APR Constructions Limited - Saffron Capital

qualification or shortlisting process, the client stipulates technical and financial eligibility criteria to be met by the
potential applicants. Pre-qualification applications generally require us to submit details about our organizational setup,
experience, technical ability and performance, reputation for quality, safety record, bidding capacity and size of
previous contracts in similar projects, financial parameters (such as turnover, net worth and profit and loss history),
employee information, plant and equipment owned, portfolio of executed and ongoing projects and details in respect
of litigations and arbitrations in which our Company is involved, although the price competitiveness of the bid is
usually the primary selection criterion. Our Company may not be entitled to participate in projects where we are
unable to meet the selection criteria specified by the relevant client or company. Further our Company may not be
able to procure a contract even if we are technically qualified owing to price competitiveness in comparison to other
bidders. Any failure to compete effectively could have a material adverse effect on our business, financial conditions
and results of operations.
6. Our Company may be exposed to several risks, including penalties, which are inherent to projects undertaken
through joint ventures. In the event of any dispute with them, it could adversely affect our business and
results of operations.
In order to meet the pre-qualification requirements for certain projects, which require higher capital adequacy or
technical expertise, our Company has to enter into joint ventures with third parties. On account of the complexity of
the joint venture agreements executed by our Company, it is very difficult to ascertain and quantify the liabilities of
our Company in case of default or breach of obligations by the other joint venture partners. In terms of such joint
venture agreements, the liability of joint venture partners is joint and several and in the event that a joint venture
partner fails to discharge its contractual obligations, our Company may, together with such joint venture partner, be
liable to pay any penalties which may be levied by the clients for whom the projects are being executed. Though our
Company has entered into joint ventures with third parties based on their track record and position in the market, the
aforesaid risks are inherent to the projects undertaken by means of a joint venture.
7. The Company faces margin pressure as a significant number of its infrastructure-related contracts and
projects are awarded by the Government of India and state governments through competitive bidding
processes. As a result, the Company's business, financial condition and results of operations may be adversely
affected.
Most infrastructure-related contracts and infrastructure development projects are awarded by governments' entities
through competitive bidding processes and satisfaction of other prescribed pre-qualification criteria. Once prospective
bidders clear the technical requirements of the tender, the contract is usually awarded to the most competitive
financial bidder. The Company also faces competition from companies who may operate on a larger scale than it and
so may be able to achieve better economies of scale. Further, the Company's margins are susceptible to decline as
contracts in the sectors that it operates in are awarded by government entities to the lowest bidder, causing the
Company to accept lower margins in order to be awarded the contract. As a result, the Company's business, financial
condition and results of operations may be adversely affected.
8. Our business has high working capital requirements. If we experience insufficient cash flows to meet required
payments on our debt and working capital requirements, there may be an adverse effect on the results of our
operations.
Our business requires a substantial amount of working capital to finance the purchase of materials and execution of
construction and other work on projects before payment is received from clients. In certain cases, we are contractually
obligated to our clients to fund working capital on our projects. Our working capital requirements may increase if, in
certain contracts, payment terms do not provide for advance payments to us or if the payment terms and schedules are
less favourable to us. Our Company may need to borrow additional funds in the future to fulfil our working capital
needs. Non availability such working capital or higher costs on such additional funds may have an adverse effect on
our financial condition and the results of our operations.
9. Increase in cost or non-availability of equipment, materials, labour or fuel may adversely affect our results of
operations.
Work expenditure constitutes approximately 92% part of our contract revenues for the eight months period ended
November 30, 2010 and approximately 91% for the fiscal ended March 31, 2010. Our infrastructure projects require
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