N Seethaiah, Managing Director, Madhucon Projects Ltd
With interests in construction, granite, coal and power sugars, Hyderabad-based Madhucon Projects Ltd is a name to reckon with in the field of civil engineering construction. Having executed state and national highways, bridges, flyovers, irrigation, industrial, township and railway projects, the company has bagged several awards, cementing its position in the industry. N Seethaiah, Managing Director, elaborates upon the company's operations, projects and the Indian construction engineering scenario.
The flagship company of Madhucon Group, Madhu Construction was established in 1983 as a partnership family firm to execute small construction works in Andhra Pradesh. Advancing to construction works in Goa and Madhya Pradesh, the company was acquired by Madhu Continental Constructions in 1990 and incorporated under the Companies Act 1956 as a Private Limited Company. It subsequently became a Public Limited Company and changed its name to Madhucon Projects Ltd. A BSE, NSE and Luxembourg Stock Exchange-listed company, Madhucon today aims to be among the top 10 construction companies in India besides earning worldwide respect.
Our portfolio includes: offering integrated services for project development and management, design and engineering, project execution, construction management and operational maintenance. Madhucon has, to date, constructed 3,600 lane km of highways. Besides, it has also built irrigation dams, canals, waterways, and tunnels for waterways, railways and roadways. A 600-MW plant in Andhra Pradesh, mining excavation for Northern Coal Fields Ltd (NCL) and Bharat Coking Coal Ltd (BCCL), and construction of buildings, hotels, and hospitals are some of our other achievements.
Several landmarks mark the 30-year journey of the company. These projects have stood the test of time and earned us several accolades. Madhucon was awarded the outstanding performance and super quality construction certificate by Konkan Railways in 1994 for the construction of bridges in Goa in reaches 4, 6 and 7, a 0.76-km railway tunnel and bridges in Ratnagiri. The company is also credited with the timely completion of the Vijayawada-Eluru road project with NHAI in 1999 and the Chittorgarh-Mangalwar NH-76 road project in 2002-2003 six months ahead of schedule. The company achieved a record by laying 1,470 running m of two-lane rigid pavement of NH-76 Chittorgarh-Mangalwar Road in a single day. It used state-of-the-art machinery imported from G&Z Paver (USA) and Schwing Stetter Batching Plant (Europe).
Evolving industry trends
Consistently increasing its infrastructure investment, the Central Government offers various incentives such as liberalisation of FDI norms and tax holidays to mobilise resources from domestic and foreign sources. Current infrastructure spending is pegged at 8 per cent of GDP and needs to be further augmented to sustain economic growth. Although the Indian economy slackened in FY12 owing to global uncertainties, huge demand for infrastructure development and accelerating savings and investment rates are likely to boost revival.
Increased tendering of road projects will boost growth from a dismal 5.3 per cent in FY12. The country's agenda to enhance infrastructure spending along with greater public-private collaboration is attracting many domestic and international investors.
Demand for grid power is expected to grow by 6 per cent per annum by the end of the Twelfth Five-Year Plan. To exploit this growth potential, we are setting up a 1,920-MW thermal power unit at Thamminapatnam, Potti Sriramulu Nellore District, Andhra Pradesh. This project will be executed in three phases. Phase-I is already generating 2 + 150 MW power from February/April 2012 and Phase-II (2 + 150 MW) will be operational from November/December 2013; Phase-III (2 + 660 MW) is under implementation, expected to be operational in 2017.
We have also obtained a power supply contract of PT PLN (PESERO)of Indonesia to design, construct, generate and supply power to the state electricity authorities for a period of 25 years. Our subsidiary PT Madhucon Sriwijaya Power has awarded the EPC works to a Chinese company and financial closure is being completed shortly for the construction of a 2 + 150-MW mine-mouth, coal-fired steam power plant, IPP Project Sumsel-7, South Sumatra, Indonesia. Rajanagaram gas power project in Andhra Pradesh and Ranchi thermal power project in Jharkhand are other upcoming projects.
With a view to further augment flow of funds to the sector and encourage private sector participation in the road sector, several initiatives have been taken by the government, which include granting of industry status to the road sector, provision of capital grants subsidy up to 40 per cent of project cost to enhance viability, duty-free import of certain high-quality construction plants and equipment, 100 per cent tax exemption in any consecutive 10 years out of 20 years, provision of encumbrance-free site for work, FDI up to 100 per cent in the roads sector, easier external commercial borrowings norms, higher concession period up to 30 years, and the right to collect and retain toll. Around 32 road projects valued at Rs 4,692.31 crore are currently being executed on BOT basis. Of these, 22 have been completed and 10 are in progress. We have completed 3,300 lane km of BOT projects with 2,018 lane km currently under progress. Huge upfront capital investment and high risks of revenue collection are two major roadblocks for private participation in this sector. To address these, the Government has offered eight projects worth Rs 2,354 crore on annuity basis.
The government currently allows FDI up to 100 per cent through automatic route for construction and maintenance of ports.
Vision 2020 has projected an investment to the tune of Rs 7,200 billion for the sector. Madhucon has also executed a few railway projects in Goa, Nandyala in Andhra Pradesh and the Northeast.
The escalation clause in the EPC mode covers losses owing to increase in prices of core materials, making it one of the safest modes of project execution; whereas in BOT, the risk element lies in cost overruns, delay in project completion and variation in revenue of toll collection owing to changes in traffic movement.
Ours is an asset-based company valued at over Rs 500 crore. Our equipment fleet boasts of some of the latest machineries launched in the market such as excavators, concrete batching plants, hot-mix plants, crushing plants, electronic sensor pavers, concrete pavers, vibratory soil compactors, loaders, tippers, Benz/Volvo/TATA/Leyland, pneumatic tired rollers (PTR), motor graders and transit mixers.
The current government norms include certain policies that hinder industry growth such as withdrawal of duty drawback on the import of machinery and escalation in prices of core materials such as steel, cement and fuel. The Bihar government's policy on issue of licenses/renewals for quarry leases and levy of Royalty and seigniorage fee on quarrying of road metal need immediate attention. On the other hand, issues such as material unavailability, cost escalation and unskilled labour can be addressed through advanced finance micro planning, machinery mobilisation, material procurement and subcontracting of works.
Partners in progress
JVs and strategic alliances have always helped the company scale new heights. The company along with Binapuri Holdings Bhd, Malaysia, executed the four-laning of NH-5 Vijayawada to Eluru and Eluru to Rajahmundry (Golden Quadrilateral) road project ahead of schedule in Andhra Pradesh in 1999-2001. It also executed irrigation projects in Andhra Pradesh from 2004 to 2012 in a JV with the Sino Hydro Corporation.
We hope to make a significant contribution in this sector by bagging several prestigious projects. We have formulated a 10-year road map (2012-2022) for the development of infrastructure projects such as BOT/annuity national highways projects, roads on item rate in metro, urban and rural areas including flyovers and bridges, irrigation projects, thermal, hydro, gas and nuclear power projects, mining projects and real-estate projects.
Year of Establishment: 1990
Top Management (Promoters): Nama Nageswara Rao, Founder; Nama Seethaiah, Managing Director; Nama Krishnaiah, PD, PTMI, PTMSP; K Srinivasa Rao, Director
No of employees: 2,150
Centres of operation: Hyderabad, Gurgaon
Ongoing Projects: (Irrigation) Indira Sagar project, Kalwakurthy Main Canal, Dhrangadhra Branch Canal; (Roads) Anik-Panjrapole Link Road, Widening and Strengthening of existing NH-37; (Power) 1,920 MW Simhapuri Energy and 1,000 MW Rajanagaram Gas Power Plant in Andhra Pradesh and 1,000 MW Thermal Power Plant in Jharkhand.
Upcoming Projects: (Irrigation) Rapti Main Canal in Uttar Pradesh; (Roads) 4-laning of Vijayawada-Machilipatnam Section of NH-9, 4-laning of Rajauli-Bakhtiyarpur Section of NH-31
Turnover: Rs 1,009.00 crore.
Current Order Book: Rs 7,100.00 crore. (Further, prequalified in number of projects i.e. highways, irrigation, railways, mining worth of Rs 16,500.00 crore)