bs-ii final report

8/3/2019 BS-II Final Report

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IBS

DIVERSIFICATION,

RESTRUCTURING, CSRAND STRATEGIC

DIRECTION OF GVKMURALI KRISHNA NISTALA 10BSPHH010426

SASWATI ROY CHOWDARY 10BSPHH011014

GAURAV PAL 10BSPHH010248

PANKAJ KUMAR RATHI 10BSPHH010508

2/13/2012


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INTRODUCTION

The GVK is a diversified business house with interests in a range of businesses

including power, roads, urban infrastructure, bio-science, hotels and

manufacturing. GVK has promoted or has equity investments in TAJGVK Hotelsand Resorts Limited, Novopan Indistries Limited, GVK Biosciences Private

Limited, GVK Jaipur-Kishangarh Expressway Private Limited.

In recent years the Promoters through their Promoter Group Companies have

increasingly focused on the power and infrastructure sector. G.V. Krishna Reddy,

the Chairman & Managing Director of GVKPIL, is a first generation entrepreneur

who established the business four decades ago.

The Company was incorporated in the National Capital Territory of Delhi on

December 2, 1994 as Jegurupadu Operating & Maintenance Company, a private

company with unlimited liability, under the Companies Act, 1956. The Company

was converted from a company with unlimited liability to a company with limited

liability and consequently the name was changed to Jegurupadu Operating &

Maintenance Company Private Limited on April 20, 2005. Subsequently, our

Company was converted from a private limited company to a public limited

company on May 19, 2005 and the name was changed to Jegurupadu Operating &

Maintenance Company Limited. Thereafter, the name of the Company was

changed to GVK Power & Infrastructure Limited on July 13, 2005.

The Company is the holding company of the power businesses of the GVK and

provides operations and maintenance services to its power assets. It has an equity

stake in GVK companies engaged in the generation of electricity in the State of

Andhra Pradesh, namely GIL, the company's Subsidiary, and GPL, Associate

Company. It also the O&M Contractor for the power plants of GIL and GPL.

GVKPIL was originally promoted by our Promoters and CMS Energy, USA. CMS

Energy, USA contributed 60% of the equity capital through JOMC, Mauritius and

the balance was contributed by the Promoters through Triumph International.. In

February 2005, GVK Reddy and his family bought the entire stake of Triumph

International and JOMC, Mauritius.


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GIL was originally promoted in 1992 by the GVK and CMS (USA). The Asian

Infrastructure Fund (through Golden Palm Limited and Vintage InvestmentsLimited) subscribed to 29.75% of the equity share capital of GIL in 1993. In

September 1995, pursuant to an equity investment of 10%, as well as a loan to

GIL, by IFC, the then shareholders of GIL executed a shareholders agreement to

set out their inter-se rights and duties as regards GIL.

GPL was originally incorporated by Satyam Constructions Private Limited (name

subsequently changed to Maytas Infra Private Limited) in 1996. Subsequently, IJM

Corporation Berhard (Malayasia) joined as strategic equity partner. In 2000 NCC

Power Corporation Limited, another IPP based in Andhra Pradesh, merged with

Gautami Power Private Limited through a Scheme of Amalgamation. As a result of

the merger the shareholders of GPL were Maytas Infra Private Limited along with

their affiliates, IJM Corporation Berhard (Malayasia) through its subsidiary and

NCC Power Corporation Limited. In July 2003, the Promoters through GVK

Energy Holdings Private Limited (originally GVK Power Private Limited) took

over the Company as a strategic equity partner and assumed the responsibility of

implementing the power project and also contributed to the equity of the project,

and executed an agreement in July 2003. Currently, equity contribution to theextent of 38.38% to the paid up equity of GPL has been made by GVKPIL, which

is proposed to be increased to 51% through the infusion of part of the IPO

proceeds. The other equity share holdings of Maytas, IJM and NCC are 17.71%,

25.09% and 18.82%, respectively. See "History and Certain Corporate Matters-

Gautami Power Limited- Agreement among the shareholders of the GPL" on page

[*] of this Draft Red Herring Prospectus for further details.

The Company has tied up the entire financial assistance of Rs.10, 150 million(constituting 70% of the project cost of Rs 14,500 million) from various lenders,

lead by Power Finance Corporation Limited (PFC). As a part of the security

mechanism Maytas, IJM, NCC and GVKPPL and their respective affiliates were

required to pledge 51% of their respective shareholding on the current paid up

capital of the GPL with PFC. Accordingly, GVK Energy Holdings Private Limited


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and Transoceanic Projects Limited, Mauritius (affiliates of GVKPPL) have

pledged 51% of their holding in GPL with PFC. In October 2005 GVKPIL

acquired GVKPPL and Transoceanic Projects Limiteds equity stake in GPL.

Accordingly, 51% of the equity shares in GPL now held by GVKPIL continue to

remain pledged with PFC.

PROGRESS SO FAR:

2006

-GVK to join hands for ultra mega projects

2007

- GVK Power & Infrastructure Ltd has appointed Mr. Sanjay Narayen (IAS) as an

Additional Director.

-GVK Power signs MoU with Govt of Tamil Nadu to set up SEZ

-GVK Power & Infrastructure Ltd has informed that Mumbai International Airport

Pvt Ltd an associate Company of GVK Power & Infrastructure Ltd, has signed

EPC Agreement on November 01, 2007 with L&T.

2008

-GVK Power & Infrastructure Ltd has informed that name of the Company's

wholly owned subsidiary i.e. GVK Energy Ltd has been changed to GVK Oil &

Gas Ltd.

-GVK Power & Infrastructure Ltd has appointed Mr. A Issac George, Chief

Financial Officer as Additional Director of the Company and also subject to

approval of the shareholders and the Central Government, if any, as Director

(Finance) for a period of 3 years with effect from April 01, 2008.

- GVK Power & Infrastructure Ltd has purchased the full equity share capital of

GVK Energy Pvt Ltd and GVK Developmental Projects Pvt Ltd on May 9. As a

result, these two companies have become wholly owned subsidiaries of the

company.


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- The Company has splits its face value from Rs10/- to Rs1/-.

2009

- GVK Power & Infrastructure Ltd has appointed Mr. Krishna Ram Bhupal as an

Alternate Director to Mr. Somanadri Bhupal at the Board Meeting of the Companyheld on April 29, 2009.

-GVK Power - Acquisition of Shares in Bangalore International Airport Ltd.

(BIAL)

2010

- GVK Power and Infrastructure Ltd. has said that it has awarded Rs. 3,200 crore

construction contract.

The project was for its 800 Mw of gas-based power project to a consortium of

South Korea's Hyundai Engineering and Larsen & Toubro (L&T).


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BUSINESSES OF GVK

ENERGY

Considering India's diverse energy needs and anticipating the high demand of the

future, GVK has established a significant presence in the energy sector. The

diverse portfolio in the energy sector covers conventional and non-conventional

energy resources. The current portfolio has gas, hydro and thermal energy projects.

Recognizing Oil and Gas as potential growth segment, GVK is also creating

presence in this area. GVK's energy portfolio currently features six power projects

which are being developed across several states in the country. Currently power

projects are present in the states of Andhra Pradesh, Jammu Kashmir, Punjab and

Uttarakhand. Together, these power projects are set to exceed over 5,000 MW

capacities.

GVK is proud of establishing India's first independent power plant at Jegurupadu,

Andhra Pradesh. This extraordinary project has won many accolades for its

environmental initiatives. It uses state of the art technology that minimizes impact

on the environment. Leveraging the company's skills and extensive experience,

GVK addresses the consistently growing energy requirements of the country.

GAS

A 235 MW plant built at a cost of USD 346 million, the Jegurupadu CCPP, Phase I

has become a benchmark among private power plants in the country. Being Indias

first private power plant, it displays farsighted design features that enhance

operational efficiencies and minimize environmental impact. It has been described

as horticulture project that also generates electricity and a metaphor of industrial

ecology.

JEGURUPADU CCPP PHASE II: The Phase II expansion of the Jegurupadu

CCPP was completed with clockwork precision. Implemented at a cost of Rs.

7,780 million, Jegurupadu CCPP Phase II has been commissioned to generate an

additional 244 MW of power. With the Power Purchase Agreement (PPA) signed

with AP Transco, Jergurupadu CCOOs plants total installed capacity amounts to

479 MW of power for the state. The plant is currently running at full capacity.


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Further, as part of its expansion plans, GVK has proposed an expansion project

(Phase III) of 800 MW capacity plan.

GAUTAMI POWER: Creating yet another milestone with its focus on power

generation, GVK initiated the 464 MW Gautami Power Project at Peddapuram,

Andhra Pradesh with a project cost of Rs. 19350 million. This dual fuel power

project has a PPA with the APDISCOM for fifteen years and also has a Ground

Support Agreement with GAIL for the life term of the PPA.

HYDRO

ALAKNANDA HYDRO POWER PLANT: A 330 MW hydro project is underway

in Uttarakhand. With most construction work in progress, the plant is expected to

commence operations in 2012.

GORIGANGA HYDRO POWER PLANT

This cutting-edge 370 MW power plant is being developed in Pittorgarh,

Uttarkhand at an estimated project cost of USD 650 million. It is expected to be

commissioned by 2012. This will be a merchant power plant for GVK. The

Government of Uttarkhand has granted its approval for the preparation of a

Detailed Project Report for a single integrated project, combining both the projects

for 370 MW merchant power plants in Uttarakhand.

RATLE HYDROELECTRIC PROJECT: The state-of-the-art 690 MW power

plant will commence operations in the year 2017. Situated on the river Chenab, it

will provide 16% of its output to the state of Jammu and Kashmir free of any

charge.

THERMAL

GVK has begun work on a 540 MW thermal power plant in Tarn Taran, Punjab ata project cost of Rs. 29638.1 million. 1,067 acres of land has been acquired for the

project to be commissioned in 2 phases of 300 MW each. The coal will be drawn

from the companys own coal mines at Tokisud and Seregarha, Jharkand.


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GVK has integrated captive coal mining with its other operations. Jharkhands

Tokisud and Sereghara mine blocks have mine-able reserves of 52 million tonnes

and 100 million tonnes respectively. These reserves will be used to address the fuel

needs at the coal-fired Goindwal Sahib Power Plant and other plants in North

India.

To support coal requirements of the Goindwal Sahib power plant and other future

projects in northern part of India, GVK has ventured into Captive Coal Mining.The Tokisud Open Cast mining block, located 50 kms north-west of Ranchi City in

the State of Jharkhand, is being developed into a captive coal mine.

OIL AND GAS EXPLORATION

GVK has partnered with BHP Billiton, one of the worlds largest diversified

resources companies, for exploring seven deepwater oil and gas blocks off the west

coast of India. GVK has carried out an extensive study and obtained necessary

approvals for the commencement and execution of these projects.

Identifying Oil & Gas as a high potential growth segment, GVK is mapping new

points, finding qualified technical personnel etc. to ensure growth and progress in

this segment. The major work has been planned over the next two years, which


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include mapping area to gather new seismic data acquisition in relation to all the

seven blocks that are being explored. GVK has estimated a capital outlay of Rs.

2200 million over the next 3 years.

AIRPORTS

As the country progresses, upgrading its transport infrastructure has become a

necessity. Competent infrastructure supplements the countrys growth. Being a

global destination for trade and tourism, Indias airports have become the new

gateways to the country.

Anticipating the need for world class airport infrastructure, GVK has ventured into

this sector by undertaking management and operational control of two major

airports of India. These modern airports are the face of Indias development. They

are the visible evidence of the countrys rapid progress.

GVK began the journey in this sector by acquiring the management and

operational authority of Chattrapati Shivaji International Airport (CSIA) in May

2006. The GVK led consortium partnered with Airports Authority of India to formMumbai International Airport Pvt. Ltd (MIAL). Subsequently, GVK also acquired

the management and operational control of Bengaluru International Airport.

Since the first steps in 2006, GVK has modernized these airports and has turned

them into world class structures. It has led the massive facelift and redevelopment

of the CSIA. While, Bengaluru International Airport was the first greenfield airport


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to be developed under the Public Private Partnership framework. Both of these

airports delight the visitors with best-in-class amenities and services.

GVK assures quick deliveries and impacting outcomes. In the future, the company

plans to strengthen this portfolio by leveraging the experience and expertise that

have been garnered through these projects.

TRANSPORTATION

Understanding Indias need for better road connectivity and transport

infrastructure, GVK has entered this sector to provide world-class solutions. In this

segment, GVK is focused on undertaking and executing projects which support the

growing economy and make a difference to the lives of the common people.

The mammoth Jaipur Kishangarh BOT project, a 90 km segment of the Golden

Quadrilateral National Highways Development Project of the Government of

India, is yet another instance where GVK has won a concession amidst a highly

competitive atmosphere. The project involved the conversion of a two-lane track to

a world-class six-lane highway and cost USD 154 million.

Completed in a record time, the project is a testimony to GVKs superior

capabilities in project management and execution. This expressway handles

approximately 19,000 vehicles per day and its daily collections are close to Rs. 40lakh. GVK is presently operating the highway and has installed cutting-edge

technology for tolling operations.

GVK continues to focus on building a strong portfolio of road assets which offer

superior returns. It has also been evaluating various road projects in the country

and has submitted RFQs for eight projects announced by the NHAI.

GVK has been awarded the four laning of the Deoli-Kota Section of National

Highway No.12. Starting from Km.165 to Junction of NH-76 on Kota bypass, this

expressway approximately covers 83.04Km. Located in the state of Rajasthan,Deoli-Kota Expressway was sanctioned to GVK on BOT basis under National

Highway Development Programme Phase III.

In order to execute this project, GVK Deoli- Kota Expressway Private Limited has

been formed as a SPV and a concession agreement with the NHAI has been signed.


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URBAN INFRASTRUCTURE

Indias modern metropolitan cities are home to the countrys youthful population

and corporate sector. The consistent growth of this area has brought forward the

need for high quality urban infrastructure. These contemporary cities deserve

world-class facilities and infrastructure as a foundation to grow and develop

further. GVK is focusing on large-scale integrated developments to fulfill the

demands of these urban cities.

REALTY

The fast paced growth of the Indian economy and industries demands an enabling

environment where this growth can be sustained successfully. As a pioneer in theIndian infrastructure sector, GVK is committed to building infrastructure that aids

this growth.

Special Economic Zones (SEZs) serve as a viable solution to problems Indian

industries and companies often face. Over the years, the potential of SEZs to attract

foreign investments and help India overcome the economic issues has been

established.

SEZs create an enabling environment for companies by providing various

incentives, special facilities and tax holidays. Along with providing an impetus to

investment, exports and employments, SEZ accelerate growth and progress.

HOSPITALITY

Bearing proof to India's reputation of playing host to its guests is Taj GVK.

Venturing with just a single property, Taj GVK, the hotels and resorts division ofGVK has established its presence as an industry stalwart in just over 5 years. With

3 world-class properties and another coming up in Begumpet, Taj GVK now has a

total room base of over 525. This constitutes a powerful base to address the

growing opportunities offered by the emergence of India as a major business

destination.


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LIFE SCIENCES

GVK Biosciences (GVK BIO) is Asias leading Discovery Research and

Development organization. GVK BIO provides a broad spectrum of services,stand-alone and integrated, across the R&D value chain. GVK BIOs discovery

services consist of Chemistry, Biology and Informatics; the development services

include Clinical research, Clinical pharmacology and Process R&D.

GVK BIOs diverse portfolio of more than 150 customers includes big

pharma, leading biotech, agro, life-sciences companies and top-notch

academic institutions.

GVK BIO has built a team of over 2000 employees handpicked from the best

universities and organizations globally. The scientists possess outstanding

academic credentials, immense capabilities and problem solving skills backed by

years of global and industry experience.

With infrastructure in the genes, GVK BIO has built world-class labs and facilities.

A match for the best globally, it houses the most advanced and sophisticated

equipment and automation, supported by highly-qualified scientists. Spread across

five locations in India and head-quartered in Hyderabad, GVK BIO provides

customers with a flexible range of services and business models.

GVK BIOs avant-garde facilities built to international standards, with about

2,50,000 sq. ft. of built-up lab-space house chemistry labs, AAALAC accredited

animal house, kilo labs, pilot plants and clinics. GVKBIO has been inspected by

all the leading regulatory agencies of the world including US FDA, ANVISA,

AFSSAPS, WHO, MoH Turkey and DCGI, India.

With a compelling value proposition, GVK BIO continues to be the partner of

choice for its loyal and increasing client base.

NAVOPAN

GVK introduced the concept of ready to use pre-laminated particle boards in India.

A pioneer in this sector, GVK has founded Novopan which is a manufacturer and

marketer of pre-laminated particle boards.


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Known for quality, Novopan pre-laminated particle boards are reliable, economical

and elegant. Novopan is recognized for its operation strategies that involve forward

and backward integrations.

RESOURCES

GVK Coal Developers (Singapore) Pvt Limited (GVKCDPL) and GVK Power and

Infrastructure Limited (GVKPIL) have acquired a 79% interest in each of the

Alpha Coal Project and the Alpha West Project and 100% interest in Kevin's

Corner Coal Project and 100% of the Infrastructure Projects.

The Alpha Coal Project and Kevin's Corner Coal Projects are well-known thermal

coal deposits within the Galilee Basin in Central Queensland, Australia.

Described as the jewel in the crown of the Galilee, the Alpha Coal Project will be a

30 Mtpa open-cut coal mine, with the potential for the future development of

significant underground reserves. The open-cut operation has an expected mine life

of 30 plus years, with sufficient Joint Ore Resources Committee (JORC) compliant

resources to extend the project life well beyond 30 years.

The Kevin's Corner Coal Project is adjacent to Hancock's Alpha Coal Project and

both Projects will utilize the proposed multi-user rail and port facilities. This is

designed so that at a future point, it will have the potential to transport, load andship capacity greater than the combined production level of both the Kevin's

Corner and Alpha Coal Projects. The Kevin's Corner Coal Project will have a

capacity of 30 Mtpa via open-cut and underground long wall operations. The

operation has a scheduled mine life of approximately 30 plus years.

The Alpha Coal and Kevin's Corner combined resource is 7.9 billion tones of

JORC compliant thermal coal.


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BRIEF LOOK AT POWER AND INFRASTRUCTURE

GVK Power and Infrastructure Limited (GVKPIL) has initiated power projects that

will cross over 2000MW capacity once operational. While Jegurupadu Combined

Cycle Power Plant is operational, several ambitious power projects are under

development.

GVK is developing power projects that are based on coal, gas and hydel resources.

The projects are being developed across several States in the country including

Andhra Pradesh, Punjab and Uttarakhand

GVK ONE

What makes 'GVK One' the most alluring business destination is its location.

Builders would reckon with pride that the location of GVK One is a winner

forever. The multitude of attributes of GVK One promise vast potential for brandsand retailers to thrive, while metamorphosing the shopping experience in the

city.GVK One - Hyderabad's world-class retail scheme - will make the city proud

and give shoppers and retailers alike more reasons to smile. The many location

attributes of GVK One indicates the vast potential it holds for brands to thrive.

Every little detail at GVK One has been planned keeping in mind the dynamic

needs of retailers and shoppers. The trade mix is perfect, offering products and

services ranging from fashion and food to home needs, leisure and entertainment.

Matching international standards for the discerning customer and retailer, it is

convenience unlimited, and pleasure multifold, making the venture a sure shot one-

stop destination for all. In short, GVK One is a complete mall in every sense of the

term, which would make even a New Yorker wince with envy.

POSITION

INVESTORS

GVK has consolidated its infrastructure assets under one company making it an

integrated infrastructure player. As part of the consolidation, all the infrastructure

assets in Power, Airport, Road, and Mining will now come under one umbrellaof GVK Power & Infrastructure Limited (GVKPIL).As a result of this

consolidation, Mumbai International Airport Pvt. Ltd. (MIAL) which operates

Indias busiest airport, the Chhatrapati Shivaji International Airport in Mumbai and

GVK Jaipur Expressway Pvt.Ltd. Which operates the six-lane toll road project on

the Golden Quadrilateral will come under GVKPIL.The Board of Directors

of GVKPIL and the Board of Directors of Bowstring Projects & Investments


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Private Limited (Bowstring) & the Board of Directors Green Garden Horticulture

Private Limited (Green Garden) have approved a proposal for the amalgamation of

Bowstring & Green Garden with GVKPIL. Bowstring and Green Garden, both

closely held unlisted companies, hold equity stakes in various power and

infrastructure projects of GVK. The consolidation will align all GVK

infrastructure companies under one roof thereby enabling GVK to position itself as

an integrated infrastructure company to leverage emerging opportunities in this

sector. It will also provide better realization of value for our investors" said Mr G.

V. Krishna Reddy, Chairman, GVK. The Scheme of Amalgamation approved by

the respective Boards envisages a share exchange ratio of 133(One hundred thirty

three) equity shares of the face value of Rs 10/- each of GVKPIL , for every 4

(Four)equity shares of the face value of Rs 10/- each of Bowstring. The Scheme

also envisages a share exchange ratio of 153 (One hundred fifty three) equity

shares of the face value of Rs 10/- each of GVKPIL, for every 4 (Four) equity

shares of the face value of Rs 10/- each of Green Garden. In the aforesaid meetingof the Board of Directors of GVKPIL, the proposal to issue and allot equity shares

in GVKPIL to members of GVK Industries Limited (GVKIL), other than GVKPIL

itself, in consideration for the transfer of and vesting in GVKPIL of the equity

shares held by such members in GVKIL in terms of Scheme of Arrangement under

section 391 of the Companies Act was also considered.The proposed Scheme of

Arrangement (Scheme) envisages a share exchange ratio of 3 (Three) equityshares

of the face value of Rs 10/- each of GVKPIL, for every 40 (Forty) equity shares of

the face value of Rs 10/- each of GVKIL. The share exchange ratio approved by

the Boards of the respective entities was based on a valuation process

incorporating international best practices. The entities had appointed leading

accounting firms, Deloitte, Haskins & Sells, and Dalal & Shah to recommend the

final share exchange ratio to the Boards of the entities. Amarchand & Mangaldas

& Suresh A. Shroff & Co. are the legal counsel for the entire process.The Scheme

of amalgamation and arrangement will be subject to various approvals including

those of Stockexchanges, shareholders of respective companies, any regulatory

authorities. The Scheme of amalgamation will have to be approved by the High

Court of Delhi and Scheme of Arrangement will have to be approved bythe High

Court in Delhi and High Court in Andhra Pradesh. The Appointed Date of merger

is proposed to beApril 1, 2006.The benefits of the proposed Scheme of Amalgamation and Arrangement are:

Create an integrated, comprehensive infrastructure company that can cater to all

segments of infrastructure and consolidate its position as a leading company in the

infrastructure sectorthereby creating substantial shareholder value


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Re-organization of the infrastructure companies within GVK will enable better

utilisation of resources and capital and would create a stronger base for future

growth of the infrastructurebusiness in general

Create large balance sheet size to participate in upcoming infrastructure projects

Align interest of all shareholders in a single listed entity and eliminate areas

potential conflict of interest and concerns of related party transactions

Enable investors, existing shareholders to participate in diverse infrastructure

assets

Unlock value in operating assets and eliminate the need for multiple listing by

group companies

GVK Power & Infrastructure Limited is a listed public company belonging to

GVK, engaged in the business of owning, operating and maintaining power plants

by itself and through its subsidiary/ associate companies. GVKPIL presently owns

53.96% in GVK Industries Limited which operates the 216 MW Jegurupadu

PhaseI gas based power plant and the 220 MW Jegurupadu Phase II gas based

project which is ready for commercial operations.

GVKPIL also owns 44.97% (to be increased to 51% in due course) in Gautami

Power (464 MW Gas based power plant) which is ready for commissioning.


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THE NEW STRUCTURE POST RE-ORGANIZATION

The proposed Scheme envisages consolidation of holdings of Bowstring and Green

Garden, direct and indirect, in various operating companies into GVKPIL, the flag-

ship company of GVK. Specifically, the following interests are proposed to beconsolidated as part of the Scheme of Amalgamation.

GVK Airport Developers Pvt. Ltd.

GVK Airport Developers is the holding company of GVK Airport Holding which

holds equity stake in Mumbai International Airport Pvt. Limited. MIAL has

entered into Operating Maintaining and Development Agreement with Airport

Authority of India in April 2006 for developing operating and maintaining the

Mumbai airport.MIAL has been operating the Mumbai airport with effect from 3rd

May 2006.

Alaknanda Hydro Power Company Limited

Alakananda is developing a 330 MW Hydropower Project in the State of

Uttaranchal. Currently, the project isunder the construction phase and the company

has signed a PPA with the Uttar Pradesh Power CorporationLimited.


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GVK Power (Goindwal Sahib) Limited

Goindwal Sahib is developing a 600 MW coal based Thermal Power Plant at

Goindwal Sahib, in Punjab. TheCompany has initialed the draft Power Purchase

Agreement with

Punjab State ElectricityBoard ("PSEB") in December 2006.

Goriganga Hydro Power Private Limited

Government of Uttaranchal has awarded 200 MW Mapang Bogudiyar and 170

MW Bogudiyar Sirkari BhyolHydroelectric Projects on River Goriganga in

Pithoragarh District in the State of Uttaranchal. Government of Uttaranchal has

agreed for implementation of Single Integrated Project i.e. combining both the

aboveprojects as 370 MW Mapang-Sirkari Hydroelectric Project.

GVK Jaipur Expressway Private Limited (GJEL)

A segment of the Golden Quadrilateral National Highway Development Project of

Government of India. GJELwas incorporated for designing, engineering, financing,

constructing, operating, maintaining and wideningthe 90.385 km existing 2 lane

project highway to 6 lanes on the Jaipur - Kishangarh section of the

NationalHighway No. 8 in the State of Rajasthan by entering into a concession

agreement with NHAI for a period of 20 years including construction period.

GVK Coal (Tokisud) Company Private Limited

Tokisud was incorporated to undertake coal mining activity. Tokisud will supply

its entire output to GVKPower (Goindwal Sahib) Limited for its exclusive

consumption.


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PORTERS FIVE FORCES

SUPPLY: Many projects have been planned but due to slow regulatory

environment, the supply is far lesser than demand. Currently, India needs to double

its generation capacity to meet the potential demand.

DEMAND: There is always a growing demand for power in India due to its

growing economy and infrastructure.

BARRIERS TO ENTRY: Barriers to entry are high, as entering this business

requires heavy investment initially. The other barriers are fuel linkages, payment

guarantees from State Governments, Retail distribution licensed, etc.

BARGAINING POWER OF SUPPLIERS: Not very high as Government

controls tariff structure. However, this may change in the future.

COMPETITION: Few large players, most of them being public sector

enterprises.

ANALYSIS

There is a huge potential for GVK to enter in to many other projects such as wind

power generation which has a huge potential and a growing sector. As GVK isalready in power sector this will prove to be a strategic fit and ensure further

growth for the company.


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SWOT ANAYSIS

STRENGHTS:

y Highly diversified companyy Have the competence and resources to enter potential sectorsy Established brand namey Successfully completed many Government projects.

WEAKNESS:

y Managing such a highly diversified companyy Ensuring there is a strategic fit among the businesses they undertakey Managing talented labor pool and diverting them for essential projects

OPPOURTUNITIES:

y As they are already in to Infrastructure and Realty, they can use theirexpertise in these fields to enter new sectors such as Education(B-schools),

Wind Power Generation, Accessories etc

y Growing infrastructure needs will provide ample opportunities to growy Pharmaceutical industry is witnessing a growth, which is an opportunity for

GVK BIO

y Same with the hospitality industry. TAJGVK has a huge growth potentialTHREATS:

y If there is no strategic congruence among various businesses that theymanage, being such a highly diversified company may pose serious issues.

y Management control might be an issue


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Road Segment is the star performer in case of margins for GVK group. India has

the second largest road network stretching 3.3 million km spread under several

categories. However, the effectiveness is weighed down due to severaldeficiencies. Roads continue to form the most common mode of transportation

carrying nearly 65% of the freight and 80% of the passenger traffic. The national

highway, which accounts for only 2% of the total road network in India, carries

nearly 40% of the road traffic. NHDP involves a total of seven phases entailing

development and up gradation of approximately 48,000 km. This is expected to

offer immense opportunities to GVK.

Airport Segment has high opportunity. The aviation sector infrastructure is all set

for a revamp with major airports under development based on the public private partnership model. Although de-growth of overall passengers has raised several

questions on the outlook of the entire aviation sector, we believe the concerns are

being overplayed and the sector is expected to be back on the growth trajectory in

the years to come.


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Key drivers that lead us to believe in the overall growth story are

(i) The development of regulatory framework,

(ii) Infrastructural changes at major airports,

(iii) Declining ATF prices compared to last year will improve the operating profile

of the airline carriers and reduce the cost of travel for passengers

(iv) Allaying funding concerns after improvement in the credit markets and capital

markets

(v) Levy of development fees by major airports will help fund the infrastructure

apex partly

Power Segments - Energy sector reforms have evolved over time and created anenvironment for private players to capture significant value from the huge demand

of power in India. Since the private players have huge opportunity to play in this

field with an expectation of rise in installed capacity so for GVK it is one type of

boon.

A continuous increase in mismatch of demand-supply in gas is rendering support

to the merchant power market. Erratic rainfall in several parts of the country is also

supporting favorable merchant rates in the near term. The merchant market is still

in a nascent stage in India and is likely to behave in a volatile matter in the initial

stages. With a view to curb volatility in the short-term market, CERC has capped

the rates at Rs 8. Then players are expected to enjoy a premium to players

operating under the regulated regime which will be an added benefit to GVK.

Recently GVK is mulling the acquisition of two under-construction thermal power

plants in Andhra Pradesh as the private developers executing these projects are

facing a resource crunch and have offered to quit. GVK Power, which aims to

become a 5,000-MW company in the next five years, is presently engaged in theconstruction of four projects, including hydro and thermal projects. The company's

under-construction projects include the 330-MW Alaknanda hydro project in

Uttarakhand. Eighty per cent of construction work on the project is complete and

the company has invested Rs 3,000 crore on the project so far. It is likely to be

commissioned in 2013.GVK Power is also executing an 850-MW hydro power


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project in Jammu, which will be commissioned in the next five years. Another

under-construction project is the 370-MW Goriganga hydro project in Pittorgarh,

Uttarakhand. The project is likely to commence power generation by 2013.The

company is also executing the 540-MW Goindwal Sahib thermal power project at

Tarn Taran, in Punjab.

Thus through this acquisition there will be many advantages faced by GVK which

are as follows:-

1) Economies of Scale - It will rise as there is an increase in the volume ofproduction which will lead to a reduction in the cost of production per unit.

This is because, with merger, fixed costs are distributed over a large volume

of production causing the unit cost of production to decline.

2) Operating economies - It will arise because a combination of two or morefirms will result in cost reduction due to operating economies. In other

words, a combined firm will be able to avoid or reduce over-lapping

functions and consolidate its management functions such as manufacturing,

marketing, R&D and thus reduce operating costs.

3) Synergy Here the combined firm will be more valuable than the sum ofthe individual combining firms. It refers to benefits other than those related

to economies of scale. But apart from operating economies, synergy may

also arise from enhanced managerial capabilities, creativity, innovativeness,R&D and market coverage capacity due to the complementarities of

resources and skills and a widened horizon of opportunities.

Also there will be substantial improvement in return ratios ensuring a near

five fold growth in revenues from the segment.

To fulfill the coal requirement of the Goindwal Sahib power plant and other future

projects in northern India, GVK has ventured into captive coal mining. The

Tokisud mining block, near Ranchi, in Jharkhand, is being developed into a captive

coal mine. The coal for the Punjab plant will be drawn from this mine.

Thus venturing into coal mine business will help it to reduce the cost for carrying

out the power plants.


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RESTRUCTURING

GVK Power & Infrastructure plans to restructure operations, particularly in power

vertical, bringing all divisions into one sub-holding company GVK Power &

Infrastructure Ltd, the listed entity and holding company of the Hyderabad-based

diversified GVK Group, has sewn up plans to restructure operations, particularly in

the power vertical, bringing all divisions into one sub-holding company. According

to the proposal, the company will transfer investments made in power assets to a

wholly-owned subsidiary GVK Energy Limited. This is part of the restructuring

of the assets in the energy business. After approval, the company will transfer

power assets worth Rs 1,170 crore made into GVK Industries Ltd, GVK Gautami

Power Ltd, GVK Power (Goindwal Sahib) Ltd, and Alakanada Hydro Power

Company Ltd into GVK Energy Ltd.With the recast, GVK Power & Infrastructure (GVKPIL) will become the flagship

company commanding an asset base of Rs 18,000-20,000 crore with all the

infrastructure assets in power, airport, road, and mining under its umbrella. Its

current asset base is about Rs 3,500 crore.

Key assets like the Mumbai International Airport and GVK Jaipur Expressway will

come under GVKPIL after the restructuring. GVK Group chairman GV Krishna

Reddy told ET that the move will enable the group to grow faster. Mr Reddy said

the promoter group's stake in the combined entity will rise to 80-85%. It is now atabout 64%.

The recast is also expected to better resource utilisation, create larger balance sheet

to bid for upcoming projects, align shareholder interest in a single listed entity,

unlock value in operating assets and eliminate need for multiple listing by group

companies.

The city-based GVK Power and Infrastructure Ltd, which is modernizing the

Mumbai international airport, is restructuring its businesses to raise more money,

said its top official.We are planning to restructure all our infrastructure businesses and form a few

intermediate holding companies, which in turn will have subsidiaries, so that we

can raise funds in an efficient manner whenever required, GVK group chairman

G.V. Krishna Reddy told Mint.


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The strategies behind restructuring are:

Increasing Value of Parts - One of the main reasons that businesses usecorporate restructuring is to divide the business up for sale. If a company is

trying to sell as a conglomerate, it will likely get lower offers from investors.

When the company is split up into separate parts, it can often get betteroffers for those individual parts. This can increase the value of the company

as a whole and help get a higher sales price for the business.

Reduce Costs - Another benefit of restructuring a company is to reducebusiness costs. It could cut back on employees and equipment to streamline

business operations. In this way, the company can expand its reach without

adding too much to the overhead of the business. If handled correctly, the

company can add significant value for its shareholders.

Strategic Fit - The decision to merge with or acquire another firm is a capitalbudgeting decision much like any other. But mergers differ from ordinaryinvestment decisions in at least five ways. First, the value of a merger may

depend on such things as strategic fits that are difficult to measure.

Increasing Market Power Restructuring through merger may reducecompetition, thereby increasing market power.

But due to this restructuring by mergers here basic competitive problems can be

raised. The first is the elimination of competition between the merging firms,

which, depending on their size, may be significant. The second is that the

unification of the merging firms' operations may create substantial market power

and could enable the merged entity to raise prices by reducing output unilaterally.

The third problem is that, by increasing concentration in the relevant market, the

transaction may strengthen the ability of the market's remaining participants to

coordinate their pricing and output decisions. The fear is not that the entities will

engage in secret collaboration but that the reduction in the number of industry

members will enhance tacit coordination of behavior.


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Strategies for the Future - The emerging contender is already on its way to un-

challengeable dominance. The success and range of its journey would depend on

the strategic initiatives it takes. We propose the following strategies for the

contender to grow and prosper globally:

The Focused Approach -The liberalization of the economy saw a period ofunhindered diversification and growth, particularly in non-core areas, which

adversely affected the corporate sector. The process of restructuring has seen

companies hiving off operations in a bid to refocus on core competencies

and become leaner to face competition. We are seeing the beginning of

possibly a large movement of Indian companies re-engineering their

businesses to be web-compatible and entering into the world of e-commerce

either directly or as part of a portal.

Building on Core CompetenciesOutsourcing Secondary Activities: The contender is most comfortable in

building on its core abilities and competes in proven grounds. Hence many

emerging Indian companies have decided to refocus on core competencies,

while outsourcing or shedding off secondary operations.

Mergers & Acquisitions and Consolidation - This is the inorganic mode ofthe focused approach. Companies consolidate and grow largest to gain larger

and diverse markets shares and build a global brand. The profits and

economies of scale help them ward off tough competition. Investments in Innovation and Research - After TRIPS, many Indian

companies realize the need to focus on innovating new products and

services. This requires allocating a major chunk for R&D activities. As a

result, Patents granted to India have been rising, an outcome of both Indian

and foreign companies that have set up operations here.

A New Productivity Drive - To increase the productivity and havecompetitive costs. To minimize overhead charges.

Brand Building and Service - The major thrust should be on building globalbrands for both products and services.


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No of emergencies handled till date: 16244137(Inception to Till 21st Nov11)

No of emergencies handled per day: 10222

No of lives saved per day: 300

As of now, one emergency dispatch is made by GVK EMRI every 8 seconds on an

average to provide assistance in emergency.

HOUSING:

Under the government scheme, GVK foundation has provided housing for 1000

underprivileged people in Kothur village of Nellore in Andhra Pradesh.

SPORTS TENNIS ACADEMY:

GVK strongly endorses and supports sport as an expression of excellence amongbudding youth. Deriving inspiration from young sports greats like Sania Mirza and

Rohan Bopanna, GVK has instituted a Tennis Academy, to promote future tennis

champions.


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EDUCATION:

GVK Foundation manages a degree college at Indukurupet village, Nellore

District. This college offers quality education to students from surrounding areas.

The GVK Foundation also sponsors and provides scholarships for students, across

disciplines.

SUSTAINABILITY:

Sustainability remains a constant through all of GVKs projects and initiatives.One of the highest priorities during project implementation and planning is

safeguarding the nature. Instead of being an add-on, sustainability has always been

a starting point at GVK. All projects under the GVK portfolio conform to the

international norms of sustainable development.

Along with reducing carbon footprints, GVK collaborates with local communities

to educate and inform the people about environment and sustainability. GVK

believes that guidance and education are essential while including people in the

sustainability initiatives.

A remarkable example of GVKs dedication to conserving the environment is the

Jegurupadu Combined Cycle Power Plant in Andhra Pradesh. This plant has won

many accolades for its environmental initiatives. It has been awarded a Gold Star


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GVKPERFORMANCE AND ITS STRATEGIC DIRECTION

Being a holding company of different vertical business operations, Company does

not have independent operating revenues other than O&M fee, incentives and

dividends, if any, from its subsidiaries, interest and other treasury income earnedon surplus funds.

GVK total income increased by 7% to Rs.1,943.19 Crores from Rs.1,815.82 Crores

in the previous year. The Power assets contributed an income of Rs.1,712.93

Crores (88.15% of total income) compared to Rs.1,603.28 Crores in the previous

year. This increase is mainly attributable to full year operation of Jegurupadu

Phase II and Gautami Power Plants in the current year. The Transportation asset

contributed an income of Rs.189.16 Crores (9.73% of total income) compared to

Rs.170.75 Crores in the previous year. The other segment contributed Rs.41.10

Crores (2.12% of total income) compared to Rs.41.79 Crores in the previous year.The Airport assets (Mumbai and Bangalore Airports) as the associates of the

company have contributed to net profit of Rs.110.93 Crores as compared to

Rs.51.68 Crores in the previous year. The consolidated net profit after tax was

Rs.154.91 Crores as against Rs.155.87 Crores in the previous year.

Dividend:

Apart from implementing the existing or new projects and / their expansions under

different vertical businesses, through its subsidiaries and associate companies, yourcompany is also exploring various business opportunities. In this endeavour, it is

necessary to conserve the funds to meet the investment opportunities, which your

board believes would enhance the shareholders value in the long term. Therefore,

your Board has not recommended any dividend for the financial year 2010-2011.

Performance of the existing assets:

i) Energy:

Currently GVK operate 900 MW gas based power plants through step downsubsidiaries i.e. GVK Industries Limited Jegurupadu Phase-I (216 MW), Phase-II

(220 MW) and GVK Gautami Power Limited (464 MW). Following is the gist of

performance of these assets.


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GVK Industries Limited:

Phase-I

During the year Jegurupadu Phase I was operated at a Plant Availability Factor

(PAF) and Plant Load Factor (PLF) of 95.94% and 76.62% respectively (PY 98.58

% and 89.56%) and reported a loss of Rs.29.03 Crores (PY Rs.0.15 Crores). The

decline in PAF, PLF and profits are mainly attributable to non availability of

natural gas. The energy generated during the year was 1455.32 Million kWh (PY

1685.82 Million kWh) out of which 1422.74 Million kWh was exported and 32.58

MUs were for Auxiliary Consumption. The Station Heat Rate during the year was

2007 kcal/kWh as against 1968 kcal/kWh in the previous year.

Phase-II

During the year Jegurupadu Phase II was operated at a PAF and PLF of 89.17%

and 81.75% respectively (PY 95.29% and 90.35%) and reported a profit after taxof Rs.20.74 Crores (PY Rs.25.26 Crores). The decline in PAF, PLF and profits are

mainly attributable to non availability of natural gas. The energy generated during

the year was 1638.85 Million kWh (PY 1742.47 Million kWh) out of which

1606.96 Million kWh was exported and 31.89 MUs were for Auxiliary

Consumption. The Station Heat Rate during the year was 1824 kcal/kWh as against

1808 kcal/kWh in the previous year.

GVK Gautami Power Limited

Phase-I

During the year Gautami Phase I was operated at a PAF and PLF of 88.64% and

83.39% respectively (PY 91.47% and 88.20%) and reported a profit after tax of

Rs.76.58 Crores (PY Rs.28.14 Crores) showing a growth of 272.14%. The energy

generated during the year was 3422.90 Million kWh (PY 2937.98 Million kWh)

out of which 3346.76 Million kWh was exported and 76.14 MUs were for

Auxiliary Consumption. The Station Heat Rate during the year was 1825.60

kcal/kWh as against 1798.98 kcal/ kWh in the previous year.


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ii) Airport:

Under Airport asset, currently we operate Chhatrapati Shivaji International Airport

(CSIA), Mumbai (a brown field project) and Bengaluru International Airport,

Bengaluru (a green field project). Following is the gist of performance of these

assets.

Mumbai International Airport Pvt. Ltd (MIAL)

During the year MIAL handled 29.07 Mio (PY 25.61 Mio) passenger traffic,

handled 242,659 ATMs (PY 229,799 ATMs) and 340,260 MT (PY 250,237 MT)

of Cargo reflecting a growth of 14%, 5.6% and 36% respectively. MIAL reported a

profit after tax of Rs.197.04 Crores for the financial year 2010-2011 (PY

Rs.132.80 Crores) showing a growth of 48%. MIAL had completed 31 of the 32

mandatory projects under OMDA as of December 2010. The only mandatory

project remaining to be completed is the S.09 International Terminal Expansion -South West Pier which is pending due to the delay in handing over of Chhatrapati

Shivaji Maharaj statue area. During the year Terminal 1C was inaugurated with a

lot of retail offerings. CSIA has become the first Indian airport website, to offer

mobile airport portal.

Bangalore International Airport Ltd. (BIAL)

During the year BIAL handled 11.63 Mio (PY 9.92 Mio) passenger traffic, handled

111,787 ATMs (PY 104,653 ATMs) and 222,783 MT (PY 174,648 MT) of Cargo

reflecting a growth of 17%, 7% and 28% respectively. BIAL reported a profit after

tax of Rs.132.10 Crores for the financial year 2010-2011 (PY Rs.77.70 Crores)

showing a growth of 70%. A new and spacious VIP lounge at the Airport has been

opened in January 2011. The expansion of the existing terminal 1 has been

designed to enhance the operational performance in order to handle, inter-alia, the

increase of passenger traffic from the current 11.2 million passengers to

approximately 17.2 million passengers annually up to the year 2015. The Project is

scheduled to be completed within a period of 18 months from the commencement

of its construction.


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iii) Transportation:

A 90.4 Km Jaipur - Kishangarh Expressway on NH-8 connecting Mumbai and

New Delhi is a BOT project and is a part the prestigious Golden Quadrilateral

Project undertaken by the Central Government of India through National

Highways Authority of India (NHAI) connecting all four major metro cities i.e.

New Delhi, Mumbai, Chennai and Kolkata. Following is the gist of performance of

this asset.

GVK Jaipur Expressway Pvt Ltd.

Toll collected by the Company during the year was Rs.189.16 Crores (PY

Rs.170.75 Crores) registering a growth of 11%. The profit after tax is at Rs.80.02

Crores for the year (PY Rs.58.96 Crores) showing a growth of 35.73%. Multi Axis

vehicles alone have contributed 73% of the toll revenue collections during the year.

This is the first road project in India to have shared certain agreed percentage ofexcess toll revenue over the projected toll fee with NHAI.


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OTHER DEVELOPMENTS

i) Energy

During the year your Company has transferred its entire shareholding in the powerassets viz GVK Industries Limited, GVK Gautami Power Limited, GVK Power

(Goindwal Sahib) Limited, Alaknanda Hydro Power Company Limited, GVK Coal

(Tokisud) Company Private Limited, to GVK Energy Limited, a wholly owned

subsidiary of the Company for a consideration of Rs.1333.17 Crores. With this, the

creation of energy vertical has been completed in all respects.

During November 2010, your Company through its subsidiary GVK Energy

Limited has entered into an Investment Agreement with M/s. 3i India

Infrastructure Fund, Actis Infrastructure India PCC Limited and an affiliate of the

Government of Singapore Investment Corporation (GIC) for a total Private Equityinvestment of Rs.1498 Crores for an ultimate equity dilution of 24.97% in GVK

Energy Limited.

ii) Airport

During the year your Company has signed an agreement to acquire 13.5%

additional equity stake in Mumbai International Airport Limited (MIAL), from Bid

Services Division (Mauritius) Limited, through a step down subsidiary, subject to

regulatory approvals. On completion of this acquisition, equity shareholding of the

GVK Group stands at 50.5% from the existing 37% of the total paid-up sharecapital in MIAL.

iii) Transportation

During the year, your Company has formed two SPVs as subsidiaries of GVK

Transportation Private Limited, a wholly owned subsidiary of the Company.

Further, your Company on April 6, 2011, as a concluding transaction, has

transferred its entire shareholding held in the GVK Jaipur Expressway Private

Limited to GVK Transportation Private Limited, a wholly owned subsidiary of the

Company for a consideration of Rs.274.01 Crores. With this, the creation of

transportation vertical has been completed in all respects.12 GVK Power &Infrastructure Limited


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PERFORMANCE OF EXISTING ASSESTS:

i) Energy

Currently we operate 900 MW gas based power plants through step down

subsidiaries i.e. GVK Industries Limited Jegurupadu Phase-I (216 MW), Phase-II

(220 MW) and GVK Gautami Power Limited (464 MW).

ii) Airport

Under Airport asset, currently we operate Chhatrapati Shivaji International Airport

(CSIA), Mumbai (a brown field project) and Bengaluru International Airport,

Bengaluru (a green field project).

iii) Transportation

A 90.4 Km Jaipur - Kishangarh Expressway on NH-8 connecting Mumbai and

New Delhi is a BOT project and is a part the prestigious Golden Quadrilateral

Project undertaken by the Central Government of India through National

Highways Authority of India (NHAI) connecting all four major metro cities i.e.

New Delhi, Mumbai, Chennai and Kolkata.


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NEW OPPOURTUNITIES:

i) Energy

During June 2010, your Company through a step down subsidiary, GVK RatleHydro Electric Project Private Limited (SPV), has signed the Power Purchase

Agreement, with Power Development Department, Govt. of Jammu & Kashmir for

implementing the 810MW Ratle Hydro Electric Project on the river Chenab,

Kishtwar District, in the State of Jammu & Kashmir. The cost of the project is

estimated at Rs.5368 Crores and expected to be operational by March 2017.

During February 2011 your Company has executed a Memorandum of

Understanding (MOU) with the Punjab State Power Corporation Limited for

implementation of 1320 MW Power Project (Phase-II), in the State of Punjab. For

this purpose GVK Power (Khadur Sahib) Private Limited, a SPV has beenincorporated as a step down subsidiary through GVK Energy Limited to implement

the Coal based thermal power project with super critical technology, proposed to

be developed in the additional land at the existing Goindwal Sahib site in Tarn

Taran District, Punjab.

ii) Airport

Your Company's capabilities, expertise and strong track record in the airports

sector helped getting two international airports to its portfolio. Your Company hassigned two MoUs with Indonesian Government during its President's State visit to

India in January 2011 to develop green field international airports in North Bali

and Yogyakarta (Java), Indonesia. Bali and Java are the prime destinations for

tourist traffic from both Europe and Asia. The signing of these MoUs marks a very

significant milestone for GVK and your Company is confident that these

agreements will yield significant synergies.


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SOURCES:

http://www.gvk.com/gvkfoundation/csrinitiatives.aspx 17th Annual Report of GVK www.gvk.com www.moneycontrol.com www.thehindu.com www.businessline.com www.economictimes.com

bs-ii final report

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