferred TaxesDeferred Tax is accounted for by computing the tax effect of timing differences which arise during the year andreverse in subsequent periods. Deferred tax assets are recognized and carried forward only to the extent thatthere is a reasonable certainty that sufficient future taxable income will be available against which such DeferredTax Assets can be realized.

o) Contingency ReserveThe Company transfers to Contingency Reserve out of the Profit and Loss Appropriation Account such amounts as the Management considers appropriate based on their assessment to meet any contingencies relating to substantial expenditure incurred during the maintenance period of a contract, non-realisation of contract bills earlier recognised as income and claims, if any, lodged by the contractees or by sub-contractors or by any third party against the Company in respect of completed projects for which no specific provision has been made.

II. NOTES ON ACCOUNTS1. Contingent liabilities not provided for

a) Letter of credit - Rs.1208.70 million (31-03-2006: Rs.937.38 million).

b) Counter Guarantees given to the Bankers - Rs.9860.05 million (31-03-2006: Rs7477.44 million).

c) Performance guarantees, given on behalf of Subsidiaries and Associates Rs.90.85 million (31-03-2006: Rs54.22million).

d) Corporate Guarantees given to Banks and Financial institutions for financial assistance extended to Subsidiaries,Associates and Joint Ventures Rs.2600.53 million (31-03-2006: Rs.263.14 million).

e) Disputed Seigniorage Charges levied by Director (Mines & Geology) Government of Andhra Pradesh, in respectof which the Company has obtained a stay from the Hon'ble Supreme Court of India - Rs.61.59 million (31-03-2006: Rs.61.59 million).

f) Disputed sales tax liability for which the Company has gone into appeal Rs.71.64 million (31-03-2006: Rs.47.89million).

g) Disputed central excise duty relating to cement plant, which was sold in earlier year, for which the Company has

filed an appeal to CESTAT, Bangalore Rs.28.23 million (31-03-2006: Rs.29.73 million).

h) Disputed sole arbitrator award of Rs. 30.00 million in case of counter claim by Bhartiya Reserve Bank Note

Mudran Private.Limited, against which the Company has filed appeal before City Civil Court,Bangalore. (31-03-

2006: Nil).

i) Joint and several liability in respect of joint venture projects and liquidated damages in respect of delays in

completion of projects - amount not ascertainable.

2. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances

Rs.8.71 million (31-3-2006: Rs.20.91 million)) - Rs.204.41 million (31-3-2006: Rs.75.72 million). Commitment towards

investment in companies net of advances paid Rs. 3237.90 million (31-3-2006: Rs.143.03 million).

3. Share Capital

a) At the Annual General Meeting of the Members of the Company held on August 31, 2006, the members of the

company had approved increase of the authorised capital from Rs.250,000,000/- divided into 125,000,000 Equity

shares of Rs.2/- each to Rs.500,000,000/- divided into 250,000,000 Equity shares of Rs.2/- each. Further, at the

Extra Ordinary General Meeting of the Members of the Company held on February 26, 2007, the members of the

company had approved increase of the authorised share Capital from Rs.500,000,000/- divided into 250,000,000

Equity shares of Rs.2/- each to Rs.600,000,000/- divided into 300,000,000 Equity shares of Rs.2/- each.

b) At the same General Meeting, consent was accorded for issue of bonus shares of Rs.2/- each as fully paid to the

holders of existing shares of the company in the proportion of one equity share of Rs.2/- each for every one

equity share of Rs.2/- each held as on the record date. Consequently, Rs.206.74 million has been transferred

from the General Reserve to Paid up equity Share Capital by capitalisation of General Reserves.

c) During the year, vested Options were exercised and the Company has allotted 56550 (pre-bonus) and 1613900

(post bonus) equity shares in Grant 1 and 320 (pre bonus) and 159940 (post bonus) equity shares in Grant 2 of

Rs.2 each at a premium of Rs.20 per share (pre bonus) and Rs.1 each at a premium of Rs.10 per share (post

bonus) aggregating to Rs.20.76 million. Consequent to the said allotment, Rs.77.46 million representing the

intrinsic value of Rs.61.81 (pre bonus) and Rs.30.905 (post bonus) per option for Grant 1 and Rs.300.05 (pre

bonus) and Rs.150.025 (post bonus) per option for Grant 2 exercised has been transferred to Securities Premium

Account from Employees Stock Options Outstanding Account.

d) Share Warrants

At the Extra-Ordinary General Meeting held on 26.02.07, the members of the company pursuant to the provisions

of sec 81(IA) and other applicable provisions of the Companies Act, 1956 have given consent to the Board for

allotment of 25,00,000 warrants on preferential basis to AVSR Holdings Pvt.Ltd., the promoter of the company,

which are eligible for conversion into equity shares of Rs.2/- each at a premium of Rs.215/- per share. The said

conversion shall be made within a period not exceeding eighteen months from the date of allotment. Accordingly,

the Board has allotted Share warrants to the promoters company and received Rs.54.25 million, being the amount

received against share warrants, which has been shown under "Share Warrants".

4. NCC Employees Stock Options Plan, 2004

a) The company follows the intrinsic value method in which the intrinsic value represents the excess of Market

price over the exercise price of the option. The accounting value is computed by aggregating the intrinsic value

of all the employee options granted during the accounting period. This accounting value is recognized as the

Deferred employee compensation expense with a corresponding obligation to the stock option holders. The

deferred employee compensation expense is amortized over the period of vesting on a straight-line basis. Upon

exercise of option, the proceeds received are credited to Share Capital and Securities Premium Account. Deferred

employee cost, obligation and amortised amount are derecognised upon lapse of options as per the terms of the

scheme.

115


114



Schedule – XI Accounting Policies and Notes on Accounts (Contd.)

b) The Company has granted (net of options lapsed) 88,520 share options of Rs.2 each in 2006-07 under the NCC

Employees Stock option Scheme, 2004 at an exercise price of Rs.22 (2005-06 - 1324710 share options of Rs.2/-

each at an exercise price of Rs.22/- each).

c) Movement in the options under ESOP, 2004

d) Fair Value MethodologyThe fair value of options used to compute pro forma net income and earnings per equity share have beenestimated on the date of grant using Black-Scholes model. Grants with graded vesting have been split up andtreated as individual grants with separate expected lives and vesting periods. The key assumptions used in Black-Scholes model for calculating fair value are (a) risk-free interest rate of 5.85% - 7.01% p.a., (b) expected life of11/2 years to 31/2 years, (c) expected volatility of share price of 52% - 54% and (d) dividend yield of 0.72% - 2.21%p.a. The weighted average fair value of the option works out to Rs.220.73 per Stock Option.

Had compensation cost for the stock options granted been determined based on fair value approach, theCompany's net profit for the year ended March 31, 2007 and earning per share thereof would have been as perthe pro forma amounts indicated as follows:


Rupees Rupees Particulars in million in million

Net Profit (as reported) 1156.61Add: Employee compensation expense based on intrinsic value 50.62

included in net income Tax effect on above (17.04) 33.58

Sub-total 1190.19Less: Employee compensation expense determined under fair 52.54

value method included in net income Tax effect on above (17.68) 34.86

Net Profit (revised) 1155.33

As reported As restatedBasic earnings per share 5.59 5.59Diluted earnings per share 5.55 5.54

Weighted averageOptions exercise price per

Stock Option(Rupees)

Options outstanding at the beginning of year 1995620 11.00Granted during the year 94110 22.00Lapsed during the year 90770 11.00Exercised during the year (pre-bonus) 56870 22.00Exercised during the year (post-bonus) 1773840 11.00Allotted during the year (pre-bonus) 56870 22.00Allotted during the year (post-bonus) 1773840 11.00Options outstanding at the end of year 111380 11.00Options exercisable at the end of year Nil

5. Loan FundsA. Secured Loans

a) Term LoansTerm Loans availed from banks and others are secured by hypothecation of specific assets, comprising plantand machinery, and construction equipment , acquired out of the said loans and personal guarantee of aDirector.

b) Working Capital FacilitiesCash Credit facilities and Working Capital Demand Loans from consortium of banks are secured by:

i) Hypothecation against first charge on stocks, books debts and other current assets of the Project andLight Engineering Division of the company both present and future ranking parri passu with consortiumbanks.

ii) Hypothecation against first charge on all unencumbered fixed assets of the Project Division of thecompany both present and future ranking parri passu with consortium banks.

iii) Equitable mortgage of six properties (Land & Buildings).

iv) Personal guarantee of certain Directors.

c) Vehicle LoansVehicle loans availed are secured by hypothecation of vehicles acquired out of the said loans.

B. Unsecured LoansUnsecured loans from banks to the extent of Rs.750.00 million are guaranteed by certain Directors of theCompany.

6. InvestmentsCurrent investments purchased and sold during the year are as follows:

7. InventoriesProperty Development Cost includes Rs.16.91 million (31-3-2006: Rs.16.91 million) representing the cost of acquisitionof land from different land owners, for which the Company holds General Power of Attorney to deal with such landincluding registration of the sale in the name of the company.

8. Balance with BanksBalance with banks in current account includes balance with non-scheduled banks as follows:

Maximum Balance any time Bank Balance as at Balance as at during the year

31.03.2007 31.03.2006 2006-07 2005-06

Standard Chartered Bank, Oman 41.72 – 750.56 –Bank Muscat, Oman 0.09 – 0.09 –

(Rs. in million)S. No. Particulars No. of units Cost of purchase

1) Prudential ICICI Liquid Fund 13000000.000 130.002) Reliance Liquid Fund 8975774.385 100.003) Principal Mutual Fund 6998460.338 70.004) HDFC Mutual Fund 1918170.832 20.00

Total 320.00


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116



9. Particulars of Loans and Advances in the nature of loans as required by clause 32 of the Listing Agreement

Balance as on Maximum outstanding

Name of the Company 31.03.2007 31.03.2006 2006-07 2005-06

A. SubsidiariesNCC Urban Infrastructure Limited 295.81 179.90 295.81 179.90NCC Vizag Urban Infrastructure Limited 266.04 – 266.04 –

B. AssociatesJubilee Hills Landmark Projects Limited 488.37 387.39 488.37 387.39Nagarjuna Contracting Company LLC 153.37 5.40 153.37 5.40Himalayan Green Energy Private Limited 10.00 – 40.00 –

C. Loans and Advances where there is 221.88 63.39 221.88 63.41no repayment schedule

D. Loans where no interest is charged or interest 211.88 63.39 221.88 63.41is below section 372A of Companies Act, 1956

E. Loans to firms / companies in which directors are interested NCC Finance Limited – 7.46 – 11.33NCC Blue Water Products Limited 58.51 57.99 58.51 58.01

(Rs. in million)

10. Loans and Advances Advances to Suppliers, Sub-contractors and others: Include Rs.323.46 million (31-3-2006:Rs.56.29 million)representing amounts withheld by contractees.

11. List of small scale industrial undertakings to whom amounts are due for more than thirty days is as follows:

Sri Varu Power Tools Jyothi Enterprises Aswathy Spun PipesUsha Spun Pipes Simplex Enterprises KK Hollow BricksVinayak Yellapur Bangalore Industrial Aids Manju Stone CrusherSuper Bright Engineering Co. Integral Systems Mahalakshmi Spun Pipes Co.

The above information has been compiled in respect of parties to the extent of which they could be identified as smallscale industrial undertakings on the basis of information available with the company.

12. The Company has not received any intimation from 'suppliers' regarding their status under the Micro, Small andMedium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the yearend together with interest paid/payable as required under the said Act have not been given.

13. Employee Benefitsa) An amount of Rs.43.22 million being the difference (net of tax effect of Rs.14.55 million) between the liability as

on March 31,2007 on employee benefits including defined plans determined based on the revised AS 15 and theliability as per the Company's previous accounting policy has been adjusted against the opening balance ofGeneral Reserve, in terms of AS 15 (revised).

b) Liability for retiring gratuity as on March 31, 2007 is Rs.30.57 million (31-3-2006: Rs.20.73 million) of whichRs.4.42 million (31-3-2006: Rs.3.15 million) is funded with the Life Insurance Corporation of India and the balanceis included in Provision for Gratuity and Liability for Gratuity and Cost of Compensated absences has beenactuarially determined and provided for in the books.

c) The details of the Company's post-retirement benefit plans for its employees including whole-time directors aregiven below which is certified by the actuary and relied upon by the auditors: * includes Rs.14.55 million tax effect on employee benefits related to transitional provision on adoption of AS 15

(Revised).

31.03.2007 31.03.2006A) Deferred Tax Assets on timing differences due to:

a) Provision for Gratuity and Leave Encashment* 52.48 10.14b) Provision for Doubtful Debts/Advances 7.62 7.36Total 60.10 17.50

B) Deferred Tax Liabilities on timing difference due to:a) Depreciation 172.85 76.92b) Deferred Revenue Expenditure 2.54 6.49Total 175.39 83.41Net Deferred Tax Liability (A-B) 115.29 65.91

(Rs. in million)

CompensatedParticulars Gratuity absences

Net Assets/(Liability) recognized in the balance Sheet as at March 31, 2007

Present value of Obligation 9.13 36.18Fair value of Plan Assets NIL NIL(Liability) / Assets (9.13) (36.18)Un-recognised Past Service Cost 17.58 53.08(Liability) / Assets recognized in the Balance Sheet (26.15) (85.83)Component of Employer’s ExpenseCurrent Service Cost 2.20 6.65Interest Cost 1.41 4.26Expected Return on Plan Assets NIL NILNet Actuarial Gain / (Loss) recognized in the year (0.79) (2.39)Past Service Cost 17.58 53.08Expenses Recognised in the ProfitAnd Loss Account (in Employees Remuneration and benefits–Schedule D) 9.13 36.18Movement in the Net Liability recognized in the Balance sheetOpening Net Liability as on April 1, 2006 17.58 53.08Expenses Recognised in the Profit and Loss Account 9.13 36.18Payment made to employee on Retirement 0.56 3.43Closing Net Liability as on March 31, 2007 26.15 85.83Discount Rate 8% p.a. NIL

(Rs. in million)

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority,promotion and other relevant factors, such as supply and demand in the employment market.

14. Current tax and Deferred Taxa) Consequent to the insertion of an "Explanation" in Section 80 IA of the Income Tax Act, 1961, by the Finance Act,

2007 with retrospective effect from assessment year 2000-01, the company has reviewed its claim for benefitunder Section 80 IA and as a measure of prudence, made full provision for all such benefits claimed. The resultsfor the period ended March 31, 2007 includes an additional charge of Rs.62.24 crores of which Rs.36.25 croresrelate to earlier years.

b) Deferred Tax Liability as at March 31, 2007 comprises of the following:

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118




15. Related Party TransactionsFollowing is the list of related parties and relationships:

S. No. Particulars S. No. Particulars

A) Subsidiaries 38) NCC - PNC

1) NCC.Infrastructure Holdings Ltd 39) NCC - SJRIPL

2) NCC Urban Infrastructure Ltd 40) Himachal JV

3) NCC Vizag Urban Infrastructure Ltd 41) NCC - KNR

4) Nagarjuna Construction Co.Ltd and Partners LLC 42) NCC - NEC - Maytas

5) OB Infrastructure Ltd D) Associates

6) NCC.Infrastructure Holdings Mauritius Pte. Ltd 43) Himalayan Green Energy Pvt.Ltd.

7) Nagarjuna Construction Co. International LLC 44) Jubilee Hills Landmark Projects Ltd

8) Patnitop Ropeway and Resorts Ltd. 45) Himachal Sorang Power Private Ltd

B) Step-down Subsidiaries 46) Nagarjuna Contracting Co.LLC

9) Liquidity Ltd.

10) Dhatri Developers & Projects Pvt.Ltd

11) Sushanti Avenues Private Ltd E) Key Management Personnel

12) Sushruta Real Estates Private Ltd 47) Sri AVS Raju

13) PRG Estates (P) Ltd 48) Sri AAV Ranga Raju

14) Thrilekya Real Estates (P) Ltd 49) Sri NR Alluri

15) Varma Infrastructure (P) Ltd. 50) Sri JV Ranga Raju

16) Nandyala Real Estates (P) Ltd 51) Sri AGK Raju

17) Kedarnath Real Estates (P) Ltd. 52) Sri ASN Raju

18) AKHS Homes (P) Ltd. 53) Sri RN Raju

19) JIC Homes (P) Ltd. 54) Sri AVN Raju

20) Sushanthi Housing (P) Ltd.

21) CSVS Property Developers (P) Ltd.

22) Vera Avenues (P) Ltd.

23) Sri Raga Nivas Property Developers (P) Ltd.

24) VSN Property Developers (P) Ltd.

25) M A Property Developers (P) Ltd.

26) Vara Infrastructure (P) Ltd.

27) Sri Raga Nivas Ventures (P) Ltd. F) Relatives of Key Management Personnel

28) Mallelavanam Property Developers (P) Ltd. 55) Smt. A.Neelaveni

29) Varaprada Real Estates (P) Ltd. 56) Smt. A.Bharathi

30) Sradha Real Estates (P) Ltd

31) NCC Urban Lanka (Private) Ltd.

C) Joint Ventures G) Enterprises owned or significantly

influenced by key management personnel

or their relatives

32) Brindavan Infrastructure Co.Ltd 57) NCC Blue Water Products Limited

33) Western UP Tollway Ltd 58) Swetha Estates

34) Bangalore Elevated Tollway Ltd 59) R.R.V. Constructions Private Limited

35) Premco - NCC 60) NCC Finance Limited

36) NCC - MAYTAS 61) Swetha Capital Private Limited

37) SDB - NCC - NEC 62) Sirisha Memorial Charitable Trust

Related Party transactions during the period ended March 31, 2007 are as follows:

Key Enterprises owned orJoint Management significantly

S. Particulars Subsidiaries Associates Ventures Personnel Influenced by KeyNo. and Management Personnel

relatives or their Relatives

1) Share Application Money pending allotment 50.07 – – – –– 497.23 – – –

2) Investments 3395.21 454.02 3.05 – –318.57 6.73 – – –

3) Loans 561.85 110.98 – – –– – – – –

4) Advances granted / (received) 52.63 160.86 1.09 – (10.60)174.52 392.97 – (65.46)

5) Sale of Fixed Assets 270.00 – – – –– – – – –

6) Share of Profit – – 47.12 – –– – 54.92 – –

7) Works Contract Receipt – – 661.75 – –– – – –

8) Other Income 4.71 49.57 69.18 – –– – 70.11 – –

9) Sub–Contract Jobs – – – – 49.08– – – – 61.71

10) Remuneration – – – 111.43 –– – – 72.76 –

11) Rent paid – – – 0.75 5.64– – – 0.83 3.70

12) Debit Balances outstanding as on 31.03.2007NCC Urban Infrastructure Limited 365.81 – – – –

179.90 – – – –NCC Vizag Urban Infrastructure Limited 266.04 – – – –

– – – – –NCC Infrastructure Holdings Limited 0.02 – – – –

0.01 – – – –Nagarjuna Contracting Company LLC – 153.37 – – –

– 5.40 – – –Nagarjuna Construction Company & 38.78 – – – –Partners LLC (5.39) – – –Nagarjuna Construction Company 9.60 – – – –International LLC – – – – –Himalayan Green Energy Private Limited – 10.00 – – –

– – – – –Patnitop Ropeway & Resorts Limited 0.04 – – –

– – – – –OB Infrastructure Ltd. 4.20 – – –

– – – – –Brindavan Infrastructure Company Limited – – 19.10 – –

– – 0.18 – –Himachal Sorang Power Pvt Ltd. – 12.89 – – –

– – – – –Jubilee Hills Landmark Projects Limited – 488.37 – – –

– 839.90 – – –NCC Blue Water Products Limited – – – – 58.51

– – – – 57.98R.R.V. Constructions Private Limited – – – – –

– – – – 3.66NCC Finance Limited – – – – –

– – – – 7.4713) Credit Balances outstanding as on 31.03.2007

Bangalore Elevated Tollway Limited – – 234.30 – –– – – – –

Western UP Tollway Limited – – 230.26 – –– – – – –

Figures in italics represent previous year's figures

(Rs. in million)


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120


Schedules forming part of the AccountsSchedule – XI Accounting Policies and Notes on Accounts (Contd.)

Disclosure in respect of transactions which are more than 10% of the total transactions of the same type with relatedparties during the year.


17. Segmental ReportingThe Company's operations predominantly consist of construction / project activities. Hence there are no reportablesegments under Accounting Standard - 17. During the year under report, substantial part of the Company's business


16. The Company's interest in Jointly Controlled Entities as on March 31, 2007 and its proportionate share in the Assets,Liabilities, Income and Expenditure of the Jointly Controlled Entities as on March 31, 2007 are given below:

Particulars 2006-07 2005-06

Share Application Money pending allotment- OB Infrastructure Limited 26.56 –– NCC Vizag Urban Infrastructure Limited 23.51 –– Jubilee Hills Landmark Project Limited – 452.50Investments– NCC Infrastructure Holdings Limited 558.64 28.09– NCC Urban Infrastructure Limited 1080.00 120.00– NCC Infrastructure Holdings Mauritius Pte.Limited 853.19 –– OB Infrastructure Limited 467.86 –– Jubilee Hills Landmark Project Limited 452.50 –– NCC Vizag Urban Infrastructure Limited – 158.51Loans– NCC Vizag Urban Infrastructure Limited 266.04 –– NCC Urban Infrastructure Limited 295.81 –– Jubilee Hills Landmark Project Limited 100.98 –Advances granted / (received)– Nagarjuna Construction Company & Partners LLC 38.78 –– Nagarjuna Contracting Company LLC 147.97 –– NCC Urban Infrastructure Limited – 179.90– Jubilee Hills Landmark Project Limited – 387.39Rent paid– Swetha Estates 4.06 2.76– Shyamala Aqua Farms 1.20 –Share of Profit – SDB-NCC-NEC JV 17.48 28.41– NCC-PNC JV 10.43 6.99– NCC-VEE JV 8.44 –– NCC-Maytas – 7.14Other Income– Maytas-NCC JV 23.05 9.80– DIC-NCC JV 42.17 33.99– Jubilee Hills Landmark Project Limited 48.53 –– SDB-NCC – 9.88Work Contract Receipt– Bangalore Elevated Tollway Limited 650.45 –

(Rs. in million)

Name of the Percentage Assets Liabilities Contingent Capital Income ExpenditureCompany of Holding Liabilities Commitment

Western UP Tollway Ltd. 30.00% 391.91 391.91 10.89 1213.31 – –Bangalore Elevated Tollway Ltd. 33.50% 1232.59 1232.59 – 1217.93 – –Brindavan Infrastructure Co. Ltd. 33.33% 818.91 818.91 40.69 – 186.74 120.62

(Rs. in million)

has been carried out in India. The conditions prevailing in India being uniform, no separate geographical disclosuresare considered necessary.

18. Earning Per Share

19. Auditors' Remuneration


a) Net Profit before prior year tax 1519.14 1039.04b) Net Profit after prior year tax available for equity shareholders 1156.61 1039.04

Nos. Nos.c) Weighted Average number of equity shares for Basic EPS 206823019 172075745

Add: Adjustment for outstanding options under ESOP 1677269 2374547d) Weighted Average number of equity shares for Diluted EPS 208500288 174450292e) Face value per share Rs.2 Rs.2f) Basic EPS before prior year taxation Rs.7.35 Rs.6.04g) Basic EPS after prior year taxation Rs.5.59 -h) Diluted EPS before prior year taxation Rs.7.29 Rs.5.96i) Diluted EPS after prior year taxation Rs.5.55 -

(Rs. in million)


a) Audit fee 6.84 6.54b) Tax Audit fee 0.24 0.29c) Certification fee 0.15 0.08

TOTAL 7.23 6.91

(Rs. in million)

20. Managerial RemunerationRemuneration to Chairman, Managing Director, Executive Director and other Whole-time Directors.

Fees mentioned above do not include service tax and education cess thereon.

Particulars 31.03.2007 31.03.2006Salaries 24.68 18.84Perquisites 2.18 2.53Commission 79.80 47.67Sub-total 106.66 69.04Sitting Fee 0.25 0.18Contribution to Provident Fund & Superannuation Fund 4.77 3.72Total 111.68 72.94

(Rs. in million)

Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956

Particulars 2006-07 2005-06Profit before Taxation 2186.45 1262.38Add: Managerial Remuneration 111.43 69.04

Provision for Doubtful Debts / Advances 1.90 21.88Loss on Sale of Fixed Assets / Written off Assets 6.05 9.91

2305.83 1363.21Less: Profit on Sale of Assets 0.32 0.88

Profit on Sale of Land 262.77 -Bad Debts written off against the provision created earlier 6.64 -

Profit for the year as per Section 349 2036.10 1362.33Commission to Non-executive Directors @1% 20.40 13.62Commission to Managing Director @1% 20.40 13.62Commission to Directors @1.5% 30.50 20.43Commission to Directors @0.5% (for 10 months) 8.50 -Total 79.80 47.67

(Rs. in million)

123


122



Schedule – XI Accounting Policies and Notes on Accounts (Contd.) Schedule – XI Accounting Policies and Notes on Accounts (Contd.)

21. Expenditure in Foreign Currency

Particulars 2006-07 2005-06On account of Travel 1.11 2.79On account of Capital Goods 251.38 75.32Share Issue expenses – 134.29

(Rs. in million)

22. Disclosure pursuant to Accounting Standard - 7 "Construction Contracts"

Sl. No. Particulars 2006-07 2005-06

1) Amount of contract revenue recognised as revenue in the period 25297.03 14564.472) Aggregate amount of costs incurred and recognised profits

(less recognised losses) up to the reporting date 25284.32 14535.703) Amount of advances received 5007.08 2582.654) Amount of retention 1855.94 1332.00

(Rs. in million)

23. Additional information pursuant to provisions of Para 3, 4C and 4D of Part - II of Schedule VI of Companies Act, 1956in respect of Light Engineering Division

31.03.2007 31.03.2006Qty. Nos. Value Qty. Nos. Value

CAPACITY PRODUCTION SALES & STOCKS1. Capacity

a) Licensed Capacity NA NAb) Installed Capacity 376,000 376,000

(as certified by Management and relied upon by Auditors, being a technical matter)

2. ProductionCylinders – – 25,998 21.27

3. SalesCylinders – – 26,138 21.39

4. Opening StockCylinders 360 0.05 500 0.17

5. Closing StockCylinders 360 0.05 360 0.05

6. Particulars of Raw Material ConsumedSteel (MT) – – 499.36 15.12LPG Components – – – 1.45

7. Value of Imported and Indigenous material Consumed and % of each to total consumptiona) Raw Materials

Imported – – –Indigenous – 100% 16.57

b) Stores & SparesImported – – –Indigenous - 100% 2.28

(Rs. in million)

24. Consumption of Materials – Project Division

25. Figures of previous year have been regrouped / rearranged wherever necessary to conform to the current yearpresentation.

31.03.2007 31.03.2006Qty. Nos. Value Qty. Nos. Value

Value of Imported and Indigenous material Consumed and % of each to total consumptiona) Raw Materials

Imported – – – –Indigenous 100% 9980.94 100% 7481.33

b) Stores & SparesImported – – – –Indigenous 100% 159.27 100% 84.37

(Rs. in million)

Signatures to Schedules I to XI and A to E.


M. V. Srinivasa Murthy A. A. V. Ranga RajuCompany Secretary & Managing DirectorC.G.M. (Legal)

R. S. Raju A. G. K. RajuC.G.M.(F&A) Executive Director


124


Balance Sheet Abstract and Company’s General Business Profile

Public Issue

Bonus Issue

3 1 0 3

Registration No.

Balance Sheet Date

I. Registration Details

II. Capital Raised during the year (Amount in Rs. Thousands)

Total Liabilities

III. Position of Mobilisation & Deployment of Funds (Amount in Rs. Thousands)

2 0 0 7

Date Month Year

Private Placement(includes share premium)

Paid-up Capital

Sources of Funds

Total Assets

Reserves & Surplus

IV. Performance of Company (Amount in Rs. Thousands)

Item Code No. (ITC Code) Not allotted

Product Description Construction Activity Cylinders Manufacturing Activity

V. Generic Names of two Principal Products/Services of the Company (As per monetary terms)

Net Fixed Assets Investments

Turnover Total Expenditure

Application of Funds

2 1 9 0 8 7 6 0

CIN No: L72200AP1990PLC011146

4 1 7 0 2 0

2 9 0 0 2 3 1 0 2 6 8 1 5 8 6 0

Profit/(Loss) before Tax Profit/(Loss) after Tax2 1 8 6 4 5 0 1 1 5 6 6 1 0

Earnings Per Share in Rs. Dividend Rate%7 . 3 5 6 0

4 2 2 8 8 5 0 4 7 6 7 6 3 0

Net Current Assets Misc. Expenditure1 2 9 0 2 3 8 0 9 9 0 0

Accumulated Losses N I L

N I L

Rights Issue N I L

State Code 0 1

2 0 6 7 4 0

N I L

2 1 9 0 8 7 6 0

9 9 1 4 3 1 0

Share Warrants ESOP Outstanding5 4 2 5 0 4 7 6 0

Unsecured Loans 7 5 8 3 5 6 0

Deferred Tax Liability 1 1 5 2 9 0

Secured Loans 3 8 1 9 5 7 0

125

Auditors’ Report

1. We have audited the attached Consolidated BalanceSheet of Nagarjuna Construction Company Limited ('theCompany') and its subsidiaries, joint ventures andAssociates ('the Company, its subsidiaries, joint venturesand Associates constitute 'the Group') as at March 31,2007 and also the Consolidated Profit and Loss Accountand the Consolidated Cash Flow Statement for the yearended on that date both annexed thereto in which areincorporated the returns from the Oman branch auditedby another auditor. These consolidated financialstatements are the responsibility of the Company'sManagement and have been prepared by themanagement on the basis of separate financialstatements and other financial information regardingcomponents. Our responsibility is to express an opinionon these consolidated financial statements based on ouraudit.

2. We conducted our audit in accordance with the auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accountingprinciples used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. a. As stated in Note 2 (a) of Schedule XI to the financialstatements, the consolidated financial statementsinclude Group's share of total assets of Rs. 2.50million as at March 31, 2007, Group's share of totalrevenue of Rs. Nil and net cash flows of Rs. 2.50million for the year then ended in respect of fivesubsidiaries which have been considered on the basisof unaudited financial statements prepared by themanagement.

b. We did not audit the financial statements of one jointventure, whose financial statements reflect Group's

share of total assets of Rs. 845.53 million as at March31, 2007, Group's share of total revenue of Rs. 186.76million, net cash flows of Rs. 4.84 million and Group'sshare of profit Rs. 58.69 million for the year thenended. These financial statements and other financialinformation have been audited by other auditorswhose reports have been furnished to us and ouropinion is based solely on the report of other auditors.

c. As stated in Note 2 (b) of Schedule XI to the financialstatements, the consolidated financial statementsinclude Group's share of profit / loss of Rs. NIL inrespect of two associates which have beenconsidered on the basis of unaudited financialstatements prepared by the management.

4. We report that:a. the Consolidated Financial Statements have been

prepared by the Company's management inaccordance with the requirements of AccountingStandard-21: Consolidated Financial Statements,Accounting Standard-23: Accounting for Investmentsin Associates in Consolidated Financial Statementsand Accounting Standard-27: Financial Reporting ofInterests in Joint Ventures issued by the Institute ofChartered Accountants of India;

b. Subject to paragraph 3 above, in our opinion and tothe best of our information and according to theexplanations given to us, the attached ConsolidatedFinancial Statements give a true and fair view inconformity with the accounting principles generallyaccepted in India:

i) in the case of the Consolidated Balance Sheet, ofthe state of affairs of the Group as at March 31,2007;

ii) in the case of the Consolidated Profit and LossAccount, of the profit of the Group for the yearended on that date; and

iii) in the case of the Consolidated Cash FlowStatement, of the consolidated cash flows of theGroup for the year ended on that date.


M. Bhaskara Rao P.R. RameshPartner PartnerMembership No. 5176 Membership No. 70928

Place: Hyderabad,Dated: May 28, 2007

The Board of DirectorsNagarjuna Construction Company Limited

127126

Consolidated Profit and Loss Account for the year ended March 31, 2007


Consolidated Balance Sheet as at March 31, 2007

(Rs. in million)

Schedule As at As at March 31, 2007 March 31, 2006

SOURCES OF FUNDSShareholders’ FundsShare Capital I 417.02 206.62 Employees Stock Options Outstanding II 4.76 31.51 Share Warrants - Advance Received (Refer Note 5 d of II of Schedule XI) 54.25 – Reserves and Surplus III 9,689.02 9,206.89 Share Application Money – 0.98

10,165.05 9,446.00 Minority Interest 577.59 4.37 Loan FundsSecured Loans IV 5,970.55 1,779.27 Unsecured Loans V 7,161.23 2,849.47

13,131.78 4,628.74 Deferred Tax Liability (Net) 115.26 65.91 (Refer note 12 b of II of Schedule XI)Total 23,989.68 14,145.02 APPLICATION OF FUNDSFixed AssetsGross Block VI 6,205.45 2,570.06 Less : Depreciation 1,046.18 720.04 Net Block 5,159.27 1,850.02 Capital Work in Progress 2,040.57 87.61

7,199.84 1,937.63Investments VII 1,014.80 561.54 Current Assets, Loans and Advances VIIIInventories 6,304.38 3,892.59 Sundry Debtors 6,052.65 3,016.56 Cash and Bank Balances 2,933.29 2,811.21 Other Current Assets 93.02 38.63 Loans and Advances 9,360.52 6,230.15

24,743.86 15,989.14 Less : Current Liabilities and Provisions IX

Liabilities 7,724.63 3,908.04 Provisions 1,254.54 457.45

8,979.17 4,365.49 Net Current Assets 15,764.69 11,623.65 Miscellaneous Expenditure X 10.35 22.20 (To the extent not written off or adjusted)Total 23,989.68 14,145.02 Accounting Policies and Notes on Accounts XI





C.G.M. (Legal)






C.G.M. (Legal)


(Rs. in million)Schedule Year ended Year ended

March 31, 2007 March 31, 2006

INCOMETurnover A 29,485.50 18,404.40 Other Income B 34.62 20.25

29,520.12 18,424.65 EXPENDITUREConstruction and Other Expenses C 25,010.38 15,803.48 Establishment Expenses D 1,547.03 966.35 Interest and Financial Charges E 578.98 217.64 Depreciation VI 380.79 181.62

27,517.18 17,169.09 Profit before Tax 2,002.94 1,255.56 Provision for Taxation – Current Tax 600.31 214.64

– Deferred Tax 63.92 (0.53)– Fringe Benefit Tax 11.79 9.30

676.02 223.41 Profit before Prior year Tax 1,326.92 1,032.15 Less: Prior Year Tax 362.53 – Profit After Prior Year Tax 964.39 1,032.15 Add: Share of Loss of Minority Interest 0.01 1.36 Add: Share of Profit (Net) from Associate Companies (Net of Tax) 0.25 0.26 – 1.36 Net Consolidated Profit 964.65 1,033.51 Balance in Profit and Loss Account brought forward 704.98 479.95 Balance Available for Appropriation 1,669.63 1,513.46 APPROPRIATIONSInterim Dividend 166.04 – Proposed Dividend 83.40 165.30 Dividend Tax (Interim and Proposed) 37.45 23.18 Transfer to General Reserve 700.30 600.00 Transfer to Legal Reserve 2.13 – Transfer to Contingency Reserve 20.00 20.00

1,009.32 808.48 Balance carried to Balance Sheet 660.31 704.98 Earnings per share of face value of Rs. 2/- each.Basic – Before prior year Tax 6.42 –

– After prior year Tax 4.67 6.01 Diluted – Before prior year Tax 6.37 –

– After prior year Tax 4.63 5.93 Accounting Policies and Notes on Accounts XI


129

Consolidated Cash Flow Statement (Contd.) for the year ended March 31, 2007

128


Consolidated Cash Flow Statement for the year ended March 31, 2007

(Rs. in million)


A) CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before tax 2,002.94 1,255.56

Adjustments for

Depreciation 380.79 181.62

Miscellaneous expenditure written off 12.23 11.98

Provision for doubtful advances 1.90 21.88

Provision for gratuity and leave encashment 84.55 11.92

Loss on Sale of Assets 6.05 9.91

Profit on Sale of assets (0.32) (0.88)

Interest and financial charges 578.98 217.64

Income from current investments (0.66) (2.21)

Employee Compensation Expense 50.62 43.28

Operating Profit before Working Capital Changes 3,117.08 1,750.70

Adjustments for changes in

Trade and Other Receivables (6,090.65) (3,950.45)

Inventories (2,411.79) (2,369.19)

Trade Payables and Other Liabilities 3,694.15 1,124.78

Cash generated from Operations (1,691.21) (3,444.16)

Taxes paid (719.72) (437.11)

Net Cash used in operating activities (2,410.93) (3,881.27)

B) CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets and other capital expenditure (5,692.46) (1,034.76)

Proceeds from sale of Fixed Assets 44.50 25.54

Investment in other companies including share application money (5.69) (686.99)

Incorporation expenses (0.38) (0.48)

Interest received 76.61 48.87

Income from current investments 0.66 2.21

Net Cash used in Investing Activities (5,576.76) (1,645.61)

(Rs. in million)


C) CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Issue of Shares 604.30 5,308.46

Long Term Funds borrowed 4,191.28 1,131.16

Mobilisation advances received from customers 4,311.76 849.50

Interest paid (697.62) (281.88)

Dividend and Dividend Tax paid (245.35) (107.62)

Net Cash from Financing Activities 8,164.37 6,899.62

D) Net change in cash and cash equivalents (A+B+C) 176.68 1,372.74

Cash and Cash Equivalents as at April 1 (Opening Balance) 2,811.21 1,438.47

Cash and Cash Equivalents as at March 31 (Closing Balance) 2,987.89 2,811.21

NET CASH INFLOW 176.68 1,372.74

Note:1) The Cash Flow Statement is prepared in accordance with the indirect Method stated in Accounting Standard 3 on Cash

Flow Statements and presents the cash flows by operating,investing and financing activities.

2) Cash and Cash Equivalents as on March 31, 2007 represent cash and bank balances which include Rs.435.48 million inMargin money Deposits lodged with Banks against letters of guarantee and Rs.111.69 million in Unclaimed Dividendaccount.

3) Figures in brackets represent cash outflows.

4) Notes on accounts stated in Schedule XI form an integral part of the Cash Flow Statement.

Sl. No. Particulars March 31, 2007 March 31, 2006a) Cash on hand and Balances with banks 2,933.29 2,811.21

b) Effect of Exchange Rate changes 54.60 –

c) Cash and Cash Equivalents 2,987.89 2,811.21




C.G.M. (Legal)


131

Schedules forming part of the Consolidated Balance Sheet as at March 31, 2007

130



(Rs. in million)


Authorised Capital30,00,00,000 Equity Shares of Rs.2/- each 600.00 250.00

(31.03.2006 : 12,50,00,000 Shares of Rs. 2/- each)(Refer Note 5 a of II of Schedule XI)

Issued Capital20,87,60,900 Equity Shares of Rs.2/- each

(31.03.2006 : 10,35,61,660 Equity Shares of Rs. 2/- each) 417.52 207.12

Subscribed and Paid up20,85,10,900 Equity Shares of Rs 2/- each fully paid up

(31.03.2006 : 10,33,11,660 Shares of Rs. 2/- each) 417.02 206.62 (Of the abovea) 10,00,000 Equity Shares of Rs.2/- each were alloted

in 1990-91 as fully paid Shares pursuant to a contract for consideration other wise than in cash)

b)10,33,68,530 Equity Shares of Rs.2 each were issued as fully paid Bonus shares in the ratio of 1:1 by capitalisation of Rs. 206.74 millions from General Reserve)(Refer note 5 b of II of Schedule XI)

Total 417.02 206.62

Schedule – I Share Capital

(Rs. in million)


Capital ReserveAs per Last Balance Sheet 0.08 0.08 Securities Premium As per last Balance Sheet 6,981.72 1,707.35 Add : Premium on shares alloted 94.48 5,352.36 Less : Share Issue Expenses – 77.99

7,076.20 6,981.72 Legal ReserveTransfer from Profit and Loss Account 2.13 – (Refer Note 7 of II of Schedule XI)Contingency ReserveAs per last Balance Sheet 120.00 100.00 Add : Transfer from Profit and Loss Account 20.00 20.00

140.00 120.00 Foreign Currency Translation Reserve - Debit BalanceAs per last Balance Sheet 0.11 – Add : Accumulation during the year (54.71) 0.11

(54.60) 0.11 General ReserveAs per last Balance Sheet 1,400.00 800.00 Add : Transfer from Profit and Loss Account 700.30 600.00 Less : Issue of Bonus Shares 206.74 – Less : Addittional liability relating to employee benefits adjusted

in Accounts - Transitional Provison as per AS-15 (Revised) 28.66 – (Net of Deferred Tax of Rs. 14.55 mn)

1,864.90 1,400.00Profit and Loss Account - Balance 660.31 704.98 Total 9,689.02 9,206.89

Schedule – III Reserves and Surplus

Employee Stock Options OutstandingEmployee Stock Options Outstanding 18.63 82.53 Less : Deferred Employee Compensation 13.87 51.02

(Refer Note 6 of II of Schedule XI)4.76 31.51

TOTAL 4.76 31.51

Schedule – II Employee Stock Options Outstanding

From BanksTerm Loan - Rupee Loan 1,062.50 405.41 Foreign Currency Loan (Refer Note 8 A (a) of II of Schedule XI) 487.01 – Working Capital Demand Loan 1,973.40 532.00 Cash Credit 424.75 671.27 (Refer Note 8 A (b) of II of Schedule XI)

3,947.66 1,608.68From OthersTerm Loan (Refer Note 8 A (a) of II of Schedule XI) 296.67 147.07 Vehicle Loans (Refer Note 8 A (c) of II of Schedule XI) 43.43 23.52

340.10 170.59 Share of Joint Ventures 1,682.79 – TOTAL 5,970.55 1,779.27 Installments falling due within next 12 months 410.46 301.51

Schedule – IV Secured Loans

From Banks (Short Term) (Refer Note 8 B of II of Schedule XI) 2,550.00 – From Others

Mobilisation Advance 4,610.56 2,849.47 Share of Joint Ventures 0.67 – Total 7,161.23 2,849.47 Installments falling due within next 12 months 2,550.00 –

Schedule – V Unsecured Loans


132 133



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March 31, 2007 March 31, 2006

Nos. Rs. in million Nos. Rs. in million

Long Term (At Cost)In Trade Investments (Unquoted)

In Other CompaniesIn Equity Shares of Rs. 10/- each, fully paid upGautami Power Limited (Refer Note below) 41325000 413.25 38007571 380.08 Brindavan Infrastructure Company Limited – – 9999725 100.00 SNP Real Estates Private Limited 340000 3.40 250000 2.50 SNP Infrastructures Private Limited 340000 3.40 250000 2.50 SNP Developers and Projects Private Limited 340000 3.40 250000 2.50 SNP Realtors Private Limited 340000 3.40 250000 2.50 SNP Ventures Private Limited 340000 3.40 250000 2.50 SNP Property Developers Private Limited 340000 3.40 250000 2.50 NAC Infrastructure Equipment Limited 999900 10.00 999900 10.00 Akola Urban Co-operative Bank Limited 4040 0.10 4040 0.10 Himachal Sorang Power Private Limited 3400 0.03 3400 0.03 Himalayan Green Energy Private Limited 1000000 113.77 – – Western UP Tollway Limited – – 225000 2.25 Jubilee Hills Land Mark Projects Limited 2500000 25.00 – – Bangalore Elevated Tollway Limited – – 80400 0.80 In Shares of 'AED' 1000 each fully paid upNagarjuna Contracting Company Limited, LLC, Dubai 147 2.52 147 1.77 Nagarjuna Facilities Management Services, LLC, Dubai 147 1.22 – – In 9% Redeemable cumulative Preference Shares of Rs. 100/- each fully paidupBrindavan Infrastrucutre Company Limited – – 500000 50.00 In 2% Redeemable Preference Shares of Rs. 100/- each fully paid upJubilee Hills Land Mark Projects Limited 4275000 427.50 – –

Other Investments (Quoted)In Equity Shares of Rs. 10/- each , fully paid upAndhra Bank 11262 1.01 11262 1.01 NCC Finance Limited 9 – 9 – In OthersIDBI Flexi Bonds of Rs. 5000/- each – – 100 0.50

Total 1,014.80 561.54

Aggregate amount of Quoted Investments 1.01 1.01 Aggregate amount of Unquoted Investments 1,013.79 560.53 Aggregate market value of Quoted Investments 0.86 0.91

Note:The shares are subject to Non-Disposal undertaking furnished in favour of the Power Finance Corporation. Further, shares tothe extent of 26,212,652 have been pledged to the said Corporation for the term loan availed by Gautami Power Limited.

Schedule – VII Investments

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Mar

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135


134




March 31, 2007 March 31, 2006

A. CURRENT ASSETSi) Inventories

Materials 1,379.33 1,700.23 Finished Goods 0.13 0.07 Work-in-progress 2,877.87 1,806.77 Property Development Cost (Refer Note 9 of II of Schedule XI) 2,047.05 385.52

a) 6,304.38 3,892.59 ii) Sundry Debtors (Unsecured)

Over Six monthsConsidered Good 400.30 59.30 Considered Doubtful 0.52 8.48

400.82 67.78 Less : Provision for doubtful debts 0.52 8.48 Others, Considered Good 5,554.18 2,957.26

5,954.48 3,016.56 Share of Joint Ventures 98.17 –

b) 6,052.65 3,016.56 iii) Cash and Bank Balances

Cash on hand 13.49 8.79 Bank Balance :

In Current AccountsWith Scheduled Banks 1,771.41 1,484.28 With Others 105.90 0.10

In Deposit AccountsMargin Money Deposits 435.48 384.27 (Lodged with Banks against guarantees / letters of credit issued)Fixed Deposits 266.63 933.77


c) 2,933.29 2,811.21 OTHER CURRENT ASSETS

Interest Accrued onDeposits 92.98 38.63

Share of Joint Ventures 0.04 – d) 93.02 38.63

B. LOANS AND ADVANCES(Unsecured and Considered good unless otherwise stated) Advances to

Associates 683.38 – 683.38 –

Advances to Suppliers, Sub-contractors and Others- For Others

Considered Good 4,500.90 2,912.01 Considered Doubtful 16.76 13.56

4,517.66 2,925.57 Less : Provision for doubtful advances 16.76 13.56

4,500.90 2,912.01Advances recoverable in cash or in kind orfor value to be received 274.69 112.64 Advance towards Share Application Money 109.62 557.19

Schedule – VIII Current Assets, Loans and Advances


March 31, 2007 March 31, 2006

Retention MoneyConsidered Good 2,044.95 1,582.26 Considered Doubtful 0.59 0.59

2,045.54 1,582.84 Less : Written off During the year 0.59 0.59

2,044.95 1,582.26 Deposits with Clients and Others 349.14 256.64 Prepaid Expenses 61.93 39.61 Advance Taxes and Tax Deducted at Source 1,295.06 769.80 Share of Joint Ventures 40.85 –

e) 9,360.52 6,230.15 Total (a + b + c + d + e) 24,743.86 15,989.14

Schedule – VIII Current Assets, Loans and Advances (contd.)

a) Current LiabilitiesSundry creditorsDues to Small Scale Industrial Undertakings 2.40 4.83 Dues to Others 4,723.19 2,508.38 Material Advance 629.32 579.43 Advances from Customers/Others 208.60 9.51 Liability towards Investor Education and Protection Fund 111.69 2.52 (Represents unclaimed dividend required to be transferred to the said fund on completion of seven years. No such amount is due as on the Balance Sheet date)Other Liabilities 1,864.48 799.46 Interest Accrued but not due on Loans 16.27 3.91


7,724.63 3,908.04 b) Provisions

Taxation 1,011.83 240.62 Proposed Dividend 83.40 165.30 Dividend Tax (Interim and Proposed) 37.45 23.18 Employee Benefits 111.99 27.44 Fringe Benefit Tax 1.13 0.91

1,245.80 457.45 Share of Joint Ventures 8.74 –

1,254.54 457.45 TOTAL 8,979.17 4,365.49

Schedule – IX Current Liabilities and Provisions

i) Preliminary Expenses 0.44 – Add : Incurred during the year 0.34 0.44

0.78 0.44 Less : Written off / Adjusted during the year 0.36 –

0.42 0.44 ii) Share Issue Expenses 0.56 0.88

Less : Amortized during the year 0.32 0.32 0.24 0.56

iii) Project and Other Amenities 21.20 32.82 Add : Incurred during the year – 0.04

21.20 32.86 Less : Amortized / Adjusted during the year 11.55 11.66

9.65 21.20 Share of Joint Ventures 0.04 –

9.69 21.20 TOTAL 10.35 22.20

Schedule – X Miscellaneous Expenditure


137

Schedules forming part of Consolidated Profit and Loss Accountfor the year ended March 31, 2007

136


Schedules forming part of Consolidated Profit and Loss Accountfor the year ended March 31, 2007


March 31, 2007 March 31, 2006

Project Division 28,459.04 17,926.66 Others 839.72 477.74 Share of Joint Ventures 186.74 – Total 29,485.50 18,404.40

Schedule – ‘A’ Turnover


March 31, 2007 March 31, 2006

a) Employees Remuneration and BenefitsSalaries and Other Benefits 776.67 385.94 Contribution to Provident Fund and Other Funds 59.16 39.52 Staff Welfare Expenses 23.90 5.42 Employee Compensation Expense 50.62 43.28 Total (a) 910.35 474.16

b) Administrative ExpensesRent, Rates and Taxes 131.51 77.79 Office Maintenance 57.24 32.30 Electricity Charges 20.52 14.89 Postage, Telegrams and Telephones 35.26 23.85 Travelling and Conveyance 135.81 95.84 Printing and Stationery 23.56 13.79 Insurance 39.18 66.96 Advertisement 13.30 10.92 Tender Documents 11.33 24.07 Legal and Professional Charges 28.90 20.02 Miscellaneous Expenses 59.04 30.48Auditors' Remuneration 7.64 7.16 Directors' Sitting Fees 0.25 0.18 Bad Debts / Advances Written off 24.67 11.64 Provision for Doubtful Debts / Advances 1.90 21.88 Consultation Charges 21.60 16.13 Donations 5.46 2.40 Loss on Assets sold/discarded/written off 6.05 9.91 Miscellaneous Expenditure written offPreliminary Expenses 0.36 –Project and Other Amenities 11.55 11.66 Share Issue Expenses 0.32 0.32 Share of Joint Ventures 1.23 –Total (b) 636.68 492.19 Total (a + b) 1,547.03 966.35

Schedule – ‘D’ Establishment Expenses

Dividend from Current Investments 0.66 2.21 Profit on Sale of Fixed Assets 0.32 0.88 Miscellaneous Receipts 33.64 17.16 TOTAL 34.62 20.25

Schedule – ‘B’ Other Income

InterestTerm Loans 207.99 39.02 Working Capital Demand Loans / Cash Credit 157.84 65.15 Mobilisation Advance 135.80 51.35 Vehicle Loans 3.38 2.36 Others 38.04 39.52

543.05 197.40 Less: Income on Foreign Exchange fluctuation – 27.42 Less: Interest Income 131.00 66.08 (Gross of Tax Deducted at Source Rs. 26.49 million (2005-06 :Rs. 9.76 million))

412.05 103.90 Financial ChargesCommission on - Bank Guarantees 83.94 76.13 Letters of Credit 19.69 24.89 Bank charges 20.70 12.72 Share of Joint Ventures 42.60 –

166.93 113.74 TOTAL 578.98 217.64

Schedule – ‘E’ Interest and Financial Charges

Material ConsumptionCement 1,408.80 486.97 Steel 5,257.42 4,453.60 Bitumen 565.94 202.50 Other Construction Material 3,139.23 2,338.26 LPG Steel and components – 16.57 Stores and Spares 159.27 86.65

10,530.66 7,584.55Power and Fuel 27.27 20.61 Sub-contractors Work Bills 9,950.24 6,252.28 Labour Charges 2,906.32 1,777.90 Transport Charges 482.94 206.14 Rates and Taxes Excise Duty 3.61 3.33 Sales Tax 51.71 104.22 Value Added Tax 649.42 261.81 Service Tax 81.68 22.82

786.42 392.18 Repairs and MaintenanceMachinery 299.19 138.53 Others 64.76 40.84

363.95 179.37 Hire Charges for Machinery and others 420.22 337.01 Technical Consultation 99.68 78.26 Royalties, Seigniorage and Cess 63.96 17.83 Watch and Ward 36.90 23.92 Real Estate site development Expenses 62.82 12.54 Other Expenses 349.50 114.21 Prior Year Expenses 0.66 10.43

1,033.74 594.20 (Increase) in Work-in-Progress / Finished Goods

Opening Balance 1,806.84 603.09 Closing Balance 2,878.00 1,806.84

(1071.16) (1203.75)TOTAL 25,010.38 15,803.48

Schedule – ‘C’ Construction and Other Expenses

139

Schedules forming part of the Consolidated Accounts

I. SIGNIFICANT ACCOUNTING POLICIES1. Principles of Consolidation

The consolidated financial statements comprise the Nagarjuna Construction Company Limited ("the Company") andits subsidiaries, jointly controlled entities and associates as at March 31, 2007 and for the year ended on that date.The consolidated financial statements have been prepared on the following basis:

a) The financial statements of the Company and its subsidiaries are combined on a line-by-line basis by addingtogether the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-groupbalances and intra-group transactions resulting in unrealized profits or losses in accordance with AccountingStandard 21 on "Consolidated Financial Statements" issued by the Institute of Chartered Accountants of India.

b) The financial statements of the jointly controlled entities have been consolidated on a line-by-line basis byconsolidating the book values of like items of assets, liabilities, income and expenses, after eliminating intra-group balances and intra-group transactions, resulting in unrealized profits or losses, (using the 'proportionateconsolidation' method) as per Accounting Standard 27 on 'Financial Reporting of Interests in Joint Ventures'issued by the Institute of Chartered Accountants of India.

c) In case of associates where the Company directly or indirectly through subsidiaries holds more than 20% ofequity, Investments in associates are accounted for using equity method in accordance with Accounting Standard23 on "Accounting for investments in associates in consolidated financial statements" issued by the Institute ofChartered Accountants of India.

d) The financial statements of the subsidiaries, the jointly controlled entities and the associates used in theconsolidation are drawn up to the same reporting date as that of the Company, i.e. March 31, 2007.

e) The excess of cost to the company, of its investment in the subsidiaries and the jointly controlled entities overthe Company's portion of equity is recognized in the financial statements as Goodwill.

f) The excess of the Company's portion of equity of the subsidiaries on the acquisition date over its cost ofinvestment is treated as Capital Reserve.

g) Minority Interest in the net assets of consolidated subsidiaries consists of:i) The amount of equity attributable to minorities at the date on which investment in a subsidiary is made;

and

ii) The minorities' share of movements in the equity since the date the parent-subsidiary relationship came intoexistence.

h) Minority interest's share of net profit/loss for the year of consolidated subsidiaries is identified and adjustedagainst the profit after tax of the group.

i) In case of non-integral foreign operations, all assets, liabilities and revenue items, are translated in accordancewith Accounting Standard 11 on "The Effects of Changes in Foreign Exchange Rates" issued by the Institute ofChartered Accountants of India. Any exchange difference arising on such translation is recognised under ForeignCurrency Translation Reserve.

j) The consolidated financial statements are prepared to the extent possible using uniform accounting policies forlike transactions and other events in similar circumstances and are presented in the same manner as theCompany's separate financial statements.

2. Investments other than in subsidiaries, jointly controlled entities and associates have been accounted as perAccounting Standard 13 on "Accounting for Investments."

3. Other significant accounting policies:a) The Accounts have been prepared on accrual basis under historical cost convention in accordance with the

Generally Accepted Accounting Principles in India and the provisions of the Companies Act, 1956.

b) Fixed Assets and DepreciationFixed Assets are stated at cost of acquisition, less accumulated depreciation thereon. Depreciation is providedon straight line method at the rates prescribed in Schedule XIV of the Companies Act, 1956 except forconstruction accessories and centering equipment which are depreciated at 20% p.a. based on useful lifedetermined by the Management. Leasehold improvements are amortised over the period of lease. Fixed assetsin joint venture operations, which are accounted to the extent of the Company's interest in the venture, aredepreciated on Straight Line Method / Written Down Value Method at the rates prescribed in Schedule XIV of the

138



Schedule – XI Accounting Policies and Notes

Companies Act, 1956 or at higher rates as stated below:

The Cost of Concessionaire Asset of a jointly controlled entity is amortised over the period of 8 years as per theconcession agreement entered into with the Public Works Department, Government of Karnataka and KarnatakaRoad Development Corporation Limited.

Capital Work in Progress: All costs incurred towards construction of "Concessionaire Assets" on Build, Operate and Transfer (BOT) basisare accumulated under capital work in progress till the completion of construction.

c) Borrowing Costs:Borrowing Costs that are directly attributable to acquisition, construction or production of a qualifying asset arecapitalised as part of the cost of such asset. A qualifying asset is one that necessarily takes substantial periodof time i.e., more than 12 months to get ready for its intended use. All other borrowing costs are charged torevenue.

d) Impairment of Assets:The carrying amount of assets, other than inventories is reviewed at each balance sheet date to determinewhether there is any indication of impairment. If any such indication exists, the recoverable amount of the assetsis estimated. The recoverable amount is the greater of the asset's net selling price and value in use which isdetermined based on the estimated future cash flow discounted to their present values. An impairment loss isrecognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.Impairment loss is reversed if there has been a change in the estimates used to determine the recoverableamount.

e) Investments:Investments are classified as long term and current investments. Long Term Investments are carried at cost lessprovision for permanent diminution, if any, in value of such investments. Current investments are carried at lowerof cost and fair value.

f) InventoriesRaw Materials:Raw Materials, construction materials and stores & spares are valued at weighted average cost. Cost excludesrefundable duties and taxes.

Work in Progress:i) Project Division: Work-in-Progress is valued at the contract rates less profit margin / estimates.

ii) Light Engineering Division: Work-in-Progress is valued at lower of cost and net realisable value.

iii) Property Development: Properties under development are valued at cost. Cost comprises all directdevelopment expenditure, administrative expenses and borrowing costs. Land held for resale is valued atlower of cost and net realisable value.

Finished Goods:Finished goods of Light Engineering Division are valued at lower of cost and net realisable value.

g) Employee BenefitsLiability for employee benefits, both short and long term, for present and past services which are due as per theterms of employment are recorded in accordance with Accounting Standard (AS) 15 (Revised) “EmployeeBenefits" issued by the Institute of Chartered Accountants of India.

i) GratuityIn accordance with the Payment of Gratuity Act, 1972 the Company provides for gratuity covering eligibleemployees.

Schedule – XI Accounting Policies and Notes (Contd.)

Description Straight Line Method Written Down Value

1) Plant and Machinery 4.75% 15% – 25%2) Furniture and Fixtures 6.33% 10% – 15%3) Office Equipments 4.75% 15% – 25%4) Computers 16.21% 60%5) Tools and Equipments 4.75% 15% – 25%6) Construction Vehicles – 15% – 25%7) Construction Accessories 20% 15% – 25%8) Office Vehicles 9.50% 15% – 25%


140



141


Schedule – XI Accounting Policies and Notes (Contd.)

Country of Proportion of Ownership Interest Name of the Subsidiaries Incorporation Current year Previous year

NCC Urban Infrastructure Limited India 80% 100%NCC Infrastructure Holdings Limited India 100% 100%NCC Vizag Urban Infrastructure Limited India 100% 100%OB Infrastructure Limited India 64% 50.25%Nagarjuna Construction Co.Ltd & Partners LLC Sultanate of Oman 100% 70%Nagarjuna Construction Co. International LLC Sultanate of Oman 100% NANCC Infrastructure Holdings Mauritius Pte.Limited Mauritius 100% NAPatnitop Ropeway & Resorts Limited India 100% NASubsidiary of NCC Urban Infrastructure LimitedDhatri Developers & Projects Private Limited India 100% 100%Sushanti Avenues Private Limited India 100% 100%Sushruta Real Estates Private Limited India 100% 100%PRG Estates (P) Ltd. India 100% NAThrilekya Real Estates (P) Ltd. India 100% NAVarma Infrastructure (P) Ltd. India 100% NANandyala Real Estates (P) Ltd. India 100% NAKedarnath Real Estates (P) Ltd. India 100% NAAKHS Homes (P) Ltd. India 100% NAJIC Homes (P) Ltd. India 100% NASushanthi Housing (P) Ltd. India 100% NACSVS Property Developers (P) Ltd. India 100% NAVera Avenues (P) Ltd India 100% NASri Raga Nivas Property Developers (P) Ltd. India 100% NAVSN Property Developers (P) Ltd. India 100% NAM A Property Developers (P) Ltd. India 100% NAVara Infrastructure (P) Ltd India 100% NASri Raga Nivas Ventures (P) Ltd India 100% NAMallelavanam Property Developers (P) Ltd India 100% NAVaraprada Real Estates (P) Ltd. India 100% NASradha Real Estates (P) Ltd. India 100% NANCC Urban Lanka (Private) Ltd Sri Lanka 100% NASubsidiary of NCC Infrastructure Holdings Mauritius Pte.LimitedLiquidity Limited Mauritius 100% NAAssociatesBrindavan Infrastructure Company Limited India 33.33% 33.33%Jubilee Hills Landmark Projects Limited India 25% 25%Himachal Sorang Power Private Limited India 34% 34%Himalayan Green Energy Private Limited India 50% NANagarjuna Contracting Company LLC Dubai 49% 49%Nagarjuna Facilities Management Services LLC Dubai 49% NAAssociates of NCC Infrastructure Holdings LimitedWestern UP Tollway Limited India 30% 30%Bangalore Elevated Tollway Limited India 33.5% 33.5%

Liability on account of gratuity is:- covered partially through a recognised Gratuity Fund managed by Life Insurance Corporation of India andcontributions are charged to revenue; and

- balance is provided on the basis of valuation of the liability by an independent actuary as at the year end.

ii) SuperannuationThe Company makes annual contribution to an approved superannuation fund covered by a policy with BirlaSunlife Insurance Company Limited. The Company has no further obligation beyond the annual contribution.

iii) Provident FundContribution to Provident fund (a defined contribution plan) made to Regional Provident Fund Commissionerare recognised as expense.

iv) Compensated AbsencesLiability for leave is treated as a short term liability and is accounted for as and when earned by the employee.

h) Deferred Revenue Expenditure:Projects and Other amenities expenditure incurred upto March 31, 2005, the benefit of which is spread overmore than one year is grouped under Miscellaneous Expenditure and is amortised over the period in whichbenefits would be derived.

i) Share Issue Expenses:Share issue expenses are written off over a period of 10 years.

j) Revenue Recognitioni) Project Division: Revenue from fixed price construction contracts is recognised by reference to the

percentage of completion of the contract activity. The stage of completion is determined by survey of workperformed and / or on completion of a physical proportion of the contract work, as the case may be, andacknowledged by the contractee. Future expected loss, if any, is recognised as expenditure.

ii) Property Development: Revenue is recognised when the company enters into an agreement for sale with thebuyer and all significant risks and rewards have been transferred to the buyer and there is no uncertaintyregarding realisability of the sale consideration.

iii) Light Engineering Division: Revenue is recognised on despatch of goods to customers.

iv) Annuity Income: Annuity is recognized on accrual basis in accordance with the provisions of the concessionagreement entered into with the Public Works Department, Government of Karnataka and Karnataka RoadDevelopment Corporation Limited.

k) Joint Venture Projects: i) In respect of Joint Venture Contracts in the nature of jointly controlled operations, the assets controlled,

liabilities incurred, the share of income and expenses incurred are recognized in the agreed proportionsunder respective heads in the financial statements.

ii) Assets, Liabilities and Expenditure arising out of contracts executed wholly by the Company pursuant to ajoint venture contract are recognised under respective heads in the financial statements. Income from thecontract is accounted net of joint venturer's share under turnover in these financial statements.

iii) Share of turnover attributable to the Company in respect of contracts executed by the other joint venturepartners pursuant to Joint Venture Agreement, is accounted under Turnover in these financial statements.

l) LeasesThe Company's significant leasing arrangements are in respect of operating leases for premises and constructionequipment. The leasing arrangements range from 11 months to 5 years generally and are usually cancellable/renewable by mutual consent on agreed terms. The aggregate lease rents payable are charged as rent in theProfit and Loss Account.

m) Taxesi) Current Tax: Provision for Current Tax is made based on taxable income computed for the year under the

Income Tax Act, 1961.

ii) Deferred Taxes: Deferred Tax is accounted for by computing the tax effect of timing differences which ariseduring the year and reverse in subsequent periods. Deferred tax assets are recognized and carried forwardonly to the extent that there is a reasonable certainty that sufficient future taxable income will be availableagainst which such Deferred Tax Assets can be realized.

n) Contingency ReserveThe Company transfers to Contingency Reserve out of the Profit and Loss Appropriation Account such amountsas the Management considers appropriate based on their assessment to meet any contingencies relating tosubstantial expenditure incurred during the maintenance period of a contract, non-realisation of contract billsearlier recognised as income and claims, if any, lodged by the contractees or by sub-contractors or by any thirdparty against the Company in respect of completed projects for which no specific provision has been made.

o) Preliminary ExpensesPreliminary expenses are written off in the year of commencement of commercial operations.

II. NOTES ON ACCOUNTS 1. The Subsidiaries, Jointly Controlled Entities and Associate companies considered in the consolidated financial

statements are:

Schedule – XI Accounting Policies and Notes

143


142



Schedule – XI Accounting Policies and Notes (Contd.) Schedule – XI Accounting Policies and Notes (Contd.)

2. a) In respect of following subsidiary companies, incorporated during the year and are yet to commence commercialoperations, the first accounting year will end on 31.03.2008 and accordingly, the consolidation has been made onthe basis of accounts compiled by the management:

• Vara Infrastructure (P) Limited

• Sri Raga Nivas Ventures (P) Limited

• Mallelavanam Property Developers (P) Limited

• Varaprada Real Estates (P) Limited

• Sradha Real Estates (P) Limited

b) Associate Companies Himachal Sorang Power Private Limited and Jubilee Hills Landmark Projects Limited areunder construction period and hence no Profit and Loss account has been prepared. Based on managementaccounts there is no change in carrying value of investments as per Accounting Standard 23 on "Accounting forInvestments in Associates in Consolidated Financial Statements" issued by the Institute of Chartered Accountantsof India.

3. Contingent liabilities not provided for:

a) Letter of credit - Rs.1244.30 million (31-03-2006: Rs.937.38 million).

b) Counter Guarantees given to the Bankers - Rs.9958.39 million (31-03-2006: Rs.7677.44 million).

c) Performance guarantees, denominated in foreign currency, given on behalf of Subsidiaries and AssociatesRs.90.85 million (31-03-2006: Rs54.22 million).

d) Corporate Guarantees given to Banks and Financial institutions for financial assistance extended to Subsidiaries,Associates and Joint Ventures Rs.2600.53 million (31-03-2006: Rs.263.14 million).

e) Disputed Seigniorage Charges levied by Director (Mines & Geology) Government of Andhra Pradesh, in respectof which the Company has obtained a stay from the Hon'ble Supreme Court of India - Rs.61.59 million(31.03.2006: Rs.61.59 million).

f) Disputed Sales Tax Liability for which the Company has gone into appeal Rs. 71.64 million (31.03.2006: Rs.47.89million).

g) Joint and several liability in respect of joint venture projects and liquidated damages in respect of delays incompletion of projects - amount not ascertainable.

h) Disputed central excise duty relating to cement plant, which was sold in earlier year, for which the Company hasfiled an appeal to CESTAT, Bangalore Rs.28.23 million.(31.03.2006: Rs.29.73 million.).

i) Sole arbitrator award of Rs. 30.00 million in case of counter claim by Bhartiya Reserve Bank Note Mudran PrivateLimited against which the company has filed an appeal before City Civil Court, Bangalore

4. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advancesRs. 721.04 million (31.03.2006: Rs.20.91 million) - Rs. 3905.37 million (31.03.2006: Rs.75.72 million). Commitmenttowards contribution to equity capital of companies Rs.3758.44 million (31.03.2006: Rs.143.03 million).

5. Share Capitala) At the Annual General Meeting of the Members of the Company held on August 31, 2006, the members of the

company had approved increase of the authorised capital from Rs.250,000,000/- divided into 125,000,000 Equityshares of Rs.2/- each to Rs.500,000,000/- divided into 250,000,000 Equity shares of Rs.2/- each. Further, at theExtra Ordinary General Meeting of the Members of the Company held on February 26, 2007, the members of thecompany had approved increase of the authorised share Capital from Rs.500,000,000/- divided into 250,000,000Equity shares of Rs.2/- each to Rs.600,000,000/- divided into 300,000,000 Equity shares of Rs.2/- each.

b) At the same General Meeting, consent was accorded for issue of bonus shares of Rs.2/- each as fully paid to theholders of existing shares of the company in the proportion of one equity share of Rs.2/- each for every oneequity share of Rs.2/- each held as on the record date. Consequently, Rs.206.74 million has been transferredfrom the General Reserve to Paid up equity Share Capital by capitalisation of General Reserves.

c) During the year, vested Options were exercised and the Company has allotted 56550 (pre-bonus) and 1613900

(post bonus) equity shares in Grant 1 and 320 (pre bonus) and 159940 (post bonus) equity shares in Grant 2 ofRs.2 each at a premium of Rs.20 per share (pre bonus) and Rs.1 each at a premium of Rs.10 per share (postbonus) aggregating to Rs.20.76 million. Consequent to the said allotment, Rs.77.46 million representing theintrinsic value of Rs.61.81 (pre bonus) and Rs.30.905 (post bonus) per option for Grant 1 and Rs.300.05 (prebonus) and Rs.150.025 (post bonus) per option for Grant 2 exercised has been transferred to Securities PremiumAccount from Employees Stock Options Outstanding Account.

d) Share Warrants:At the Extra-Ordinary General Meeting held on 26.02.07, the members of the company pursuant to the provisionsof sec 81(IA) and other applicable provisions of the Companies Act, 1956 have given consent to the Board forallotment of 25,00,000 warrants on preferential basis to AVSR Holdings Pvt.Ltd., the promoter of the company,which are eligible for conversion into equity shares of Rs.2/- each at a premium of Rs.215/- per share. The saidconversion shall be made within a period not exceeding eighteen months from the date of allotment. Accordingly,the Board has allotted Share warrants to the promoters company and received Rs.54.25 million, being the amountreceived against share warrants, which has been shown under "Share Warrants".

6. NCC Employees Stock Options Plan, 2004a) The company follows the intrinsic value method in which the intrinsic value represents the excess of Market

price over the exercise price of the option. The accounting value is computed by aggregating the intrinsic valueof all the employee options granted during the accounting period. This accounting value is recognized as theDeferred employee compensation expense with a corresponding obligation to the stock option holders. Thedeferred employee compensation expense is amortized over the period of vesting on a straight-line basis. Uponexercise of option, the proceeds received are credited to Share Capital and Securities Premium Account. Deferredemployee cost, obligation and amortised amount are derecognised upon lapse of options as per the terms of thescheme.

b) The Company has granted (net of options lapsed) 88,520 share options of Rs.2 each in 2006-07 under the NCCEmployees Stock option Scheme, 2004 at an exercise price of Rs.22 (2005-06 - 1324710 share options of Rs.2/-each at an exercise price of Rs.22/- each).

c) Movement in the options under ESOP, 2004

d) Fair Value MethodologyThe fair value of options used to compute pro forma net income and earnings per equity share have beenestimated on the date of grant using Black-Scholes model. Grants with graded vesting have been split up andtreated as individual grants with separate expected lives and vesting periods. The key assumptions used in Black-Scholes model for calculating fair value are (a) risk-free interest rate of 5.85% - 7.01% p.a., (b) expected life of11/2 years to 31/2 years, (c) expected volatility of share price of 52% - 54% and (d) dividend yield of 0.72% - 2.21%p.a. The weighted average fair value of the option works out to Rs.220.73 per Stock Option.

Had compensation cost for the stock options granted been determined based on fair value approach, the

Weighted averageOptions exercise price per

Stock Option (Rupees)

Options outstanding at the beginning of year 1995620 11.00Granted during the year 94110 22.00Lapsed during the year 90770 11.00Exercised during the year (pre-bonus) 56870 22.00Exercised during the year (post-bonus) 1773840 11.00Allotted during the year (pre-bonus) 56870 22.00Allotted during the year (post-bonus) 1773840 11.00Options outstanding at the end of year 111380 11.00Options exercisable at the end of year Nil


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Schedule – XI Accounting Policies and Notes (Contd.) Schedule – XI Accounting Policies and Notes (Contd.)

liability as per the Company's previous accounting policy has been adjusted against the opening balance ofGeneral Reserve, in terms of AS 15 (revised).

b) Liability for retiring gratuity as on March 31, 2007 is Rs.30.57 million (31-3-2006: Rs.20.73 million) of which Rs.4.42million (31-3-2006: Rs.3.15 million) is funded with the Life Insurance Corporation of India and the balance isincluded in Provision for Gratuity and Liability for Gratuity and Cost of Compensated absences has been actuariallydetermined and provided for in the books.

c) The details of the Company's post-retirement benefit plans for its employees including whole-time directors aregiven below which is certified by the actuary and relied upon by the auditors:

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority,promotion and other relevant factors, such as supply and demand in the employment market.

12. Current tax and Deferred Taxa) Consequent to the insertion of an "Explanation" in Section 80 IA of the Income Tax Act, 1961, by the Finance Act,

2007 with retrospective effect from assessment year 2000-01, the company has reviewed its claim for benefitunder Section 80 IA and as a measure of prudence, made full provision for all such benefits claimed. The resultsfor the period ended March 31, 2007 includes an additional charge of Rs.62.24 crores of which Rs.36.25 croresrelate to earlier years. Accordingly, an amount of Rs.36.25 crores has been appropriated from the opening balancein the Profit & Loss Account towards prior years tax.

b) Deferred Tax Liability as at March 31, 2007 comprises of the following:

Rupees Rupees Particulars in million in million

Net Profit (as reported) 964.65Add: Employee compensation expense based on intrinsic value

included in net income 50.62Tax effect on above (17.04) 33.58

Sub-total 998.23Less: Employee compensation expense determined under fair value

method included in net income 52.54Tax effect on above (17.68) 34.86

Net Profit (revised) 963.37

As reported As restatedBasic earnings per share 4.67 4.66Diluted earnings per share 4.63 4.62

Company's net profit for the year ended March 31, 2007 and earning per share thereof would have been as perthe pro forma amounts indicated below:

7. Legal ReserveAs per Article 106 of the Commercial law of 1974 in the Sultanate of Oman, 10% of a Company's Net Profit requiredto be transferred to a non-distributable legal reserve until the amount of the legal reserve equals one-third of theCompany's issued share capital. Accordingly, Rs.2.13 million has been appropriated to legal reserve by a subsidiarycompany.

8. Loan FundA. Secured Loans

a) Term LoansTerm Loans availed from banks and others are secured by hypothecation of specific assets, comprising plantand machinery and construction equipment, acquired out of the said loans and personal guarantee of aDirector.

b) Working Capital Facilities: Cash Credit facilities and Working Capital Demand Loans from consortium ofbanks are secured by:

i) Hypothecation against first charge on stocks, books debts and other current assets of the Project andLight Engineering Division of the company both present and future ranking parri passu with consortiumbanks

ii) Hypothecation against first charge on all unencumbered fixed assets of the Project Division of thecompany both present and future ranking parri passu with consortium banks.

iii) Equitable mortgage of six properties (Land & Buildings).

iv) Personal guarantee of certain Directors.

c) Vehicle Loans: Vehicle loans availed are secured by hypothecation of vehicles acquired out of the said loans.

B. Unsecured LoansUnsecured loans from banks aggregating to Rs.750.00 million are guaranteed by certain Directors of theCompany.

9. InventoriesProperty Development Cost includes Rs.16.91 million (31-3-2006: Rs.16.91 million) representing the cost of acquisitionof land from different land owners, for which the Company holds General Power of Attorney to deal with such landincluding registration of the sale in the name of the company.

10. Loans and Advances Advances to Suppliers, Sub-contractors and others: Include Rs. 323.46 million (31- 3-2006:Rs.56.29 million)representing amounts withheld by contractees.

11. Employee Benefitsa) An amount of Rs.43.22 million being the difference (net of tax effect of Rs.14.55 million) between the liability as

on March 31,2007 on employee benefits including defined plans determined based on the revised AS 15 and the

CompensatedParticulars Gratuity absences

Net Assets/(Liability) recognized in theBalance Sheet as at March 31, 2007Present value of Obligation 9.13 36.18Fair value of Plan Assets NIL NIL(Liability) / Assets (9.13) (36.18)Un-recognised Past Service Cost 17.58 53.08(Liability) / Assets recognized in the Balance Sheet (26.15) (85.83)Component of Employer’s ExpenseCurrent Service Cost 2.20 6.65Interest Cost 1.41 4.26Expected Return on Plan Assets NIL NILNet Actuarial Gain / (Loss) recognized in the year (0.79) (2.39)Past Service Cost 17.58 53.08Expenses Recognised in the Profit and Loss Account (in Employees Rumuneration and Benefits-schedule “D”) 9.13 36.18Movement in the Net Liability recognized in the Balance sheetOpening Net Liability as on April 1, 2006 17.58 53.08Expenses Recognised in the Profit and Loss Account 9.13 36.18Payment made to employee on Retirement 0.56 3.43Closing Net Liability as on March 31, 2007 26.15 85.83Discount Rate 8% p.a. NIL

(Rs. in million)

* includes Rs.14.55 million tax effect on employee benefits related to transitional provision on adoption of AS 15 (Revised).

31.03.2007 31.03.2006A) Deferred Tax Assets on timing differences due to:

a) Provision for Gratuity and Leave Encashment* 52.48 10.14b) Provision for Doubtful Debts/Advances 7.62 7.36Total 60.10 17.50

B) Deferred Tax Liabilities on timing difference due to:a) Depreciation 172.85 76.92b) Deferred Revenue Expenditure 2.54 6.49Total 175.39 83.41Net Deferred Tax Liability (A-B) 115.29 65.91

(Rs. in million)

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Schedules forming part of the Consolidated AccountsSchedule – XI Accounting Policies and Notes (Contd.) Schedule – XI Accounting Policies and Notes (Contd.)

13. Related Party TransactionsFollowing is the list of related parties and relationships:

S. No. Particulars S. No. Particulars

A) Subsidiaries 38) NCC – PNC

1) NCC.Infrastructure Holdings Ltd 39) NCC – SJRIPL

2) NCC Urban Infrastructure Ltd 40) Himachal JV

3) NCC Vizag Urban Infrastructure Ltd 41) NCC – KNR

4) Nagarjuna Construction Co.Ltd and Partners LLC 42) NCC – NEC – Maytas

5) OB Infrastructure Ltd D) Associates

6) NCC.Infrastructure Holdings Mauritius Pte. Ltd 43) Himalayan Green Energy Pvt.Ltd.

7) Nagarjuna Construction Co. International LLC 44) Jubilee Hills Landmark Projects Ltd

8) Patnitop Ropeway and Resorts Ltd. 45) Himachal Sorang Power Private Ltd

B) Step-down Subsidiaries 46) Nagarjuna Contracting Co.LLC

9) Liquidity Ltd.

10) Dhatri Developers & Projects Pvt.Ltd

11) Sushanti Avenues Private Ltd E) Key Management Personnel

12) Sushruta Real Estates Private Ltd 47) Sri AVS Raju

13) PRG Estates (P) Ltd 48) Sri AAV Ranga Raju

14) Thrilekya Real Estates (P) Ltd 49) Sri NR Alluri

15) Varma Infrastructure (P) Ltd. 50) Sri JV Ranga Raju

16) Nandyala Real Estates (P) Ltd 51) Sri AGK Raju

17) Kedarnath Real Estates (P) Ltd. 52) Sri ASN Raju

18) AKHS Homes (P) Ltd. 53) Sri RN Raju

19) JIC Homes (P) Ltd. 54) Sri AVN Raju

20) Sushanthi Housing (P) Ltd.

21) CSVS Property Developers (P) Ltd.

22) Vera Avenues (P) Ltd.

23) Sri Raga Nivas Property Developers (P) Ltd.

24) VSN Property Developers (P) Ltd.

25) M A Property Developers (P) Ltd.

26) Vara Infrastructure (P) Ltd.

27) Sri Raga Nivas Ventures (P) Ltd. F) Relatives of Key Management Personnel

28) Mallelavanam Property Developers (P) Ltd. 55) Smt. A.Neelaveni

29) Varaprada Real Estates (P) Ltd. 56) Smt. A.Bharathi

30) Sradha Real Estates (P) Ltd

31) NCC Urban Lanka (Private) Ltd.

C) Joint Ventures G) Enterprises owned or significantly

influenced by key management personnel

or their relatives

32) Brindavan Infrastructure Co.Ltd 57) NCC Blue Water Products Limited

33) Western UP Tollway Ltd 58) Swetha Estates

34) Bangalore Elevated Tollway Ltd 59) R.R.V. Constructions Private Limited

35) Premco – NCC 60) NCC Finance Limited

36) NCC – MAYTAS 61) Swetha Capital Private Limited

37) SDB – NCC – NEC 62) Sirisha Memorial Charitable Trust

Related Party transactions during the period ended March 31, 2007 are as follows:

Key Enterprises ownedJoint Management or significantly

S. Particulars Associates Ventures Personnel Influenced by KeyNo. and Management Personnel

relatives or their Relatives

1) Share Application Money pending allotment – – – –497.23 – – –

2) Investments 454.02 3.05 – –6.73 – – –

3) Loans 110.98 – – –– – – –

4) Advances granted / (received) 160.86 1.09 – (10.60)392.97 – – (65.46)

5) Share of Profit – 47.12 – –– 54.92 – –

6) Works Contract Receipt – 661.75 – –– – –

7) Other Income 49.57 69.18 – –– 70.11 – –

8) Sub–Contract Jobs – – – 49.08– – – 61.71

9) Remuneration – – 111.43 –– – 72.76 –

10) Rent paid – – 0.75 5.64– – 0.83 3.70

11) Debit Balances outstanding as on 31.03.2007Nagarjuna Contracting Company LLC 153.37 – – –

5.40 – – –Himalayan Green Energy Private Limited 10.00 – – –

– – – –Brindavan Infrastructure Company Limited – 19.10 – –

– 0.18 – –Himachal Sorang Power Pvt Ltd. 12.89 – – –

– – – –Jubilee Hills Landmark Projects Limited 488.37 – – –

839.90 – – –NCC Blue Water Products Limited – – – 58.51

– – – 57.98R.R.V. Constructions Private Limited – – – –

– – – 3.66NCC Finance Limited – – – –

– – – 7.4712) Credit Balances outstanding as on 31.03.2007

Bangalore Elevated Tollway Limited – 234.30 – –– – – –

Western UP Tollway Limited – 230.26 – –– – – –

Figures in italics represent previous year's figures

(Rs. in million)


148



Schedule – XI Accounting Policies and Notes (Contd.)Disclosure in respect of transactions which are more than 10% of the total transactions of the same type with relatedparties during the year.

14. Segmental ReportingThe Company's operations predominantly consist of construction / project activities. Hence there are no reportablesegments under Accounting Standard - 17. During the year under report, substantial part of the Company's businesshas been carried out in India. The conditions prevailing in India being uniform, no separate geographical disclosuresare considered necessary.

15. Earning Per Share

16. Figures of previous year have been regrouped / rearranged wherever necessary to conform to the current yearpresentation.

Particulars 2006-07 2005-06

Share Application Money pending allotment– Jubilee Hills Landmark Project Limited – 452.50Investments– Jubilee Hills Landmark Project Limited 452.50 –Loans– Jubilee Hills Landmark Project Limited 100.98 –Advances granted / (received)– Nagarjuna Contracting Company LLC 147.97 –– Jubilee Hills Landmark Project Limited – 387.39Rent paid– Swetha Estates 4.06 2.76– Shyamala Aqua Farms 1.20 –Share of Profit – SDB-NCC-NEC JV 17.48 28.41– NCC-PNC JV 10.43 6.99– NCC-VEE JV 8.44 –– NCC-Maytas – 7.14Other Income– Maytas-NCC JV 23.05 9.80– DIC-NCC JV 42.17 33.99– Jubilee Hills Landmark Project Limited 48.53 –– SDB-NCC – 9.88Work Contract Receipt– Bangalore Elevated Tollway Limited 650.45 –

(Rs. in million)


a) Net Profit before prior year tax 1327.18 1033.51b) Net Profit after prior year tax available for equity shareholders 964.65 1033.51

Nos. Nos.c) Weighted Average number of equity shares for Basic EPS 206823019 172075745

Add: Adjustment for outstanding options under ESOP 1677269 2374547d) Weighted Average number of equity shares for Diluted EPS 208500288 174450292e) Face value per share Rs.2 Rs.2f) Basic EPS before prior year taxation Rs.6.42 Rs.6.01g) Basic EPS after prior year taxation Rs.4.67 –h) Diluted EPS before prior year taxation Rs.6.37 Rs.5.93 i) Diluted EPS after prior year taxation Rs.4.63 –

(Rs. in million)


M. V. Srinivasa Murthy A. A. V. Ranga RajuCompany Secretary & Managing Director

C.G.M. (Legal)

R. S. Raju A. G. K. RajuC.G.M.(F&A) Executive Director

Nagarjuna Construction Company Limited tomorrow!

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