In July 2011, when he joined TPL, opportunities in the Indian engineering and infrastructure space were reaching new heights every day. Today, the market scenario is very different. Despite this fast-changing scenario, Vinayak Deshpande, Managing Director, Tata Projects Ltd, has admirably steered the company to growth, with the support of his team. Manas R Bastia caught up with him for his insight into the journey and TPL's future roadmap. Excerpts from the conversation:
How have you seen the infrastructure space change since July 2011? It has become more mature, with project execution and domain expertise taking precedence over blatant bidding, a typical trend of past growth years. Also, we observe that the market is shifting from pure EPC to a larger scope with end-to-end services, especially as PPP will be the way forward and full play across the entire value chain will be critical to realise expected Internal Rate of Return (IRR).
What are the challenges facing the Indian infrastructure sector? First, owing to the economic slowdown, there have not been enough funds for EPC cost-based projects. The next challenge relates to lack of maturity in the PPP framework of doing business (read increased risks and pressure on positive cash flow) because of which many private investors have stopped looking at infrastructure projects. The common factor in these two have been the ground-level reforms that need to be expedited by removing execution bottlenecks from infrastructure projects such as land acquisition, labour situation, environment clearance, etc. However, going by recent announcements, I believe the Government has acted upon these areas and many improvements are possible in land, environment and labour-related reforms.
How has the slowdown affected the EPC industry and your business? The slowdown has also made the industry cost-effective, innovative and wary of taking undue risks, which were symptoms of past growth years. The learning has set in motion a process of collaboration with foreign players and domestic partners that has brought forth new entrepreneurship skills to explore international markets.
TPL too has tied up with a few players for entering new geographies. Today, the industry has a new economic logic of looking at domain expertise prior to bidding. Stretched balance sheets have taught people to possess more financial prudence and reliance on owned funds rather than borrowed funds. Improving RoI or IRR in projects is the need of the hour. Technological and execution process improvements û all need to focus on on-time deliveries. This is TPL's mantra.
What is the addressable size of the market for TPL and what is the expected growth rate for this market in the next three to five years? The addressable size identified by us in the next three to five years is about Rs 80,000 crore to Rs 100,000 crore every year. This is as per the Twelfth Five-Year Plan and the opportunities identified by our teams. Over the next 18-20 months, as the economy recovers from the slowdown, we are likely to see 4-6 per cent of growth rate in infrastructure. Beyond this period, the growth rate is likely to be 9-10 per cent with other core sectors of the Indian economy gaining momentum.
Where do you see the green shoots appearing in the Indian infrastructure space? The possibility of revival will come when infrastructure debt funds (IDFs) are rolled out as these will bring in funding. Also, it is heartening to see a lot of discussions on how to improve the PPP framework, especially towards having a more balanced approach towards risk sharing. As a result, core sectors such as steel, mining, real estate and power are expected to pick up fast, among others.
TPL is reportedly aiming to triple its turnover to `10,000 crore in three to four years. What is the action plan to achieve this milestone? Well, we are expanding in scope and scale within our verticals and focusing on new geographies and markets. Urban infrastructure, PPP, infrastructure services and international markets mark our new foray.
What are the possible challenges before TPL to achieve its growth targets for the next three to five years? Skilled manpower, ramping up foreign operations and robustness in investments and policy issues, especially affecting the power sector, are major challenges that we have accounted for in our growth plan.
What have been the highlights of TPL's achievements in the direction of corporate sustainability? We have a well-articulated, appropriately funded and seamlessly integrated approach to our sustainability, corporate social responsibility (CSR) and affirmative action initiatives. These are towards education support for deprived sections of society, imparting employability skills, assisting entrepreneurship development, providing healthcare and drinking water, green cover enhancement, energy conservation, recycling and adoption of frugal engineering practices. Our employability and entrepreneurship support has benefitted 1,041 people who are now either employed or associated as subcontractors with us. Our education support schemes have benefitted 11,200 students.
TPL is the recipient of the CONSTRUCTION WORLD Most Admired Company of the Year Award for 2013. What does it mean to you? The award means a lot to us. Industry recognition reinforces our belief in our chosen path. It is a prestigious recognition of our collective efforts. It also provides positive einforcement to our employees, customers and partners in the industry. Indeed, we value it substantially.
What will be your message to policymakers to bring back the Indian infrastructure and construction space into sustainable growth mode? With many things at the policy level being further improved in India, I think 2014 will be an exciting year as the EPC sector becomes mature against the background of past years. Now is the time for PPP and process innovation, higher productivity, global sourcing and collaboration.
The Government needs to take the lead to improve the PPP framework, long-term financing for the sector and ground-level reforms to ensure execution efficiency. The next growth wave is just around the corner.
Strategy bytes TPL has been growing well in the past decade. What is your strategy to sustain and accelerate growth in dampened market conditions? We are leaders in the verticals we operate in. We plan to focus on international markets and expand into urban infrastructure projects while growing in our verticals.
What is the strategic value TPL will bring to the market? We are focusing on delivering projects on time with the highest quality and on a sustainability platform along with value engineering.
What key engines of growth and strategy do you have? Key engines are market-driven. For example, rapid urbanisation offers huge opportunities and international markets are beckoning Indian EPC expertise. In the long term, Build-Own-Operate-Transfer (BOOT) and Build-Own-Operate-Maintain (BOOM) are areas of interest to us.
How do you envisage TPL's new strategic initiatives in light of the current market scenario to have an edge over the competition? The new strategic initiatives make the approach to business more broad-based with new verticals and markets being added. TPL has always been a financially well-managed company with a sharp focus on project commercials and contractual matters. The company's capability in advanced engineering and 3-D tools shall serve as a sustainable edge in the markets we operate in.
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