CHAPTER 1 INDUSTRY PROFILE

1. INDUSTRY PROFILE
The construction industry is the second largest industry of the country after agriculture. It makes a significant contribution to the national economy and provides employment to large number of people. The use of various new technologies and deployment of project management strategies has made it possible to undertake projects of mega scale. In its path of advancement, the industry has to overcome a number of challenges. However, the industry is still faced with some major challenges, including housing, disaster resistant construction, water management and mass transportation. Recent experiences of several new mega-projects are clear indicators that the industry is poised for a bright future. It is the second homecoming of the civil engineering profession to the forefront amongst all professions in the country.

The Construction industry involves constructing, repairing, and renovating buildings and engineering works, as well as subdividing and developing land. Construction companies can work independently or under contract to other firms or property owners, and either produce complete projects or a portion of projects.

A construction company may be the only establishment of an enterprise, or one of several establishments of an integrated real estate enterprise engaged in the land assembly, development, financing, building and sale of large projects. Because of large variations between projects and the inputs required to complete them, this industry group is divided into three sub-sectors: construction of buildings, heavy and civil engineering construction and specialty trade contractors. Some establishments undertake projects that require several different construction activities (known as trades) to be performed. Other establishments specialize in one trade.

Sub-sectors in this industry: Construction of Buildings Heavy and Civil Engineering Construction

Specialty Trade Contractors Real estate sector in India is witnessing tremendous boom. Real estate industry in India is presently worth $12 billion and is growing at the rate of 30 per cent per annum. The importance of real estate sector in India can be gauged from the fact that it is the second largest employer next only to agriculture. The real estate industry has significant linkages with several other sectors of the economy and over 250 associated industries. According to a study One Rupee invested in real estate sector results in 78 paise being added to the GDP of the country.

Eighty percent share of the real estate market is garnered by residential sector and the rest is comprised of offices, shopping malls, hotels and hospitals. The sustained demand from the Information Technology (IT) sector has fuelled the growth of real estate sector. It has been estimated that the demand for IT space would be 66 million square feet over the next five years. Several multinational companies are shifting their operations to India to take advantage of the relatively low costs. With human resources being the key element in this industry, hiring people and housing them assume great importance. The need to create space for people to work and live triggers the development of other related infrastructure.

The boom in retail industry has also spurred the growth in real estate sector. India at the moment is witnessing a spurt in extremely large retail spaces. Shopping malls with over 1 million sq ft of space have become the order of the day. As the competition in the market intensifies, builders are going out of their way to be different. Specialized malls, designer brands and multi-movie options are the order of the day. With the big players like Reliance, Big Bazaar, and Bharti entering retail market, real estate sector would be the big beneficiary.

The prospects for real estate industry in India looks buoyant. All the factors which contributed to the growth of real estate sector-high disposable incomes, sharp increase in global liquidity, selective capital account liberalization, looser credit policies, a greater availability of leverage due to financial liberalization and a consequent increase in

mortgage lending and price increases-look set to continue. The sustainability of growth in the real estate industry has its roots in strong demand fundamentals:

a. Rapid expansion of the IT/ ITES and business outsourcing industry (including knowledge process outsourcing and clinical testing outsourcing); b. Rising demand in the residential sector, encouraged by rapidly increasing income levels; c. Acceptance of shopping malls as one stop destinations for consumers; and d. Growing popularity of Special Economic Zones as preferred destinations for both manufacturing and service industries.

Source: CMIE Industry Reports

The global financial crisis and the resultant slowdown in the global economy during the year 2008-2009 have halted industrial and business expansion. The subsequent drying up of liquidity has led to an overall slowdown in the real estate sector in India.There has been sales slowdown across all real estate asset classes: Residential, Commercial, SEZ/Industry Parks.

Demand in real estate has remained grim, primarily due to low consumer confidence. This can be attributed to a weak economic scenario. High levels of inflation led to the government increasing interest rates. This led to the drying up of liquidity available for businesses to expand, leading to a slowdown in the commercial real estate demand. The increase in the cost of finance also led to a drop in residential real estate demand.

According to a report released by UBS Investment Research in April 2009, unsold inventory with developers in major residential real estate destinations in India is still high at around 18% of the properties being promised for delivery over the next 12 months. The inventory situation is not limited to the residential space. Recent data from Jones Lang Lasalle REIS on supply and vacancy for office space in Delhi and Mumbai

indicates that office vacancy rates are very high. However, analysts and industry experts believe that long term prospects of the Indian real estate sector remain promising. Indias growing young population, rapid urbanization, growth in industry and services and rapid development of tourism are factors that will propel real estate demand in the long term.A number of reforms introduced by the Government in recent years have contributed to the scorching pace of development of the Indian Real Estate Industry in the past and will facilitate future growth

CHAPTER 2 COMPANY PROFILE

2. COMPANY PROFILE
SOBHA spearheading a revolution in Real Estate in India over a decade of quality focused best practices for building world class products have helped us enhance quality of life and delight customers, over a decade of engineering excellence and unique initiative towards Backward Integration that has helped us control costs, and deliver on time, every time, over a decade of passion in every detail of work, at every level, driving continuous innovation; has resulted in making Sobha a preferred real-estate brand in India, over a decade of rock-solid values, uncompromising business ethos, and transparency in all transactions; have contributed to our earning the trust of all our stakeholders.

The Company has achieved in a short span of time the enviable status of being one of the leading real estate players in India. It is mainly involves in development and construction of residential and commercial projects apart from undertaking contracts from major clients, especially from the IT sector. Residential projects include luxury and super luxury residential apartments, villas and row houses. Standard facilities such as well equipped club house, Swimming pool, gymnasium, game courts and recreation center are provided in all projects. In 2007 it has made its move towards a pan-India presence. The Company is currently undertaking projects in Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Maharashtra, Orissa, Haryana, Chandigarh and Himachal Pradesh and has plans to enter other states as well. During the year 2008-09 the company has implemented a new ERP, which covers the entire operation of the company spread over 10 cities involving projects under implementation aggregating to more than 15 million sft of construction, this process will bring integrity in our business operation with proper internal control for maximization of shareholders wealth. Sobha Developers long term strategy comprises of four critical elements: - To procure the required quantum of land on a timely basis at the right price with the perfect legal requirements of titles, etc. - To obtain all statutory approvals in time

- To achieve our targeted sales and support the customer through our highly trained and motivated Marketing, Sales and CRM teams - To produce products/projects having the highest quality standards taking into account the parameters of cost, time and safety.

2.1 HISTORY
It was in the year 1995 that Mr. P N C Menon founded Sobha developers with the clear vision to "transform the way people perceive quality" in the real estate industry returned home from the Middle east where he was acclaimed for quality interiors and construction since 1977. His intuition and business sense buttressed with the exhilaration of returning to his homeland led him to believe that he could make Quality the key differentiator between his proposed venture and other construction companies. Over the intervening years this vision continues to be the bedrock of all endeavours.

Today Sobha developers a Rs. 10 billion plus company is one of the largest and only backward integrated company in the construction arena. Since its inception Sobha's reputation is built on rock solid values, benchmark quality standards, uncompromising business ethos, focused customer centric approach, robust engineering, in-house Research and development and transparency in all spheres of conducting business, which have contributed in making Sobha a preferred real estate brand in both residential and commercial segments. This was emphatically endorsed during its IPO in 2006 when the issue was oversubscribed by 126 times that created history, being the first event of its kind in Indian capital markets.

In the past 14 years since its inception, Sobha has completed 47 residential projects, 13 commercial projects and 166 contractual projects covering about 36 million sq. ft. area in 18 cities across India (as of 31 March 2010). The company currently has 21 ongoing residential projects aggregating to 8.5 million sq. ft., while 4.24 million sq. ft. of contractual projects are under various stages of construction. On an average, Sobha has constantly executed about 6 million sq. ft. of work on an average basis over the last 5

years. In the current year, which will be the 15th year of establishment, Sobha Developers are inching towards the execution of the 50th million sq. ft., which will be a landmark in the real estate industry. The whos who of Corporate India form the client list including stalwarts like Infosys Technologies, Hewlett Packard, dell, the Taj Group, Mico, Timken and others. Residential projects include premium apartments, villas and row houses with amenities like club houses, shopping centres and swimming pools as a value addition to the Sobha lifestyle that the company brings home to all its clients.

2.2 VISION & MISSION

Vision - Transform the way people perceive 'Quality' Mission - No Short Cuts to Quality Philosophy - Passion at Work Theme-Building Resilience through long term strategy with a tool of Value engineering

Corporate Social Responsibility

Corporate Social Responsibility (CSR) takes on a whole new meaning at Sobha Developers, a company that distinguishes itself by not just being among the largest but also the only backward integrated real estate player in the country. Far from being regarded as a mere brand image booster, CSR at Sobha Group is a sincere devotion that stems out of genuine concern and the drive to provide comprehensive and sustainable social development to rural India.

It is in this context that, Sobha Developers launched Graamasobha, a unique social developmental initiative for Vadakkenchery & Kizhakkenchery grama panchayaths in Palakkad district of Kerala in the year 2006. The entire BPL population of the two panchayaths, comprising about 2500 families, has been adopted through an in-depth scientific poverty mapping called Social Empowerment Mapping Exercise (SEME) to 9

implement Vision 2020. The aim of this action plan is to achieve comprehensive and sustainable social empowerment of these families. The program covers key human development verticals like education, health, employment, water, sanitation and housing besides various social empowerment measures. We have also established various institutions for the development of the rural poor

Sobha Academy has been created to empower the rural poor to break away from the vicious circle of poverty, ignorance, deprivation and exclusion by providing their children the best of schooling possible anywhere in the world. The Sobha Health Care Center has redefined the limits of a primary healthcare institution run anywhere in the country.Sobha Hermitage is the epitome of humanity, tendering love, care and support to the neglected segments of society - senior citizens as well as young widows and their children.Sobha Vocational Training Center (SVTC) has advanced resources and facilities and aims at providing functional vocational training and paid apprenticeship in carpentry and other trades to youth from. The Sobha Community Centres core purpose lies in feeding the poor, several of whom are fed free every single day.

In the history of Indian villages, Sobha initiatives are perhaps first of its kind, undertaken with so much investment for designing, developing and delivering state of the art infrastructure to the poorest of the poor without any discrimination of caste. Graamasobha stands as a successful model for others to follow to usher development at the village level.

2.3 MANPOWER STRENGTH

As of March 31, 2010, we had approximately 1885 permanent employees. With experts in construction technology, electrical and mechanical engineering, landscape development and structural engineering, Sobha continues to maintain very high levels of quality. A special aspect of Sobha is the fact that it has an in-house team of German experts for Quality Control. Sobha is often consulted by reputed international construction houses for providing solutions.Our employee strength has increased consistently over the years. From about 900 employees in 2004, and around 1500 in

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2005, today we have about 2,619 employees. And, along with a buffer team for contingencies, were strong enough to meet the growing demands of the real estate market and efficiently meet emerging challenges.

2.4 UNIQUE BACKWARD INTEGRATION MODEL

Sobha has a unique backward integration model, which means that we have the key competencies and inhouse resources to deliver a project from its conceptualization to completion. The backward integration includes an architectural and design studio for the team of qualified architects, concrete block making plant, metal and glazing factory, interiors and wood working factory, mechanical, electrical and plumbing division, and project implementation team. Backward integration ensures that products and services required for development and construction of a project meet the quality standards and are delivered in a timely manner. Backward integration model has been one of the important contributing factors to our successful completion of a number of projects in a timely manner, without compromising on quality.

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2.5 ORGANIZATIONAL STRUCTURE

Chairman Vice chairman

Managing Director

Deputy MD Corporat e communi cation & PR Design & Engineeri ng Sales & Marketin g

Executive Director CRM Facility Manageme nt

Executive Director Administra tion HR

Executive Director Concrete products Division Contracts

Customer care cell Delivery managem ent, monitorin g& resources support Infrastruc ture Process& IT Projects (Real estate) Quality, safety & technolog y

Internal Audit Finance

Glazing& metals Interiors Division Mattresses Division Division M&E execution

Land purchase Legal Purchase Secretarial

Fig 2.1 Organizational chart

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2.6 SOBHA DIVISIONS

Sobha has a number of Group companies that support its backward integration model. These include:

Sobha Interiors Division Set up in 1999, Sobha Interiors Division more than exemplifies Sobha's thrust on backward integration. After all, even the best of constructions would be a trifle incomplete without woodwork and interiors to match. Sobha Interiors is thus an endeavour to create products of consistent high quality, superlative finish and lasting value. Its work is at par with the best in the world and conforms to international standards. It is a reiteration of the Sobha philosophy of using only international quality products in all its projects. Sobha Interiors manufactures doors and windows, wall paneling, cabinets, modular kitchen cabinets, cupboards and wardrobes, office furniture and home furniture. Sobha Glazing and Metal Works Division Sobha Glazing and Metal Works (SGM) were primarily set up to raise the bar by introducing international standards for structural glazing and architectural metal works in India. Till date, this strategic division of the Sobha Group has successfully executed a plethora of projects for various prestigious organizations. Its principal focus is to consistently evolve products of high quality and lasting value.

Sobha Concrete Products In 1994, Sobha Developers pioneered the concept of international quality in the construction area. With moorings in the Middle East where the parent company set standards and competed with the best European companies, Sobha brought to India the same international home-building expertise.The Concrete Products Division (CPD) of Sobha Developers Ltd. is a continuation of the Sobha Group's journey of excellence. Set up in Jigani Industrial Area, Bangalore, with the same philosophy, vision, and business ethos, CPD manufactures Concrete Blocks, Pavers, Kerbs,Water Drainage Channels,

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Paving Slabs and related landscape products of international quality in large scale volumes. Sobha Restoplus - Spring Mattress Crafted expertly in a state-of-the-art facility in Bangalore, Sobha Restoplus spring mattress is the most advanced sleeping technology in India. Imported machinery and materials make the mattress a durable, comfortable and reliable sleeping surface. The 'core' innerspring unit lends ultimate support to ensure the sleep is laden with dreams. Each Group company is bound by one goal: to offer expertise in its area of operation, thereby achieving global standards.

Sobha Projects & Trade Division Sobha Projects and Trade Division is headquartered in the Stateof Oman. It has autonomous operating divisions in the State of U.A.E., Qatar and also in India. The team has several man-years of experience in successfully delivering products, solutions and projects

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Vice chairman

Head of Department

General Manager

Senior level Managers

Lower level Managers

Technical staff

Network Specialist

Database Administrator r

Testing team

Developers

Website Designer

Fig 2.2 Process & IT department organizational structure

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2.7 KEY DIFFERENTIATOR

Backward integration is what drives the organizations turnkey projects. In a turnkey scenario, we bring the expertise of all our Divisions to focus on every aspect of the project. In simple words, everything from precision engineering to aesthetic design, from quality metal glazing to high-class interiors is done in house. This allows for stringent focus on quality control - which in turn gives our customers a fine combination of precision and aesthetics. The Infosys centers in Bangalore, Mysore and several other cities are fine examples of the Group's synergy in turnkey construction.

Fig 2.3 Key differentiator

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2.8 UNIQUE SELLING PROPOSITION

In the present economic scenario, the company has been able to hold its head high due to its preeminent strengths in quality construction, project execution capabilities, transparent and honest dealing, aggressive marketing strategy and above all a strong customer-centric approach. Customer delight has Companys Mantra, with a dedicated team of professionals serving the customers interest from time the sale is made until after delivery and the conclusion of mandatory post delivery warranty period of one year. Utmost importance is given to client satisfaction. While the Company markets its product directly to the customer through a dedicated marketing team of Customer Relationship Management (CRM). The Company and its management will leave no stone unturned to achieve its USP.

2.9 QUALITY-EHS COMMITMENT

The Sobha Group believes in developing and constructing aesthetically designed, functionally efficient residential and commercial complexes of international quality, offering more value for money. We believe our buildings should reflect engineering excellence with a view to providing complete customer satisfaction. It is our intention that the quality of our products and services should result in complete value for our clients, as well as foster continuous demand for our products. While rendering our construction services, we shall strive to make Environmental, Health and Safety (EHS) matters as an integral part of our business. As a responsible corporate citizen and employer, Sobha Group commits itself to: Provide high quality construction at economical cost to customers, thereby gaining their confidence and satisfaction Ensure Health and Safety of all its employees Protect the environment against pollution

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Fig 2.3 Certifications Sobha Developers Limited was awarded the ISO 9001:2008 certification for meeting the requirements of the standard as early as in 1998. The Company was also awarded the ISO 9001:2000 certification for adhering to the requirements of the revised standard. Sobha Developers Limited has also been awarded the ISO 14001 (2004 series) and OHSAS 18001 (2007 series) certificates for adhering to Environmental, Health and Safety Standards. The in-house R&D Department helps the Sobha Group benchmark itself against world standards in project conception, execution and delivery. This helps to focus singlemindedly on innovations in construction and to adapt and integrate them into work processes. Hence total value to the customer is assured at every stage of construction. The Sobha Group is highly regarded for its transparency, fair play, integrity and honesty. Every Sobhaite is pledged to working towards redefining quality for all its stakeholders. As a team, we believe that Sobha epitomizes 'Passion at Work. The following certifications are achieved - ISO 9001:2008 Certificate, Quality Policy,Environment Health and Safety Policy,ISO 14001:2004 Certificate,OHSAS 18001:2007 Certificate.

2.10 DEPARTMENTS
Quality, safety & technology Department: The QST measures of quality during the construction process, gives the specification of quality requirements in the design and contract documentation. Quality requirements should be clear and verifiable, so that all parties in the project can understand the requirements for conformance. Safety during the construction project is also influenced in large part by decisions made during the planning and design process.

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Estimation Department: The estimation department gives a reasonably accurate idea of the cost. It estimates mainly on 3 factors labor, materials & time. Administration Depatment:The administration department does the administration work of the office .Under this department all the matters relating to the proper functioning of day to day affairs are handled. Administrative department have a direct/indirect relation with tall the departments. Purchase Department: The department is responsible for keeping a tab on the various materials required for the purpose of construction, Cement and Steel being the most important. The team invites bids for the purpose of obtaining the best quality material and at the lowest price. Architects Department: This department is basically involved in the creation of the building .The department undertakes various activities like levelling of land, Designing of the building etc. Human Resource Department: They look after the employees of the organisation and also meet the IT requirements of the firm. They are involved in activities like Recruiting, Training, Payroll aspect, generalisation, and systems. The main functions of Human Resources Departments are procurement, development, compensation, integration & separation. Audit Department: The Audit Department performs a wide range of audit services including financial audits, compliance audits, operational audits, information technology audits, and consulting services. Value engineering Department: VE is a creative, organized effort, which analyzes the requirements of a project for the purpose of achieving the essential functions at the lowest total costs (capital, staffing, energy, maintenance) over the life of the project. Through a group investigation, using experienced, multi-disciplinary teams, value and economy are improved through the study of alternate design concepts, materials, and methods without compromising the functional and value objectives of the client.

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Customer Relationship Department: This department coordinates with the clients and is involved with them from the time of site visit till the handing over stage. They act as an intermediary between the company and the customer.

Interiors Department: The teams in involved in designing the interiors of the building as per the individual customer requirements and their specifications. Sales/marketing Department: The department is initially involved with the commercial department. In checking the commercial viability of the building with respect to the site so selected. The department performs 2 basic functions : Marketing: It deals with media planning, various techniques of marketing the upcoming project, analysis of market trends...etc Sales: It deals with activities like taking the customer to the site, showing of projects, maintaining customer database, closing of sale etc... Legal Department: This department is involved in the process of land acquisition .The legal department has to then interact with the various personnel like Village office authorities, Land bureau department for the purpose of obtaining the required documents and completing other legal formalities. They also check for the authenticity of the land owner, the legality of the rules and are also involved in negotiation of the price of the land. Process & IT Department: This department is involved in the process of creating MIS reports, IT infrastructure policy, internet policy, maintaining IT stocks. It maintains the ERP and Mpower software and is involved in the upgrading of existing modules or implementing new concepts. The process & IT department is under the vice chairman and is headed by HOD with a general manager. Under GM the senior level managers comes which include AGM, deputy manager. Junior level managers include team leaders & project development manager. Technical staff team consists of website designers, network specialists, developers and functional consultants. Finance Department: The finance department is responsible for the financial functions and activities. The various functions of finance department at SDL includes daily book

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keeping, preparation and compilation of budget estimates, control of managing all activities related to banks, administration of taxes.

expenditures,

2.11 PRODUCTS
The projects undertaken by Sobha are of 3 categories: Residential Projects Commercial Projects Corporate Contracts

Fig 2.5 Contractual products Interiors and Furnishing Division(Including Spring Mattress Division)(Division) Solid wood veneer paneled doors and MDF paneled doors Customized joinery works like Paneling, partitions, Tables etc Loose furniture like Chairs, Sofas, Cots and Modular Kitchens etc. Customized Spring Mattress

Sobha Glazing & Metal Division Structural Glazing Works MS & SS metal fabrications Conventional curtain wall Glazing works Aluminum composite panels, windows and doors.

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Sobha Concrete Product Division Hollow, Solid Blocks (4, 6& 8) and Lintel Blocks. KerbStones & Bull Nose Kerb Dish Channels & Bar face Drainage Covers

Paving Slabs Engineering over Excellence

In 1994, Sobha Developers pioneered the concept of international quality in the construction area. With moorings in the Middle East where the parent company set standards and competed with the best European companies, Sobha brought to India the same international home-building expertise. Today, renowned for its undeviating quality standards, transparency, customer orientation and unshakeable integrity, Sobha is well accepted as the industry benchmark. It has transformed and added much value to the infrastructural landscape of Bangalore. As the preferred builder for Infosys Technologies, Sobha has displayed rare innovative skills and engineering brilliance. A primary contributing factor for its immense success is its unique business model adopting a well thought-out backward integrated approach. It is astutely self-reliant in important areas such as own pool of architects, own workforce, Concrete blocks, Woodworking, Structural glazing, Tile and granite laying, Aluminum cladding ,Steel ,Plumbing and electrical ,Interiors &Masonry Thus avoiding outsourcing and gaining full control of quality, time, deliverability and cost. Each of these areas is fully operational, modern and efficiently managed by highly qualified and competent professionals and management teams employing current best practices in their respective fields. The Concrete Products Division (CPD) of Sobha Developers Ltd. is a continuation of the Sobha Group's journey of excellence. Set up in Jigani Industrial Area, Bangalore, with the same philosophy, vision, and business ethos, CPD manufactures Concrete Blocks, Pavers, Kerbs, Water Drainage Channels, Paving Slabs and related landscape products of international quality in large scale volumes.

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2.12 FUTURE PLANS

In the year 2011-12, Sobha plans to launch about 11 Million sq. ft. In addition to launches in the four existing cities of our operations in Bangalore, Coimbatore, Thrissur and Pune, we plan to enter into three new territories of Mysore, NCR and Chennai. The land required for proposed launches has been fully paid up and the infrastructure needed for development is in place.

FIG 2.6 Proposed launches

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Fig 2.7 Land Bank Development Potential

2.13 AWARDS
SDL has received following awards during the financial year 2009-10: Sobha bagged CW & ARCHITECT BUILDERS AWARD 2010 by Construction World for the year 2010, for being among Indias Top 10 Builders, on Aug10 Sobha received PUBLIC RELATION COUNCIL INDIA AWARD 2010 PRCI Gold Award Newsletter, PRCI Silver Award for annual Report and PRCI Bronze Award for Corporate Brochure, on July10 The Best Real Estate Developer for IT Infrastructure2010by Construction Source India on May 2010 The Best Contractor working with Safety practices at site by Bayers Material Technology services, on April10

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to Mr. PNC Menon, Chairman & Founder of Sobha DContribution to Real Estate Sector from Realty Plus on Feb11evelopers, for Outstanding Lifetime Achievers Award

2.14 REVENUE GROWTH

The increase in revenue was primarily on account of better sales volume and better realization from the second half of the current financial year and also due to selective monetization of land. The company has achieved an overall growth of about 13.57% in the total revenue during the year. The increase in net revenue was primarily on account of improvement in real estate operations. Revenue Growth-Real Estate: New launches in existing cities &segments Launches in new geographies mainly Tier I cities Addressing other segments of market Revenue Growth-Other Business: Contracts-Aggressively expand footprint across multiple customers Manufacturing-Aiming for higher capacit

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2.15 COMPETITION AND MARKET CAPITALISATION

Fig 2.8 Market share

Last Price DLF Oberoi Realty HDIL Indiabulls Real Godrej Proper Prestige Estate Sobha Developers Omaxe Anant Raj Ind Puravankara Pro Table 2.1 market share 231.05 231.75 175.15 115.95 655.75 138.45 259.80 129.40 72.40 95.20

Market (Rs. cr.) 39,219.16 7,606.81 7,268.79 4,664.45 4,580.41 4,542.18 2,547.70 2,245.96 2,136.50 2,031.80

Cap. Sales Turnover 2,916.08 1,802.63 159.10 337.29 1,456.10 1,141.09 388.86 414.14

Net Profit 1,269.58 897.36 45.81 106.15 182.40 62.50 167.47 83.87

Total Assets 25,467.85 11,169.45 6,526.27 1,270.33 3,162.51 2,942.10 3,592.33 2,198.83

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2.16 SWOT ANALYSIS

Mostly Strengths and Weaknesses of business are internal and Opportunities and Threats are external. .A SWOT helps SDL to look beyond our company walls and determine what opportunities are open for company and how to capitalize on strengths.

Strength Strong execution capability Presence across 20 cities Control on supply chain through backward integration Strategically located landbanks Value engineering Generating positive operational cash flow Brand value Visibility on achieving superior growth Sufficient availability of raw material and natural resources Diversifying the portfolio of projects undertaken by us Maintain high standards of quality Offer a broad range of Sobha products Strong and efficient project management and delivery model Ability to construct innovative structures Qualified and experienced management team Ability to identify emerging trends in customer requirements. Standardised and documented internal processes Extensive land reserves

Weakness Major contractual business from single customer Undifferentiated products and sevices Difficult to maintain consistent growth rate

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Opportunities Entering new geographies Good visibility of contracts Contractual projects from IT & other upcoming sector Better realization Opening to international market Indian construction industry is large and booming

Threats Increase in interest rates with a potential risk of lower demand and higher interest cost for the company Increasing labour cost and shortage of skilled and technically qualified manpower Delay in getting project finding Increasing input cost Current economic situation may have an adverse impact on construction industry Political and security conditions in the region and Late legislative enforcement measures Competitors are emerging in the industry by leaps and bounds Land prices still continue to be high due to lack of clear land policy Lack of desirable progress in development of infrastructure specifically in the areas of roads, water and sewage systems, power, etc

Implementation of new Direct Tax Code, newer regulations to control the industry by the Government

2.17 CAPITAL STRUCTURE

Strong focus on operational cash flow management with existing and new launches Monetization of land assets

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 Equity capital infusion at project level opportunistically

2.18 BUSINESS TURNOVER

The business turnover details of the company for the past 5 years are given below:

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Turnover(Rs.in million) 11,193 11,894 14,363 9,917 11,193

Table 2.2 Business Turnover

2.19 SHAREHOLDING

Fig 2.9 Shareholding

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2.20 CLIENTS

Fig 2.10 Clients Completed & handed over 12 projects aggregating 0.84 mn.sft during Q4-11 and 25 projects aggregating 2.20 mn.sft during FY 10-11. Added new clients in FY 10-11 other than Infosys, including prestigious clients like ITC Biocon Institute of Public Enterprises (IPE) Robert Bosch GMR Hotel Leela Venture Blue Horizon Hotel and many others.

Corporate Clients includes Dell, HP, Timken, Taj, MICO, Bayer Material Science, HCL, Bharat Forge, ITC, Biocon, IPE, Bosch, GMR, Hotel Leela Ventures etc

Other Clients includes Ragsons Electronics, Vakil Housing, Sterling Mac Hotels, Shanthi Hospital, FAME school, Gold Plus Glass Industries and many other Private bunglows.

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2.21 PROFIT/LOSS
The table shows the profit details of the company for the past 3 years

Financial year Profit before tax (Rs. in Million) Profit after tax(Rs. in Million)

2010 1,602.71 1,366.62

2009 1,455.23 1,096.78

2008 2,708.79 2,283.01

Table 2.3 Profit/loss

2.22 SUPERIOR INTERNAL PROCESS

Continuous training to the Engineers and Tradesmen from Sobha Training Academy International Quality Standards at execution (IS & DIN Germany) Imported German tools and supervision for fine detailing and workmanship Web based Quality rating system for all the Sobha Projects for bringing International Quality homes Continuous focus on Integration and Automation of projects by using latest technologies and machineries R&D and Value Engineering teams are established to improve and update the latest Construction Technologies and innovative ideas at execution Well defined Technical and Process manuals Centralized Planning team Customized ERP system for enabling controlled and fastest working culture in the entire organization

2.23 OFFICES
Corporate Office: Richmond Circle, Bangalore, India.

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Registered Office: Ulsoor Road, Bangalore, India. Marketing Office: Wilson Garden,Bangalore, India. Finance & Audit Office: Dickenson Road, Bangalore, India.

Sobha has branches at Chennai, Pune,Thrissur, Gurgaon,Coimbatore.

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SECTION II PROBLEM CENTERED STUDY

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CHAPTER 1 BACKGROUND & OVERVIEW

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1.1BACKGROUND
Enterprise Systems (ES), also called Enterprise Resource Planning (ERP) systems, are among the most important business information technologies to emerge in the last decade. While no two industries Enterprise Systems are the same, the basic concept of Enterprise Systems is focused mainly on standardization, synchronization and improved efficiency. ERP is basically the successor to material resource planning (MRP) and integrated accounting systems such as payroll, general ledger, and billing. The benefits of Enterprise Systems are very significant: coordinating processes and information, reducing carrying costs, decreasing cycle time and improving

responsiveness to customer needs. Traditionally, the construction industry has been faced with the problems of meeting project schedule, budget, and specifications set by the owner and architect/engineer. The proper utilization of internal and external resources is essential if construction companies are to make the best business decisions, maximize business goals, and survive in the competitive environment. Although the construction industry is one of the largest contributors to the economy, it is considered to be one of the most highly fragmented, inefficient, and geographically dispersed industries. To overcome this inefficiency, a number of solutions have long been offered including adaptation of information technology (IT) and information systems (IS).

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1.2 OVERVIEW OF ERP

Modern Enterprise Resource Planning (ERP) systems have their roots in Materials Requirement Planning (MRP I) systems, which were introduced in the 1960s. MRP I systems are computer-based systems for inventory control and managing production schedules. As data from the factory floor, warehouse, or distribution center began to affect more areas of the company, the need to distribute these data across the entire enterprise demanded that other business area databases interrelate with the MRP I system. However, MRP I systems had limitations on this functionality leading to the development of Manufacturing Resource Planning (MRP II) systems, which have now given way to ERP. MRP II systems can evaluate the entire production environment and create or adjust master schedules based on feedback from current production and purchase conditions. Finally, companies such as SAP, Oracle, and others are reaping the rewards of dramatic growth as companies move away from legacy MRP II systems and begin the process of ERP implementation. OLeary (2000) defined ERP systems as computer-based systems designed to process an organizations transactions and facilitate integrated and real-time planning, production, and customer response (O'Leary 2000). The process of ERP systems includes data registration, evaluation, and reporting.. The role of enterprise resource planning (ERP) does not match its name. It is no longer related to planning and resources, but is rather related to the enterprise aspect of the name. ERP attempts to unify all systems of departments together into a single, integrated software program based on a single database so that various departments can more easily share information and communicate with each other. This integrated approach can have a remarkable payback if companies install the software properly.

However, currently, instead of implementing an entire ERP package, many companies have adopted a best-of-breed approach in which separate software packages are selected for each process or function. For this reason, regardless of the agreed upon implementation approach, any integrated corporate system in which all the necessary

36

business functions are pieced together for the company is considered the ERP system in this study.

37

CHAPTER 2 MAJOR VENDORS & COMPARISON

38

2. MAJOR VENDORS & COMPARISON

2.1SAP
SAP has 30 years of active involvement in the construction industry, supporting more than a thousand construction businesses across the globe leveraging the SAP for Engineering, Construction & Operations (SAP for EC&O) solution portfolio. A tightly integrated set of applications encompassing every aspect of the construction business, SAP for EC&O solutions help to complete more projects on time and within budget with fewer resources. The end result: maximum profit and business growth over the long term. Today, success is determined by what you know about the projects and when you know it. The crews in the field may have all the high-tech tools and state-of-the-art equipment they need but when information determines success, the management team needs to be similarly equipped. The various modules are: Project Management Financial Management Enterprise Asset Management Talent Management Real-Estate Management Data unification Rent adjustments. Improved data integration Improved reports and invoicing Equipment and Tools Management Procurement CAD Integration Resource-Related Down Payments and Billing Corporate Performance Management Turnover to Owners and Operators

39

Specialized Hardware and Network Support Data unification Process integration Business information management

2.2MICROSOFT DYNAMICS NAVISION (NAV)

Microsoft Dynamics Navision or NAV ERP provides a complete solution for companies in the construction industry. The construction industry solution is ideally positioned to service the needs of Estate developers, Builders and Property Promoters, Contracting Companies and Property management firms. A Microsoft Dynamics NAV construction management solution centralizes your critical estimate, permit; sales, project management, labor, and financial information to help your construction management company better manage budgets, schedules, field activities, customer relationships, and the bottom line. And it's easy to customize, learn, and implement. The Microsoft Dynamics Navision ERP solution consists of many groupings of integrated functionality or modules. These modules are: Business Intelligence Financial Management

Human Resources Management Manufacturing Project Management Sales and Marketing Service Management Supply Chain Management (SCM)

2.3SAGE 1000 SUITE

Sage 1000 Suite is a powerful application that seamlessly unifies information from finance, distribution, manufacturing and service operations. This creates a

40

comprehensive management system for the vast majority of your business from prospecting for new customers and taking orders to after-sales service, on the shop-floor and in the warehouse and more. As a single solution from a single source, Sage 1000 Suite offers all the benefits of simplification in deployment, training, licensing, upgrading and support. Sage 1000 Suite contains the following modules: Accounting, Finance & Payroll Supply Chain Management and Distribution Manufacturing Project Management Sales Management Customer Management, Service and Support Marketing Management Business Intelligence, Dashboards and Reporting Sage POS (Point of Sale)

2.4 EPICOR
Epicor understands the industry and its challenges, and has developed Epicor for Construction and Engineering an industry-specific ERP solution that integrates seamlessly into the existing technology infrastructure. Epicor for Construction and Engineering is a powerful business and software solution that provides the flexibility and scalability you need to grow the company profitably by optimizing your most important resources. Epicor offers strong ERP software functionality along with several impressive Industry solutions for Professional Services Automation (PSA), financial services, hospitality management, retail, distribution, and manufacturing and not for profit. Epicor software contains the following modules: Financial management Supply Chain management Production management Planning and scheduling Customer Relationship management

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Sales management Human capital management Service Management Project Management Product Data management Enterprise performance management

2.5 ORACLE
Increasing project risk and complexity together with the growth of long-term contracts and opportunities in post construction services creates both challenges and opportunities for the engineering and construction industry. To meet all of these business challenges, and more, Oracle for Engineering and Construction delivers a powerful combination of technology and comprehensive, preintegrated business applications including key functionality built specifically for engineering and construction enterprises. Only Oracle offers a complete solution to run your key operations, from initial project identification through contract closeout. Oracle ERP contains the following modules: general leisure global consolidation system global inter company system payables Receivables fixed assets cash management purchasing iProcurement inventory management 42

project costing project management Application desktop integrator shared database for human resources Discoverer for key reporting needs. Learning management system Marketing Customer data librarian

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2.6 COMPARISON CHART

SAP Did you expect the following effect to lead to? Implementatio n cost(million) Implementatio n time(months) Benefits Factor Cost Reduction $16.8 20 Ms Navision Oracle Sage Epicor

$2.6 18

$12.6 18.6

$3.46 17.8

$3.46 17.8

72.2% 50 % overall cost reduction

68.0% significant reduction in cost 65.4% 76.9% Easy

58.0% Quick cost reductions

68.6% Eliminates duplication of costs 67.7% 76.5% Complex

68.6% substantial capabilities focused on cost reduction 67.7% 76.5% Easy

Executive Satisfaction Employee Satisfaction Ease of Implementatio n Cycle time reduction

76.4% 73.6% Complex

75.9% 60.3% Complex

Maintenance costs Productivity improvement

Shortened procurement& subcontracting cycle time High Products produced per employee, customer served per employee

Data interchange cycle reduced by 50% High significant productivity improvements

Cycle Time Reduction in Implementations / Rollouts Low Cost reductions through productivity improvement

Reduced financial reporting cycle time High streamlines procurement, manufacturing &customer management processes to improve productivity massive enhancements in Quality improvement

Reduced supply cycle time by 20% Low productivity improvements through the optimization of resources

Quality Improvement

Error rate reduction, duplicates reduction, accuracy rate

Enhances High quality overall quality control & quality & delivers assurance high quality

Quality improvement in key areas (product reliability, 44

Customer services improvement

Ease of customer data access and customer

radical improvement in customer care

Through on-line, real-time operational data

by streamline quotes, providing accurate orders & eliminate dual data entry for orders

Responsivenes s

Improve overall organizational responsiveness

Standardizatio n

standardization of integrated project processes

increase customer loyalty with better responsivenes s automating &standardizin g key business processes flexibility to adapt to everchanging business needs Good HRM

responsiveness at all levels

Build business flexibility for current and future changes Better resource management

Rapid response to internal and external changes at lower cost Better asset, inventory, production and workforce management Improved strategic, operational and customer decisions

through improved communication with suppliers, partners and customers Standard business Standardized process models processes with limited or no customization required Multi level of unprecedented flexibility degree of flexibility

customer service and knowledge management) by documenting and sharing customer communication with the organization and manage contact interactions High customer responsiveness

standardize & consolidate all workforcerelated processes High level of flexibility for future expansion Not so efficient in managing resources

High level project resource management

Improved decisionmaking and planning

improve the quality and speed of decision making and planning performance control and improvement

collaborative decision making, long-term strategic planning

Performance improvement

Financial and manufacturing performance and overall efficiency management

service and process continuous improvement

highly configurable project management module decisionmaking with real-time business intelligence, advanced planning continuous performance improvement through realtime business

speed up management decisionmaking & longrange planning

continuous performance improvement through realtime, in-context

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intelligence Standardizatio n for operating procedures and reporting Information quality Lack of standard operating procedures for data collection High Standardized and automated accounting procedures accurate information you need and when you need it integration capabilities that ensure smooth business growth Not so efficient Standardization provides accuracy &consistency Standardization provides coordination

business insight standardizing core procedures

critical to the business

Increase in Information Quality and Integration Accelerate business, growth meet current needs and provide a strong platform for growth Support to develop and distribute new business adapt to technological innovations

Provide realtime quality information

Support business growth

Support business alliance Build business innovations

Transaction volume, processing capacity, new markets, new business products and services Efficient consolidation of newly acquired businesses Enabling new market strategy, building new process chain, creating new businesses

Industry-specific capabilities to support the needs of growing enterprises

Accelerate business growth and support business of all sizes

Successful in keeping alliances

Not so efficient

Breakthrough innovations gives the flexibility to adapt to new opportunities & growth

adopt the latest innovations and best practices

Build costleadership

Generate product differentiation

Build external linkages

Economies of scale through streamlined processes or shared services Provide customized products and services and lean production with make-to-order capabilities with customers, suppliers, contractors,

Not successful

cost effective internal operations

Not so effective in reducing cost of operation

business innovation allowing increased insight and efficiency, support emerging innovations Not so effective in building costleadership

No much product differentiation

Provide the gateway to external and

broad product differentiation based on the exceptionality of attributes in products or services with internal and external partners

No much differentiation available

new product & service differentiation strategies

equally connects both internal and

Internal & external collaboration

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collaborators, etc.

internal constituents

external links

Catalyst for change

catalyst of process improvements

major catalyst for innovations

catalyst to drive change in business processes

major catalyst of change within organizations

Competitive advantage

Insight, differentiation, increased productivity and business agility.

Ensuring a common data pool IT costs reduction

Integrated and transparent pool of data 20% to 30% reduction in IT support costs Growing Infrastructure, Retention Management, Data Safety Highly complex

Builds competitive advantage through best practice business process Large pool of data Reduce It costs & streamline Management Secure IT infrastucture

Outstanding customer service, ability to change direction and adapt quickly to external pressures Shared and optimized pool of data 21%

with extensive multi-currency and multicompany capabilities

with suppliers, contractors, collaborators, etc. catalyst for change that efficiencies across the enterprise at a low total cost of ownership Scalability,flexi bility & technology innovation

common logical data Not so effective

Not so effective

Not so effective

Increased IT infrastructure capability

Huge IT infrastructure

Comparatively low infrastructure

solid IT infrastructure

Support organizational changes

adapts to organization's needs

Unsuccessful

Facilitate business learning

Learned by entire workforce, shorten learning time, broaden employees skills More value added responsibility, more pro-active users in problem

reduces the learning time for new users

Empowerment

Empowering People with Better Productivity

learning management system module provides interactive learning Empowering business through increasing customer reach

Adapts to organizational changes without requiring disruptive modifications Real-time Learning

Partially successful

Less effective in providing business learning

Not so effective

Not so effective

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solving, greater employee involvement in management Information flows Real time and effective

Experience

(B2C) or managing business partners (B2B). Streamline, direct and enhance information flow High seamless integration of information flow High

crossfunctional understanding Changes to the organizational structure

High

streamlined Smooth and the flow of increased information across other systems in use High High

Structure changes, process changes

adapts to changing corporate structures

changes in structure work and processes

support the business processes & structural changes

Business practices changes

transforming

Promotes better business practices.

Material Management

visibility into the totality of business

Manage cash flow, liquidity and banking relationships.

yield unprecedented transparency of the schedules and costs of all customer projects. across departments and business silos, into cost implications across site Forecast liquidity, Measure future cash flows

Strong material requirements planning & production

constant stream of mesh with changes driven by existing the business business practices and adapt to new ones reasonably plan, manage forecasts material materials and requirements, costing and ensures the costs optimize production

complete synchronization with the changing organizational structure Refines Business practices

Improve inventory confidence and overall accuracy

Profit visibility, real-time visibility

Automate the four 'M's

High

Monitor cash flow, wide range of relationship management services Low

End-to-end visibility at all stakeholder levels, greater organizational visibility cash flow forecasts, Manage financial risk, banking relationships High

360 degree customer visibility, deep & real-time visibility Maintain strong cash flow, vital liquidity and good banking relationships High

Lack of global visibility, maintaining visibility of operations is difficult Maintain positive cash flow and solid liquidity & core banking relationships medium

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Integrate core High construction management processes with accounting and scheduling systems Built-in make informed business decisions and intelligence improve performance

powerful systems-level integration capabilities

offer easier implementation and flexibility

Streamlined integration

real-time integration

Adds competency, acts as a strategic factor

enable faster and more informed decisions

Drive continuous improvement through realtime business intelligence

provides insightful business intelligence

Table 2.1 Comparison chart

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CHAPTER 5 AN OVERVIEW OF R-CONSTRUCT

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3. R-CONSTRUCT
R-Construct is the first-of-its-kind construction ERP solution, designed to address all the financial, departmental, compliance and operational requirements of various segments, integral to the construction business. This enables optimal process integration and provides seamless collaboration between the various functions of the enterprise.

Backed by a strong domain expertise acquired through numerous experiences, we have observed that software solutions alone are not adequate to achieve the desired goals. R-ConstructTM is a suite of technology products and consultancy services that provides end-to-end support; right from customization as per clients requirements and implementation to business consulting and IT consulting services. Being a comprehensive, end-to-end integrated, modularized and user-friendly construction ERP, R-Construct is probably the only product that ensures, measures and takes responsibility for the clients ROI.

R-Construct focuses on empowering the top management and managers to make business critical decisions with total visibility. The end-to-end integration factor lends authenticity to the business information viewed. Management Dashboards & Reporting Systems enable brief overview of TM information and easy information drill down. RConstruct supports a range of financial, operational and marketing analytics that help managers to read and understand the business dynamics accurately.

R-Construct is a comprehensive package of an ERP product, technology consulting and business consulting services, configured to the needs of individual clients. Providing one of the widest ranges of business and TM technology services, R-Construct is probably the first product suite to measure the utilization of the solution by the client. It is the first & the only Construction ERP solution providing Business Process Reengineering & Business Process Outsourcing services.

The Construction ERP solution, R-Construct, is tailor-made to suit the business management needs of various sectors of construction industry including:

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Builders / Real Estate Developers Contracting Companies Construction Project Management Companies Infrastructure Companies Property Management Companies

3.1 R-Construct Software Modules

While IT solutions address most of the challenges arising from various sectors of construction business, scalability and flexibility of these solutions have become the next big issue. The software modules of SRITs construction ERP solution, R-Construct include: Estimation Module Tendering & Billing Contracts Module Sub-Contractor Billing Module Procurement Module Inventory Module Labor Management Module Engineering Costing Module - Not implemented Finance Fixed Asset Module Sales Module Administration Module CRM Enquiry and Marketing Management Module Client management Module MPower HR Module Payroll Module

52

R-Construct Software Modules (in detail) The software modules of SRITs construction ERP suite are listed below:

3.1.1 Estimation Module Addresses the complete project life cycle i.e. Project definition, planning, estimation and tracking Project level Material Requirement Planning (MRP) is one of the most distinct features Handles various types of projects ranging from residential, contractual and commercial to industrial and architectural

3.1.2 Tendering & Billing Contracts Module Addresses complete set of activities for contractual projects Covers functionalities ranging from receipt of client PO to final settlement Integrates seamlessly with Finance & Estimation modules

3.1.3 Sub-Contractor Billing Module Keeps track of all the outsourced activities and related financial settlements Flexibility to cater to the processes involving both Purchase Request Worksheets (PRW) contractors & External Contractors Functionalities include work order quotation, advance transfer, external retention request & release

3.1.4 Procurement Module Handles the complete purchase cycle at project / store level Salient features include Vendor comparison and validation, Flexible billing structure, sorting of vendors based on prices, configurable payment & delivery terms Price matrix, Terms and conditions and Suppliers advance recovery Sales & distribution activities which are part of the supply module are well defined in the module

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3.1.5 Inventory Module Caters to all the business processes of inventory management Built-in inventory control features include Batch & bin tracking, expired items tracking, minimum and maximum quantities Offers the flexibility to choose inventory evaluation methods as per accounting practices of the company/financial year Planning features such as suggested order quantities, vendor to item cross referencing are very well mapped here. Apart from the stock transaction documents such as stock request/indents, issues, transfers, returns, reservation, adjustments, stock taking there are a host of power packed features such as user configurable reports, user configurable document printing etc.

3.1.6 Labor Management Module Covers functionalities related to both daily wage workers and tradesmen Helps optimize workforce to achieve maximum productivity, reduce labor costs and improve employee satisfaction

3.1.7 Finance Comprehensive, integrated module enabling finance managers to efficiently manage all financial activities It has basic tools of accounting & modern analytical reports to give an edge to the finance department in effectively managing and controlling finances. From user-defined Chart of Accounts to configurable MIS reports, this finance module encompasses all the required features from BRS to budgeting, voucher approvals to multiple currencies.

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3.1.8 Fixed Asset Module Encompasses asset purchase & sales and asset control & tracking Enhanced features such as bulk asset functionalities, choice of depreciation method and asset revaluation in line with international accounting practices Seamlessly integrates with finance module It covers all aspects of management, control & tracking of fixed assets. Automatic depreciation calculation and fixed asset register are also provided in this module

3.1.9 Sales Module Maps the production of blocks, tiles and other construction materials In-built state-of-the-art simultaneous material and capacity planner helps generate plans that ensure optimal resource utilization

3.1.10 Administration Module Addresses day-to-day activities and operations of the administrative office Closely integrated with finance, payroll and human resources management modules Built-in distinct facilities like third party agreements, fringe benefit eligibilities, administrative request, etc.

3.1.11 CRM

Enquiry and Marketing Management Module Vital in maximizing the conversion of enquiries to prospects Handles functions like marketing budget, ad campaign process, enquiry process & allocation Distinct features include referrals & reference register, competitor analysis, broker commission-processing

55

Client Management Module Functionalities mainly focused on sales and post-sales activities, including receivables management Enhanced features include unit modifications, automatic interest calculations, flexible tax structure, dispatch management, etc.

HR Module (Human Resource) Web-based, flexible, scalable, parameter driven, configurable HRMS application Seamlessly integrates with payroll and other modules Remote access for users to take care of all the HR activities ranging from preemployment to post-employment

Payroll Module Integrates personnel data management and payroll processing as a unified solution Streamlines & centralizes the management of personnel records and avoids redundancies and inaccuracies in employee data, thus reducing the payroll cycle time.

3.2 SALIENT FEATURES

Project Estimation with rate analysis Rolling back of Quantities from PO to PR and PR to Estimation Billing against tendered items and non tendered items Sub Contractors Bill Processing Purchase request is restricted to approved estimated quantity Stock Transfer is integrated with request project and issue project estimation User level access rights for Branch, Project and Store Accommodation, Travel, Security and other Site Requirements (Stationery, computers etc.) Processing Report Designer Form Designer Convert Handler AI- editor and AI-customization 56

Grid level customization with drag and drop feature Configurable document/profile view and grouping option Work Flow Manager Automation of critical processes Identification of strategic customer segments Configurable audit trail Re-opening of closed bills for correction Flexibility to adopt any tax structure future changes can be incorporated by users Voucher-based approval configuration Parallel cost center concept Default overhead apportionment in chart of accounts Saving partial work as draft so that work is not lost in case of connectivity issues Tracking the vouchers posted, by location Multicurrency facility 15 modules covering all construction business processes comprehensively Tight integration between modules leading to increased efficiency Variety of MIS reports that enable closer monitoring of business Improved operational efficiency & faster decision making Designed on the basis of best practices followed by industry leaders Loan Management Sub-Module BOQ importable from Excel Service Order Quotation Flexible numbering schema

3.3 BENEFITS
Complete Integration of business operations across multiple locations in India Ability to generate accurate and real-time reports on various business activities Elimination of waiting period for information from various locations to be collated Eliminating redundant work done across different departments & branches

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Faster decision making with real-time information made available to decision makers

Ability to execute more volume of work in a given period of time due to increased
efficiency

3.4 ADVANTAGES
Lower TCO Faster Utilization - We ensure system adoption in fixed time-frame with implementation cycle Faster decision making & Improved operational efficiency Reduced sales lead time Improved customer service Pro-active response to demand changes Reduced budgeting time Reduced administration costs Reduction of stock holding / quicker stock turnaround Identification of product age concerns / Identification of stock shortages Reduced supervisor checks on performance and balancing Improved quality Reduced work in progress

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CHAPTER 4 RESEARCH METHODOLOGY

59

4. RESEARCH METHODOLOGY
TITLE A study and benchmarking of the ERP system at Sobha Developers Ltd

PROBLEM STATEMENT The existing system R construct was not a fully integrated system, the degree of data exchange was low and visibility within the modules across the various departments of the company was not effective. The company wanted to integrate the majority of its business processes, gain visibility across processes & increases the efficiency of operations,. The existing ERP system R construct which has been in use since 2004 did not achieve its implementation objectives completely and current needs of the business. The organization wants to enhance its ERP solution so that the current business needs are met. OBJECTIVES To study and understand the existing ERP system in SDL To study about the major market vendors in ERP in Construction Industry To compare and benchmark the ERP in SDL

SCOPE OF STUDY The study was conducted at Sobha Developers LTD, Bengaluru from 2 nd May 2011 to 10th June 2011.

LIMITATIONS OF THE STUDY Time constraints. The busy schedule of employees There are chances of errors caused due to respondent bias

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RELEVANCE OF THE STUDY The study helped the organization to understand shortcomings in the existing system and suggested improvements/enhancements in the system so that it helped to meet the current business needs RESEARCH DESIGN A descriptive research has been chosen for the study.

ANALYSIS DESIGN The Percentage analysis method and weighted average method was used to analyze the data.

SAMPLE DESIGN SAMPLE SIZE: The sample size for the study was 40.

SAMPLING TECHNIQUE: Judgmental sampling.

SAMPLING UNIT: An employee who uses R-construct at Sobha Developers Ltd

POPULATION: The population consists of all the employees of Sobha Developers Ltd who uses R-construct.

METHOD OF DATA COLLECTION Primary Data

Primary data were collected from the employees of Sobha Developers Ltd to understand the effectiveness of R Construct through questionnaires. Secondary Data

Secondary data were collected from company magazines, company internal documents, company website and other ERP related websites.

TOOLS FOR DATA COLLECTION Questionnaire-A structured questionnaire which includes both closed and open ended questions on ERP 61

CHAPTER 5 DATA ANALYSIS AND INTERPRETATIONS

62

5. DATA ANALYSIS
1. Need for automation in the department

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 24

TOTAL

11

40

Table 5.1 Need for automation

Fig 5.1 Need for automation

60% of the respondents strongly agree that there is a need for automation in their department.None of the respondents disagree completely

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2.Benfit the organization

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 21

TOTAL

13

40

Table 5.2 Benfit the organization

Fig 5.2 Benfit the organization 53% of the respondents strongly agree that the ERP implementation benefits the organization. None of the respondents disagrees completely

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3. Add corporate image to SDL

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 14

TOTAL

20

40

Table 5.3 Add corporate image to SDL

Fig5.3 Add corporate image to SDL Half of the respondents somewhat agrees that ERP has added better corporate image for SDL

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4.Provide Accurate information and report generation

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 9

TOTAL

10

19

40

Table 5.4 Accurate information and report generation

Fig5.4 Accurate information and report generation

Only 23% of the respondent strongly agrees that ERP provides the accurate information and exact reports. None of the respondents disagrees completely.

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5. Achieve Implementation objectives

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 22

TOTAL

10

40

Table 5.5 Achieve Implementation objectives

Fig 5.5 Achieve Implementation objectives

55% of the respondents strongly agrees that the implementation objectives of the ERP has been achieved.

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6.Sucess of data migration

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 7

TOTAL

23

40

Table 5.6 Sucess of data migration

Fig 5.6 Sucess of data migration

58% of the respondents feel that the process of data migration was successful.

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7. Functionalities of the system

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 5

TOTAL

23

40

Table 5.7 Functionalities of the system

Fig 5.7 Functionalities of the system

57% of the respondents somewhat feels that the functionalities of the ERP system has been used.

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8.Success of Business Process Reengineering

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 5

TOTAL

14

21

40

Table 5.8 Success of BPR

Fig 5.8 Success of BPR Only 13% of the respondents strongly feels that process of BPR was successful.

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9.Level of eductaion and training for the users

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 13

TOTAL

10

15

40

Table 5.9 Level of eductaion and training for the users

Fig 5.9 Level of eductaion and training for the users Only 33% strongly feels that training andlevel of education was sufficent.

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10.Achieve standardization for operating procedures and reporting

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 9

TOTAL

26

40

Table 5.10 Standardization

Fig 5.10 Standardization

65% of the respondents somewhat agrees that ERP implementation has achieved standardization for opertaing procedures and repoting.

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11. Satisfaction of the original expectations

Disagree

Somewhat disagree

Neutral

Somewhat agree

Strongly agree 7

TOTAL

14

17

40

Table 5.11 Satisfaction of the original expectations

Fig 5.11 Satisfaction of the original expectations

Only 18% strongly feels that the general outcome of the ERP implementation satisfied orginal expectations.

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Fig 5.12 Parameters measuring the ERP Majority of the respondents somewhat agree that there is a need for automation in their department Majority of the respondents somewhat agree that the ERP implementation benefits the organization Majority of the respondents somewhat agree that the successful of ERP implementation adds corporate image to the organization Majority of the respondents agree that the report generation has been partially successful Majority of the respondents agree that the implementation objectives have been partially achieved Majority of the respondents agree that the data migration was partially successful Majority of the respondents agree that the functionalities of the system has been partially achieved Majority of the respondents agree that the process of Business process Reengineering has been partially achieved Majority of the respondents somewhat agree that there is sufficient level of training & education given to the users of ERP

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Majority of the respondents agree that standardization for operating procedures & reporting has been partially achieved Majority of the respondents somewhat agree that the general outcome of the implementation project has partially satisfied the original expectations

12.Security provided by the ERP

Parameters Data Reliabilty Data Access Data Control Data Legality

Average 4.22 3.9 4.02 4.22

Inference Somewhat Agree Somewhat agree Somewhat agree Somewhat agree

Table 5.12 Security Majority of the respondents somewhat agrees that the ERP provides good security of the data.

13.Achieving the following parameters Parameters Improve information flows Support changes to the organizational structure user friendly Resistance to change Improve cross-functional understanding Facilitate business learning Generate product differentiation Support business growth Improved decision-making and planning Productivity and quality improvement Build business innovations Support business alliance average 4.375 3.8 3.85 3.70 3.75 3.725 3.775 3.925 3.975 3.975 3.575 3.625 inference Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree

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visibility into data across divisions and locations achieve competitive advantage Integration with other departments

4.25 3.775 4

Somewhat Agree Somewhat Agree Somewhat Agree

Table 5.13 Achieve the parameters It was found that majority of the respondents somewhat agrees that the ERP implementation has helped to achieve the above parameters.

14.Shortening of the following business processes

Business Processes Purchasing lead time (in weeks) Production lead time (in weeks) Delivery lead time (in weeks) Monthly financial closing time (in days) Production planning lead time (in days)

Average 3.4 3.425 3.8 3.65 3.4

Inference Neutral Neutral Somewhat Agree Somewhat Agree Neutral

Table 5.14 Shortening of the business processes

Majority of the respondents were found to have a neutral opinion in the shortening of purchase and production lead time.This is because many of the users were unaware of some business process. Only shortening delivery lead time and monthly financial closing time were achieved to some extent

15.Achieving the following stategic advantages

Strategic Advantages Better collaboration Improved communication Greater flexibility Increased efficiency

Average 4.175 4.025 4.025 4.1

Inference Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree

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Reduced cycle time Lower operating costs Increased revenue Higher profit margin

3.725 3.875 3.75 3.675

Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree

Table 5.15 Achieving the strategic advantages

By taking the average it was found that majority of the respondents somewhat agrees that the ERP implementation has helped to achieve the above strategic advantages.

16.Automation of the following business processes

Business Processes Project Estimation Material Requirements Planning Material procurement Sub Contracting Labor management Material Inventory Management Administration process Human resources management Enquiry and Marketing management Sales Accounting Fixed Assets management Financial accounting

Average 3.8 3.95 3.925 4.125 3.95 3.925 3.925 4.075 3.8 3.875 3.7 3.85

Inference Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree

Table 5.16 Automation of the business processes Majority of the respondents somewhat agrees that the above business processes have been automated.

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17. Degree of data exchange between processes

Business Processes Material Estimation to Material Planning Planning to Procurement Procurement to Project Execution sites (stores) Procurement to Finance Quantity Surveyor to Finance (Sub contractor bills passing) Sales Accounting to Finance

Average 3.275 3.9 3.575 3.3 3.5

Inference Neutral Somewhat Agree Somewhat Agree Neutral Somewhat Agree

3.65

Somewhat Agree

Table 5.17 Degree of data exchange between processes

Majority of the respondents somewhat agrees that the degree of data exchange between processes were successful. Some of the processes were unknown to some respondents. That is why some processes show neutral results

18) Success of solving problems emerged between functional departments regarding maintenance of master data Data Material Master Data Vendor Master Data Customer Master Data Bill of Materials Average 3.575 4 3.55 3.7 Inference Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree

Table 5.18 Success of solving problems Majority of the respondents somewhat agree that ERP was successful in solving problems emerged between functional departments regarding maintenance of master data

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19. Causes of problems faced by Rconstruct? Causes Too much software modification increase complexity and failure risk along with the maintenance cost of the ERP implementation. Lack of formal strategy leads to uncertainty and confusion during and after the ERP implementation Lack of formal communication leads to misunderstanding and results in the failure of ERP implementation Poor quality of testing Unclear concept of the nature and use of the ERP system among users Lack of knowledge transfer before and after ERP Implementation Poor IT infrastructure High turnover rate of project team members Improper project management and mismanagement of resources Functionality problems with the system 3.55 3.575 4.075 3.575 Somewhat Agree Somewhat Agree Somewhat Agree Somewhat Agree 3.725 Somewhat Agree 4.025 4.075 Somewhat Agree Somewhat Agree 3.8 Somewhat Agree 4.1 Somewhat Agree Average 3.75 Inference Somewhat Agree

Table 5.19 Causes of problems

Majority of the respondents agree on the various causes of problems faced by R construct

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CHAPTER 6 FINDINGS

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6. FINDINGS
77% of the users are not fully satisfied with the report generation process and its accuracy 88% of the users understand the need for ERP 85% of the users agree that the ERP benefits the organization 85% of the users agree that the use of ERP adds corporate image. 65% of the users agree that the implementation objectives has been achieved. 10 %of the users agree that complete integration of different modules are yet to be realized 24 % of the users feel that the data migration was not successful 30 % of the users feel that there are many functionalities which are not yet achieved 48% of the users feel that BPR was not successful 78 %, 83 %, 78 %, 80 % of the respondents feels that good security has been provided by R-construct in terms of data reliability ,data access ,data control & data control respectively. Achievement of the following parameters has been found out as follows .The figures show the percentage of respondents who agree that those parameters have been partially achieved Improve information flow- 98 % Support changes to the organizational structure-68 % User friendliness-68 % Resistance to change-48 % Improve cross functional understanding-68 % Facilitate business learning-68 % Generate product differentiation-73 % Support business growth-80 % Improved decision making & planning-80 % Productivity & quality improvement-68 % Build business innovations-50 % Support business alliance-63 % 81

 Visibility into data across divisions & locations-81 % Achieve competitive advantage-65% Integration with other departments- 86% 53 %,48 %,68 %,65 %,60 % of the respondents agree that shortening of business processes was successful in terms of purchasing lead time, production lead time ,delivery lead time ,monthly financial closing time & production planning lead time respectively. Achievement of the following strategic advantages has been found out as follows .The figures show the percentage of respondents who agree that those parameters have been partially achieved Collaboration-80 % Improved communication-75 % Greater flexibility-83 % Increased efficiency-81 % Reduced cycle time-60 % Lower operating costs-68 % Increased Revenue-50 % Higher profit margin-58 % Automation of the business process have been found out as follows. The figures show the percentage of respondents who agree that automation have been partially achieved Project estimation-73 % MRP-63 % Material procurement-65 % Sub contracting-75 % Labour management-63 % Material inventory manangement-63 % Administration process-63 % HR management-73 % Enquiry & marketing manangement-60 % Sales accounting-65 %

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 Financial accounting-65 % Success of degree of data exchange has been found as follows. The figures show the percentage of respondents who agree that degree of data exchange have been partially achieved Material Estimation to Material Planning-42 % Planning to Procurement-88 % Procurement to Project Execution sites (stores)-53 % Procurement to Finance-50 % Quantity Surveyor to Finance (Sub contractor bills passing)-53 % Sales Accounting to Finance-53 % Success rate of maintenance of master data has been found as follows. The figures show the percentage of respondents who agree that maintenance of master data have been partially achieved Material master data-66 % Vendor master data-63 % Customer master data-68 % Bill of materials-56 % The causes of problems faced by R-construct have been found as follows. The figures show the percentage of respondents who agree that the following are the causes of the problems faced by R-construct Too much software modification increase complexity and failure risk along with the maintenance cost of the ERP implementation-60 % Lack of formal strategy leads to uncertainty and confusion during and after the ERP implementation-81 % Lack of formal communication leads to misunderstanding and results in the failure of ERP implementation-68 % Poor quality of testing-83 % Unclear concept of the nature and use of the ERP system among users -73 % Lack of knowledge transfer before and after ERP implementation-68 % Poor IT infrastructure-68 %

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 High turnover rate of project team members-50 % Improper project management and mismanagement of resources-73 % Functionality problems with the system-50 %

12 % of the users feel that bulk report downloading time has to be improved. 10 % of the users feel that stability has not been accquired. 5 % of the respondents feel that filtering of data before/after migration was not done. 27 % of the respondents feel that there was no sufficent training and 15 % of the users feels that newcomers are not given sufficient training 10 % of the respondents feel that accuracy problems are found in report generation. 40% of the users feels that the ERP implementation couldnot satisfy original expectations Challenges faced by R construct Connectivity problems-10% Bugs in the process-15% Time consuming for downloading the modules-10% Speed & efficiency-25% Training-25% One time entry from back end-5% Changes and modifications-10% Userfriendliness-5%

Error prone areas for R construct Network instability-20% Unable to work in different locations under one module-5% Performance related issues(server down)-20% Material or stock updation-15% Approval time-20% Reoprt generation-10% Tender & Billing-10%

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Aspects to be implemented BOQ entry and planning schedule-5% Comprehensive reporting system-5% Integration-25% Authenticated MIS reports-10% Material rejections/corrections-10% Financial Budgeting-20% Man power planning -5% Web based technology-10% Business intelligence-10%

Modules to be enhanced/upgraded Tender & Bidding-10% CRM-5% SCM-25% Work order-5% Estimation of materials-5% Sales order-5% Finance-15% Fixed asset-20% Architectural/design information-5% Planning and costing-5%

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CHAPTER 7 RECOMMENDATIONS

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7. RECOMMENDATIONS
The employees should be given proper training to understand the usage of Rconstruct and about how it can simplify their regular tasks. Sufficient level of education & training should be given to new comers. Connectivity problems & performance related issues can be resolved by providing a good IT infrastructure. High level of integration should be provided so that departments can co-ordinate their activities and visibility across divisions can be obtained. Supply chain management module needs lot of improvements in procurement, inventory management. This can increase the speed and efficiency of the overall system. The modifications/changes should be properly transferred which can help to increase the visibility of data across divisions. Simultaneous working under the same module in different locations should be made possible to increase the speed of the overall operations of the organization.

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CHAPTER 8 CONCLUSION

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8. CONCLUSION

Recently, a significant number of major construction companies embarked on the implementation of integrated information technology solutions such as ERP systems to better integrate various business functions. However, these integrated systems in the construction sector present a set of unique challenges, different from those in the manufacturing or other service sectors. There have been many cases of failure in implementing ERP systems in the past, so it is critical to identify and understand the factors that largely determine the success or failure of ERP implementation in the construction industry . The goal of the ERP systems success model is to better evaluate, plan, and implement ERP projects and help senior managers make better decisions when considering ERP systems in their organization.

Various ERP vendors are available in the market in the construction sector and depending upon the needs and costs each firm can adopt. Each has its own merits and demerits. The research shows that among the available packages SAP proves to be the most efficient to meet the present needs of a construction industry. The study about Rconstruct was done with help of questionnaire to understand how much the employees are benefited, the shortcomings, the need for enhancements & implementation of new concepts.

R construct developed by Sobha Renaissance helps the integration and automation of the processes. But the study shows that many of the implementation objectives are yet to be achieved and there are many error prone areas. The success of data migration is yet to improve. The users have to be properly trained about the functionality of the software.R construct will have to make lot of improvements in the existing system and need to implement more new concepts to reach upto the level of industry standards. Many of the modules need to be enhanced so as to meet the current needs. Thus R construct can be used as a complete integration tool and achieve all the implementation objectives so as to gain to gain competitive and strategic advantage.

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CHAPTER 9 BIBLIOGRAPHY AND REFERENCES

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9. BIBLIOGRAPHY & REFERENCES

BOOKS REFERRED: 1.Leon Alexis, Enterprise Resource Planning , Second Edition,Tata McGraw-Hill Publishing Company Limited 2. KOTHARI C R, Research Methodology, Second Edition, New Age International Publishers

WEB:

http://www.sobhadevelopers.com/about/index.html http://www.erpfacts.com/sap-erp-review.html http://www.sap.com/india/about/index.epx http://www.oracle.com/us/products/enterprise-manager/index.html http://www.sage.com/ourbusiness/aboutus/ourproductsservices http://www.epicor.com/asia/Products/Pages/Epicor.aspx http://www.microsoft.com/en-us/dynamics/products/nav-overview.aspx http://www.erp.com/erp-software-database.html http://www.compareerp.com/compare-erp

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ANNEXURE

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ANNEXURE
ERP Assessment -Questionnaire Name: Designation & Department: Please mention the number in the box, which best represents your satisfaction level: (Your point of view will be kept 1 = Disagree; 2 = Somewhat Disagree; 3 = Neutral; 4 = Somewhat Agree; 5 = Strongly Agree) 1) Is there a need for the automation of the processes in your department? 2) Does an Automation of processes of your department benefit the organization? Comment if you disagree: 3) Do you think successful implementation of ERP has added better corporate image for SDL? Comment if you disagree: 4) Does the ERP system provide the accurate information you need & providing Exact Reports at the right time? Please provide additional comments:

5) Do you think that implementation objectives were achieved? (Objectives such as Integrating/streamlining business processes, information sharing, improving productivity etc.) Please provide additional comments:

6) Do you think that the Data Migration was successful? (From legacy system to ERP system) If not please provide additional comments:

7) Are all the functionalities of your ERP systems is been used? (System functionalities such as streamline operations, integrating functions, managing resources, information exchange etc.) If not please provide additional comments:

8) Business process reengineering refers to aligning the company business processes with the ERP software implemented. Do you think that process of business process

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reengineering for your ERP project was successful? If not please provide additional comments:

9) Do you think that there was sufficient level of education and training for ERP users in your project? If not please provide additional comments:

10) Do you think that ERP implementation helped to achieve standardization for operating procedures and reporting? If not please provide additional comments:

11) Do you think that the general outcome of the implementation project satisfied the original expectations? If not please provide additional comments:

12) Please do read the following statements and express your degree of agreement or disagreement regarding the security provided by ERP? Data Reliability Data Access Data Control Data Legality

Additional Comments:

13) Do you think that the ERP implementation has helped to achieve the following? Improve information flows Support changes to the organizational structure user friendly Resistance to change Improve cross-functional understanding Facilitate business learning Generate product differentiation Support business growth

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Improved decision-making and planning Productivity and quality improvement Build business innovations Support business alliance visibility into data across divisions and locations achieve competitive advantage Integration with other departments

Additional Comments:

14) Do you think that the following business processes have been shortened as a result of the ERP implementation? Purchasing lead time (in weeks) Production lead time (in weeks) Delivery lead time (in weeks) Monthly financial closing time (in days) Production planning lead time (in days)

Additional Comments:

15) Do you agree that ERP software has given your organization the following Strategic advantages? Better collaboration Improved communication Greater flexibility Increased efficiency Reduced cycle time Lower operating costs Increased revenue Higher profit margin

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Additional Comments:

16) Do you agree that the following business processes are automated after the ERP implementation? Project Estimation Material Requirements Planning Material procurement Sub Contracting Labor management Material Inventory Management Administration process Human resources management Enquiry and Marketing management Sales Accounting Fixed Assets management Financial accounting

Additional Comments:

17) Do you think that the degree of data exchange between processes given below were successful? Material Estimation to Material Planning Planning to Procurement Procurement to Project Execution sites (stores) Procurement to Finance Quantity Surveyor to Finance (Sub contractor bills passing) Sales Accounting to Finance

Additional Comments:

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18) Do you agree that the problems emerged between functional departments regarding maintenance of master data was solved successfully? Material Master Data Vendor Master Data Customer Master Data Bill of Materials

Additional Comments:

s19) Please do read the following statements and express your degree of agreement or disagreement regarding your views about the causes of problems faced by Rconstruct? Too much software modification increase complexity and failure risk along with the maintenance cost of the ERP implementation. Lack of formal strategy leads to uncertainty and confusion during and after the ERP implementation Lack of formal communication leads to misunderstanding and results in the failure of ERP implementation Poor quality of testing Unclear concept of the nature and use of the ERP system among Users Lack of knowledge transfer before and after ERP Implementation Poor IT infrastructure High turnover rate of project team members Improper project management and mismanagement of resources Functionality problems with the system

Additional Comments: 20) What is the biggest challenge that you face while working with Rconstruct and according to you what is the solution for it?

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21) Which is the major error prone area in the working of ERP?

22) What are the aspects that you think is needed in the ERP project and still not implemented?

23) Which are the modules that you think that there is a need to enhance/upgrade in Rconstruct?

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