FUNDAMENTOS PARA LA PREPARACION Y LA CELEBRACION DE LA PRIMERA COMUNION

INDUSTRY OVERVIEW

The information in this section includes extracts from publicly available information, data and statistics and has been derived from various government publications and industry sources, including reports that have been prepared by CRISIL Limited (“CRISIL”). Neither we nor any other person connected with the Issue have verified this information. The data may have been re-classified by us for the purposes of presentation. Our Company accepts responsibility for accurately reproducing such information, data and statistics. Industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but that their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured and, accordingly, investment decisions should not be based on such information.

Disclaimer from CRISIL Limited:

CRISIL has used due care and caution in preparing reports that were used as a basis for the preparation of this section. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of CRISIL's reports used as a basis for the information in this section may be published or reproduced in any form without CRISIL's prior written approval. CRISIL is not liable for investment decisions that may be based on the views expressed in such reports. CRISIL Research operates independently of, and does not have access to information obtained by, CRISIL's Rating Division, which may, in its regular operations, obtain information of a confidential nature that is not available to CRISIL Research.

Overview of the Indian Economy

India is the fifth largest economy in terms of purchasing power parity after the European Union, the United States, China and Japan, with an estimated GDP (at purchasing power parity exchange rates) of US$ 3.30 trillion in 2008. (CIA – The World Factbook) Between fiscal years 2004 and 2008, India’s GDP grew at an average annual rate of approximately 8.8%. At 1999-2000 prices, India’s GDP grew at a rate of 9.7%, 9.0% and 6.7% in fiscal years 2007, 2008 and 2009, respectively. (Source: Economic Survey 2008-2009, Ministry

of Finance, Government of India)

The global financial crisis and economic recession have been identified as being major factors resulting in lower growth rate of India’s GDP in fiscal year 2009 as compared to fiscal year 2007 and fiscal year 2008. Despite the slowdown in growth, investment in India has remained relatively stable with the ratio of fixed investment to GDP increasing to 32.2% of GDP in fiscal year 2009 compared to 31.6% in fiscal year 2008.

(Source: Economic Survey 2008-2009, Ministry of Finance, Government of India) The charts below set

forth certain indicators of the Indian economy for the past five fiscal years.

(Source: Economic Survey 2008-2009, Ministry of Finance, Government of India)

Construction Industry

Introduction

The Indian construction industry has witnessed rapid growth over the last few years, with the growth of the sector having been strongly linked to the overall growth and development of the Indian economy. Investments in construction account for nearly 11.0% of India’s GDP, and almost 50.0% of the gross fixed capital formation, which is the value of additions to the existing pool of fixed assets in India less fixed assets sold off or scrapped. (Source: Infrastructure: Construction, CRISIL Research, September 2009)

The Indian government has taken a number of measures to encourage and facilitate foreign investment in the construction and infrastructure development sector. Such measures have included:

• permitting FDI of up to 100% in companies engaged in construction development projects relating to housing, commercial premises, resorts, educational institutions, recreational facilities, townships and city and regional level infrastructure, subject to certain conditions contained in Press Note No. 2 (2005) issued by the Government of India;

• permitting FDI of up to 100% for setting up SEZs; and

• supporting the repeal of the Urban Land Ceiling Act by state governments, with some states having already repealed this act.

In addition, a number of state governments have rationalised property taxes.

Construction expenditure is expected to almost double to Rs.12,189 billion during the period from 2008- 2009 to 2012-2013 from Rs.6,217 billion expended during the period from 2003-2004 to 2007-2008 (based on 2008-2009 prices). Currently, the size of the construction industry is Rs.1,866 billion (based on 2008- 2009 prices). (Source: Infrastructure: Construction, CRISIL Research, September 2009)

The graph below displays the expected growth of the infrastructure and industrial segments of the construction industry through fiscal 2012-2013:

(Rs. billion)

E= Estimate

(Source: Infrastructure: Construction, CRISIL Research, September 2009) Industrial Construction

Expenditure on industrial construction is expected to grow by 2.2 times over the next five years (the period from 2008-2009 to 2012-2013) as compared to the previous five year period from 2003-2004 to 2007-2008. Industrial investment will maintain its growth momentum due to the increased government focus on this area. CRISIL Research expects construction expenditure of Rs.2,641 billion to be incurred in the industrial segment over the next five years (in the period from 2008-2009 to 2012-2013). (Source: Infrastructure:

Construction, CRISIL Research, September 2009)

Industrial investments are likely to be driven mainly by oil and gas investments. Companies in both the upstream and downstream sectors have planned extensive expansion. These companies include: Indian Oil Corporation, Oil and Natural Gas Corporation, Reliance Industries, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

The Graph below displays the construction opportunity within the industrial sector through 2010-2011:

E = Estimate

(Source: Infrastructure: Construction, CRISIL Research, September 2009) Infrastructure Construction

The Government’s emphasis on infrastructure development holds significant promise for the construction industry. Over the next five years, infrastructure development will account for 78.3% of all construction expenditure in India. CRISIL Research estimates that infrastructure construction opportunities will almost double over the next five years, from Rs.5,006 billion in the period from 2003-2004 to 2007-2008 (based on 2008-2009 prices), to Rs.9,548 billion in the period from 2008-2009 to 2012-2013. (Source: Infrastructure:

Construction, CRISIL Research, September 2009)

In the infrastructure sector, road construction will be the primary growth driver, accounting for an expected 44.0% of total construction expenditure on infrastructure over the next five years, followed by irrigation and the development of urban infrastructure, which together will contribute 28.0%. (Source: Infrastructure:

Construction, CRISIL Research, September 2009) Road programmes such as the National Highway

Development Project (“NHDP”) and Pradhan Mantri Gram Sadak Yojana, together with state level projects, are expected to propel the construction industry. Other sectors, such as irrigation (especially in Andhra Pradesh); water supply and sanitation (driven by Jawaharlal Nehru National Urban Renewal Mission and

(Rs. billion)

481

531 542

Bharat Nirman Yojana); railways (driven by freight corridor programmes and other rail capital outlays); and power (driven by capacity additions in thermal and hydel sectors), will act as catalysts for construction investment.

The graph below displays the construction opportunity within various areas of the infrastructure construction segment:

E = Estimate

(Source: Infrastructure: Construction, CRISIL Research, September 2009)

Infrastructure is considered a key component of GDP growth. It is believed that a country with an improved infrastructure can enhance GDP growth, while increased GDP growth can trigger the need for further infrastructure development to continue to fuel additional growth. However, in the past India has spent far less on infrastructure than other developed and developing nations. The importance of infrastructure for sustained economic development is well recognised by the Government in its Eleventh Five Year Plan (fiscal 2008 to fiscal 2012). It is difficult to estimate the exact financing requirement for infrastructure as the quality and amount required increases in line with the economy’s growth. As a result, the infrastructure target becomes a moving target. The revised draft of the Eleventh Plan Approach Paper states that investments in physical infrastructure would have to increase to around 8.0% in the five-year period of fiscal 2007-2008 to 2011-2012 to meet the Government’s GDP growth target of 9.0%. This translates into an investment of around US$310 billion (Rs. 13,950 billion) over the five-year period of fiscal 2007-2008 to 2011-2012 (source: Planning Commission Vice-Chairman, Mr. Montek Singh Ahluwalia, 2006). These investments are to be achieved through a combination of public investment, public-private partnerships (“PPPs”) and exclusive private investments, wherever feasible.

The Role of the Private Sector in Infrastructure Development

Traditionally, the government has played a key role in supplying and regulating infrastructure services in India. The private sector has historically refrained from significant investment in infrastructure development because of the pervasiveness of market failure associated with infrastructure investment and provision of infrastructure services. However, due to the public sector’s limited ability to meet the massive infrastructure funding needs, private sector investment in infrastructure has become critical. Therefore, the Indian government is actively encouraging private investments in infrastructure, especially in solid waste management, power, urban water supplies and mass rapid transport system. The investment in infrastructure during the Tenth Five-Year Plan was Rs.8,877,940 million, which constituted 5.1% of GDP. This included Rs.1,752,030 million of investment by the private sector. (Source: Private Participation in Infrastructure,

Planning Commission Report, June 2009)

(Rs. billion)

1,385

1,696

1,906

In order to overcome the infrastructure deficit, The Eleventh Five-Year Plan projects an investment of Rs.20,561,500 million, which would imply an investment of 7.6% of GDP during the course of the Plan and 9.0% of GDP in the final year of the Plan (2011-12). This includes public sector investment of Rs.7,656,220 million in the central government projects and Rs.6,709,370 million in the state government projects, leaving the remaining Rs.6,195,910 million to be invested by the private sector. Private capital is thus expected to fund approximately 30.0% of the total investment during the Eleventh Plan, as compared to 20.0% during the Tenth Plan. (Source: Private Participation in Infrastructure, Planning Commission Report, June 2009) Further, private participation in the infrastructure industry through PPPs not only provides needed funding, it enables the government to transfer construction and commercial risks to the private sector. Such arrangements are increasingly becoming the preferred vehicle for infrastructure construction, given the large investment needs.

Types of PPP arrangements

In a PPP project, private investors invest in public service infrastructure through one of the following four ways (according to the World Bank classification):

• concessions: a private entity takes over the management of a state-owned enterprise either to rehabilitate and operate or to operate for a given period;

• greenfield projects: a private entity or a public-private joint venture builds and operates a new facility for the period specified in the project contract. The facility may be returned to the public sector at the end of the concession period;

• divestitures: a private entity buys an equity stake (full or partial) in a state-owned enterprise through an asset sale, public offering, or mass privatisation programme; or

• management and lease contracts: a private entity takes over management of a state-owned enterprise for a fixed period, while ownership and investment decisions remain with the state. Key segments of the infrastructure industry in which the Company is involved are described below.

Roads Introduction

Road development is a priority in India because roads constitute a vital part of India’s transportation infrastructure. Roads account for about 86.0% of passenger traffic and 62.0% of freight traffic. India has the second largest road network in the world, aggregating 3.3 million km, consisting of national highways, expressways, state highways, and district roads. The road network comprises of 66,754km of national highways, 128,000km of state highways, and 3,120,000km of district and rural roads. National highways comprise only about 2.0% of the total length of roads in India, but carry about 40.0% of the total traffic across the length and breadth of the country. Whereas state roads and major district roads carry about 40.0% of the total traffic across the length and breadth of the country, they only account for approximately 18.0% of the road length. (Source: Roads and Highways, CRISIL Research, August 2009)

National Highway

Poor finances have historically restrained the Government from making heavy investments in transport infrastructure. However, the Government has taken several steps to correct this problem, including, most importantly, the implementation of the NHDP. The NHDP is the largest highway project ever undertaken in India and is being implemented by the National Highway Authority of India (“NHAI”). The NHDP entails seven phases involving the development and upgrading of national highways. Between 2009 and 2014, the Government is anticipating the construction of approximately 18,000 km of national highways over the various phases of NHDP, at an estimated cost of Rs.1,888 billion.

The estimated time of completion and cost of works that remain to be performed on the first three phases and the Phase V of the NHDP are as follows:

NHDP Component Estimated time of Completion Estimated cost of remainder of work as of August 2009 (in Rs. billion)

Phase I 2013-2014 26

Phase II 2014-2015 322

Phase III 2016-2017 913

Phase V 2016-2017 Data unavailable

Note: Phase IV has been excluded as no work has yet been performed. (Source: Roads and Highways, CRISIL Research, August 2009)

The table below sets forth the status of the NHDP as of 31 March 2009: Phase I Phase II Phase

III

Phase V Total

Total length 7,188 7,274# 12,109 6,500 33,071

Completed to date 6,708 3,399 787 102 10,996

Completion rate as % of total 93.3 46.7 6.5 1.6 33.2

Under implementation (“UI”) 454 3,032 1,878 928 6,292

UI as a % total 6.3 41.7 15.5 14.3 19.0

Balance length for award (“BFA”) 26 843* 9,444 5,470 15,783

BFA as a % of total 0.4 11.6 78.0 84.2 47.7

Cost incurred so far 359 288 84 13 744

Note: For the purpose of the analysis, the entire lengths of NSEW Corridor in Phase II and of National Highways (“NH”) in Phase I have been utilised.

# Actual current length is 7,274km (excluding 442km of common length with the Golden Quadrilateral portion of Phase I). The original approved length of NSEW corridor was 7,300km.

* Includes 53km terminated in 2008.

(Source: Roads and Highways, CRISIL Research, August 2009)

As can been seen from the table above, 33.2% of the total road length under Phases I-III and Phase V of the NHDP has been achieved at completed as of 31 March 2009. The focus of implementation has shifted to the Phase II (NSEW Corridor) and Phase III. Of the total length of 33,071 km to be developed during Phases I, II, III, and V of the NHDP, approximately 6,300 km is under implementation and about 15,800 km is yet to be awarded, mainly from Phase III and Phase V.

State Road Networks

State roads contribute significantly to the economy of midsized towns and to the rural economy. They also contribute to India’s industrial development by enabling the movement of raw materials to and from the rural areas surrounding urban areas. (Source: Roads and Highways, CRISIL Research, August 2009)

Investments in state roads have risen continuously since fiscal 2006-2007. The cumulative actual capital expenditure, by the respective state governments, was RS.195 billion in fiscal 2006-2007. The revised estimate of state government’s expenditure for fiscal 2007-2008 was Rs.251 billion, compared with the originally budgeted estimate of Rs.233 billion. The budget estimate for 2008-2009 is Rs.272 billion. Due to the prevailing economic climate, the future growth rate is expected to slow down. For 2009-2010 and 2010- 2011, the growth in the states’ outlay for capital expenditure on roads and highways is expected to be 8.0% per annum, which is further expected to decrease to 6.0% per annum for the next three years. (Source: Roads

and Highways, CRISIL Research, August 2009)

Certain progressive states such as Maharashtra, Gujarat, Madhya Pradesh, Rajasthan and Karnataka will contribute 34.0% to the total outlay of capital expenditure on roads and highways by state governments over the next five years. States are taking several initiatives in facilitating and promoting private sector participation in road projects. These states have taken several initiatives to facilitate and promote private sector participation in road projects such as putting in place model concession agreements and well-defined toll policies and bidding processes. These initiatives have further encouraged private sector participation in road and highway projects in these five states. (Source: Roads and Highways, CRISIL Research, August

Outlook and Investment Opportunities

Between fiscal 2009-2010 and fiscal 2013-14, it is estimated that the governmental expenditure in the road sector will be approximately Rs.5,216 billion. Out of the total investments, state roads would account for 39.0% of the investment, followed by national highways which would account for 36.0%, and rural roads with 25.0% of the total investment. Since 2006-2007, state governments’ focus on improving state roads can be seen by their increased share in investment in road projects. (Source: Roads and Highways, CRISIL

Research, August 2009)

The table below displays trends in road sector investment: (Rs. billion) 2006- 07 2007- 08 2008- 09 2009- 10 P 2010- 11 P 2011- 12 P 2012- 13 P 2013- 14 P Total (2009-10 to 2013-14 P) Proportion National Highways 124 187 183 264 287 388 471 477 1,888 36.0% % growth - 51% -2% 44% 9% 35% 21% 1% - - State roads* 195 251# 272## 326 373 395 445 471 2,010 39.0% % growth - 29% 8% 8% 14% 6% 13% 6% - - Rural roads 73 106 152 181 218 264 304 352 1,319 25.0% % growth - 45% 43% 19% 20% 21% 15% 16% - - Total 392 544 607 771 878 1047 1,220 1,300 5,216 100.0%

# Revised estimates; ## Budget estimates; P = Projected

* State roads investment number for 2006-07, 2007-08 and 2008-09 includes only state’s capital outlay Source: MORTH, NHAI, RBI, National Rural Roads Development Agency, CRISIL Research

Historically, road projects have been largely financed through public funds, which will remain true for the next five years. Out of the Rs.5.2 trillion of funding that is required for the road sector over the next five years, around Rs.3.7 trillion is expected to come from the public sector and the remaining Rs.1.5 trillion is expected to come from the private sector. The proportion of public funding is slowly decreasing as private funding becomes more prominent through BOT (build-operate-transfer) projects. It is anticipated that private-sector funding will increase in the future. (Source: Roads and Highways, CRISIL Research, August 2009)

Irrigation

Irrigation is critical for the growth and success of the agricultural industry. Future growth of the agricultural industry is dependant on intensive cultivation of existing land and decreased reliance on rainfall. Irrigation infrastructure facilitates more intensive cultivation of existing land and decreased reliance on rainfall by enabling farmers to grow multiple crops on the same plot during different agricultural seasons. Irrigation infrastructure includes dams, barrages, reservoirs, canal networks, lift irrigation and treatment plants, among others.

Irrigation Investments

After the road, urban infrastructure and power sectors, irrigation is expected to be the biggest contributor to total infrastructure investment expected to materialise during the five year period from 2008-2009 to 2012- 2013. Investment in India in irrigation-based infrastructure is expected to grow by 1.8 times during this five year period, with an expected investment of Rs.2,474 billion from 2008-2009 to 2012-2013 compared to RS.1,361 billion during the period from 2003-2004 to 2007-2008 (based on 2008-2009 prices), which would reflect growth of 182.0%. (Source: Infrastructure: Construction, CRISIL Research, September 2009) Irrigation is mainly funded by state government allocations. Andhra Pradesh has consistently been the highest investing state in irrigation. Out of the total investments made in India during 2006-2007 and 2007- 2008, 31.0% and 34.0%, respectively, were made in Andhra Pradesh. Andhra Pradesh’s total expenditure on irrigation projects is expected to be approximately Rs.166 billion in fiscal 2010 and Rs.190 billion in fiscal 2011. The leading seven states, in terms of level of investment in irrigation projects, account for almost 80.0% of the total expenditure on irrigation. Considering the current status and the future potential of irrigation infrastructure, five states, Bihar, Andhra Pradesh, Gujarat, Tamil Nadu and Madhya Pradesh, offer substantial opportunities going forward. These states have realised less than 70.0% of their total irrigation potential. (Source: Infrastructure: Construction, CRISIL Research, September 2009)

Water and Waste Water

The quality and delivery of water has become increasingly important in India in recent years. Even though as of 2006 over 96.0% of urban India had access to water supply, availability of water varied considerably from city to city. Additionally, only 52.0% of the urban population of India had access to improved sanitation facilities as of 2006. (Source: World Bank) Access to improved sanitation facilities with sewage continues to vary significantly among the various states in India. Due to the increased focus being placed on the quality and delivery of water and the significant need to improve sanitation facilities with a sewage