Water scarcity isn’t the problem, poor resource management is!
VA Tech Wabag recently overhauled its business to become future-ready. As the world’s third-largest water management company today, how has this strategic shift benefited the organisation?
We have overhauled our business to become future-ready. This strategic shift has significantly benefited the organisation as the world’s third-largest water management company. About three-and-a-half years ago, we embarked on a journey called Vidhi to re-strategise. With the guidance of consultant Jayant Sinha, the board approved this strategy. The primary goal was to achieve a decent valuation by promoting our advanced technology, which includes over 125 patents and trademarks. We focused on improving marketing to highlight our unique technology, providing us with an edge over competitors. We emphasised technology and engineering, avoiding the construction business to remain focused on our strengths. Additionally, we enhanced our O&M (operation and maintenance) business for better revenue visibility and lower risk. We strategically moved away from the municipal sector as it does not fully appreciate our advanced technology. Instead, we targeted industries like oil & gas, pharma, and semiconductors that value and can pay for our technological innovations. Given the overcrowded Indian market, we expanded internationally, leveraging our presence in 27 countries. This strategy has yielded positive results to improve key financial ratios and boost investor confidence, as evidenced by our strong market performance and increased share prices.
With a robust order book, which sectors are the primary growth drivers, and do you foresee demand emerging from new areas?
Definitely! For us, growth drivers are advanced technology jobs. What is advanced technology? What is manufactured water?
We create water from sources not normally usable. All of us are aware of the famous [Samuel Taylor Coleridge] line: “Water, water everywhere, not a drop to drink.” What we have done is we have made seawater drinkable. Seawater is a perennial, anti-drought source. Today, we are a global leader in desalination. The other perennial, anti-drought source is used water. I started saying 15 years ago that water is too precious to be used once, which has turned out to be right. It’s a goldmine, an asset! Industrial or municipal used water from domestic homes is reused. We are recycling water at 6 paise ($0.00073) per litre, making the business sustainable and profitable. We are working on ultra-pure water for industries like semiconductors, green hydrogen, and solar PV. Recently, we got an order from Indosol Solar, and the Adani and Reliance groups are also setting up plants. Zero liquid discharge is vital with the NGT (National Green Tribunal) penalising industries and municipalities. We advocate recycling all water within the premises to avoid hefty fines and improve water reliability. We have made a couple of pilot plants for future customers to see and get encouraged.
A supplementary question here: with the energy-intensive nature of desalination plants being a major concern, what’s your view on the issue?
In a comparative world, if fresh water is unavailable, desalination is a viable and affordable alternative. Other options, like river linking or building dams, involve high costs and significant environmental concerns. Over the past decade, desalination has become more efficient, with power consumption reduced by almost 50 per cent due to energy-efficient components. In cities like Delhi, Bombay, and Chennai, people pay `2,000 for tanker water without knowing its quality. Desalinated water, delivered via pipes, ensures consistent quality and is far superior to tanker water. Moreover, the cost of power has significantly decreased. Today, solar and wind energy are available at around `4 per unit, compared to `7-8 for thermal. We recently won a bid for green power at `4 per unit, highlighting desalination's affordability and sustainability. In conclusion, while desalination may have higher initial costs, it offers reliable, high-quality water, making it a better choice for maintaining quality of life.
Given your focus on emerging market economies, which countries appear most promising for medium- and long-term growth?
Certainly, the Middle East stands out as a significant growth engine. The pace of development in countries like Saudi Arabia and the UAE is astounding. I visited Saudi Arabia six months ago after almost seven years, and the transformation is remarkable under the new ruler. Other countries in the region, such as Qatar, are following suit. We believe this region holds tremendous potential for us. Africa is another promising market. While they may lack financial resources, they are rich in natural resources. This has attracted substantial investments from multilateral organisations, including the World Bank, European Bank for Reconstruction and Development, African Development Bank, JICA, and KfW. As beneficiaries of this investment flow, we see significant opportunities in Africa. The CIS countries are also emerging as a promising market. Rich in resources, they can invest in new infrastructure to support urbanisation. Southeast Asia remains a focus due to the ongoing urbanisation, similar to India. We have established offices and partners in Malaysia, Singapore, and the Philippines and will continue to expand in these areas. Neighbouring countries such as Nepal, Bangladesh, and Sri Lanka are also on our radar. Despite recent disturbances, they are recovering. Lastly, our home market in India remains a priority. As an Indian multinational, maintaining a strong presence in our home country is essential.
O&M activities constitute more than 40 per cent of your order book. What kind of engagement does this signify in your specialised business line?
The most important thing is that we were among the first water management companies to believe in the business potential of O&M. This isn’t about chasing the top line; it’s about improving profitability, cash flows, and proximity to customers. Being on their premises daily, we interact with prospective clients constantly. Whenever they think of water, they think of us first. This business strengthens our life partnership with clients through long-term contracts, ensuring we remain part of their operations for years. This proximity helps us secure repeat business and builds our reputation as a process and technology contractor reducing operating costs. Our efficiency-driven digitalisation reduces chemical and power consumption, positively impacting the clients’ P&L. By adding value, clients always consider us. You mentioned O&M contributes 40 per cent to our order book; we’re targeting at least 20 per cent of revenues from the business. The strategy ensures O&M and project businesses will support the bottom line.
With only 4 per cent of freshwater reserves, India is among the most water-stressed countries globally. As the world’s most populous country with a rapidly growing economy, how can it become more ‘water-wise’?
As a water manager, I want to reassure the people and the government that we have enough water. We are not water-starved or water-scarce; it’s poor management that has created this perception. If water is managed well, even 2 or 3 per cent reserves are sufficient. The key is knowing how to use, reuse, and tap alternative sources effectively. There is no shortage of water in India or globally if it is managed properly. Our role as water managers is to ensure water security for any business or infrastructure development. In Delhi, our Pappankalan sewage treatment plant processes sewage and sends it to your taps, ensuring no water shortage. We employ direct and indirect potable reuse methods. In Delhi and Chennai, indirect reuse involves groundwater percolation. In Namibia, water goes directly from the plant to the tap. This indirect approach addresses public perception concerns. Human actions create water shortages; judicious use, available technology, and funding can resolve it. Therefore, India can become more water-wise by implementing efficient water management practices and leveraging available technologies and alternative sources.
Since natural resources are finite, what is your view on the issue of ‘free water’ as promised by several state governments in India?
I have always been against the concept of free water. There’s no such thing as a free lunch for nothing’s truly free. Offering free water is merely a political gimmick. Free water may sound appealing during elections, but it’s not a viable long-term solution. Someone has to bear the cost, and it ultimately comes from taxpayers’ money. Providing free water or electricity at a significant cost affects everyone. When something is free, it is often not appreciated or valued. Instead, a more fair and economically sustainable approach would be a graded tariff structure, ensuring that resources are used judiciously and responsibly.
In the run-up to the recent Delhi assembly elections, cleaning the River Yamuna was a major voter demand. As a civilisation of rivers and forests, how do we balance ongoing brisk industrialisation and rising consumerism with clean water sources?
When the Ganga flows from Gangotri, it is pristine and filled with minerals. Who then pollutes it? We do! The government’s Namami Gange programme, initiated a decade ago, aims to clean the Ganga. For Hindus, the Ganga is holy. Even today, we fill bottles with its water for our puja rooms. If we value it so much, why can’t we ensure it remains clean? VA Tech Wabag is a major beneficiary of Namami Gange, with projects from Uttarakhand to West Bengal. Our projects include stopping waste discharge, installing pumping stations, and treating water. Treated water can be used by the industry or for groundwater recharge. Excess water can flow back to the Ganga, maintaining its flow. We must act responsibly, recharging rivers with clean water. Similar projects are underway for the Yamuna under the Ganga Action Plan,
and the new state government in Delhi will likely use this successful model for a cleaner Yamuna in coordination with the centre’s Jal Shakti Ministry.
In January 2024, you partnered with Peak Sustainability Ventures to establish 100 bio-CNG plants in various regions. How has the alliance progressed over the past year?
The alliance focuses on clean technologies and sustainability, areas with significant growth potential. Many funds are dedicated to projects promoting sustainability, the circular economy, and green energy. Peak Sustainability Ventures, recognising our decades of experience in producing green energy from wastewater, partnered with us. We treat wastewater to produce biogas, primarily methane, a clean and green fuel that can be converted into energy. The government has introduced a scheme to convert this biogas into fuel like CNG. Compressed biogas will be sold to companies such as Indian Oil, GAIL, BPCL, and HPCL for distribution through their filling stations. We are already in discussions with the Ministry of Petroleum and Natural Gas and the Prime Minister’s Office, working on MOUs to produce biogas and sell it to these companies for further distribution. This partnership with Peak Sustainability Ventures has progressed well, aligning with the government's initiatives and showing promising results.
Finally, what is it like celebrating more than a century in the unique water management business?
We are fortunate to be celebrating a hundred years in this business. Not many people get the opportunity. We are truly grateful to God for bringing us here. We have celebrated this milestone with our stakeholders worldwide, as without them, we would not have achieved it. Having started from humble beginnings, I am deeply emotional about this achievement. A few key supporters helped us reach this point, and we have a responsibility to foster more entrepreneurs, or waterpreneurs. Last year, we launched an initiative to fund young innovators in the water business with pre-seed and seed capital. It’s not about the money; if an idea is good, funding won’t be a limit. We have enough industry friends willing to join us in supporting such initiatives. This commitment to nurturing new talent and ideas ensures that our legacy continues to grow and evolve, driving innovation in water management for the next hundred years.
Recent Developments
The company has significantly expanded its desalination projects, particular ly in the Middle East and Europe, contributing to consistent revenue growth.
Achieved consistent revenue growth, averaging 10-15% YoY. In FY2024, it reported revenues of `32.5 billion, a 12% increase over the previous year.
A market cap of around `84 billion ($924 million), and an order book of nearly `85 billion in municipal, industrial and desalination segments globally.
Strategic partnership with Mumbai-based Peak Sustainability Ventures for 100 bio-CNG plants at sewage treatment facilities across India and other regions.
The company currently operates in more than 20 countries across four continents, with
over 2,000 employees.