Bold Bidders
ROADS & HIGHWAYS

Bold Bidders

CW traces current trends in the roads sector and connects with EPC contractors with winning bids to delve into their procurement and expansion plans, strategies, and more.

The roads sector continues to be the most action-packed in the infrastructure space. And, while it has been experiencing its own ´mode´ swings, a new set of contractors have emerged as significant players in the EPC space.

Five years ago, these companies may have not been among the top bidders, but in the past couple of years, they have come out in the open, making bold bets and expanding. Some prominent names include Dilip Buildcon, APCO, PNC Infratech, Gayatri Projects, GR Infra, Oriental Structural Engineers, Uniquest Infra Venture, and others (see page 61-62 and read interviews).

Consider this: According to National Highways Authority of India (NHAI) data as on May 31, 2016, from FY15-16 to FY16-17, a total of 86 projects worth 4,592 km has been awarded, of which 57 per cent (about 2,604 km worth about Rs 35,191 crore) have been bagged by these ´bold bidders´ (see table on page 61-62).

The accelerators
In a tough market scenario in the recent past, many contractor-turned-concessionaires burnt their profits in pursuit of BOT projects. Mukund Sapre, Executive Director, IL&FS Transportation Networks, says, ´Aggressive bidding in the initial phases has lowered the viability of projects. Also, obtaining funds from banks has become even more arduous for developers.´ Now, their strategy and focus remain on asset divestment and strengthening the balance sheet. Many have strategically chosen to participate selectively and conservatively in new highway bids. This has led to the emergence of new EPC players who are strengthening their order books.

Vikash Sharda, Director, PricewaterhouseCoopers, agrees, saying, ´The exit of some players has created space for new players to garner market share.´ And RK Pandey, Member (Projects), NHAI, adds, ´Over the past four to five years, the whole emphasis was on BOT. So all the big contractors converted to developers and the vacuum created was filled up by new companies.´

Some of these are relatively large-sized companies with strong balance sheets and modest leverage. Sushi Shyamal, Partner, Ernst & Young, adds, ´They are established regional players with strong execution capabilities. They are now being recognised as emerging pan-India EPC contractors. Their financial strength is helping them bid and grab the plethora of contracts being awarded by the government.´

Most of these companies have been in the highway contracting space for over 10-15 years. What has changed is their role - from being subcontractors for the lead contractors and infrastructure developers to having developed pre-qualifications and independently bidding for new projects. ´The new bidding system tests execution and construction capability more and tolling capability less,´ shares Shyamal. ´Further, as most large infrastructure developers have taken a backseat, these companies have emerged as lead contractors for new projects.´ Barring two to three select players, most current bidders have limited BOT exposure or BOT exposure only to select regions and, hence, manageable debt pressures. Their balance sheet strength and low working capital have also given them the financial prowess to bid for larger new contracts.

Certainly, lack of financial appetite among players whose presence was dominant in the BOT space has led to the emergence of these new players. However, VG Sakthikumar, Managing Director, Schwing Stetter Sales and Services, and Chairman of the Mechanisation Committee, Builders Association of India, adds that the new companies are dynamic and knowledgeable in selection of equipment, especially production machines such as concrete batching plants. He says, ´As cement and steel are major cost contributors in a road project (rigid pavement), careful selection of a batching plant is key to controlling project costs.´

For business growth
EPC contractors have historically used the JV or consortium model to qualify for larger projects and for risk diversification. ´This strategy continues,´ says Shyamal, ´In case a bidder is unable to independently meet tender requirements, he opts for a JV or consortium for bidding and execution of big-ticket projects.´ To this, Sharda adds, ´While forming a JV or consortium depends on the size and location of a project, a large project would see more bidders in the form of a consortium.´ Further, with the new businesses being more EPC in nature, there is limited need for higher funding from the private sector. However, Sharda says, ´If there would be an EPC market from hybrid annuity projects (HAM), the overall scaling up of this sector would be triggered, opening up better prospects in the IPO market for EPC companies.´

He sees the situation being more conducive after a year or so. Road EPC contractors have not seen listing in the past 12 months, the last being that of PNC Infratech in May 2015. Shyamal avers, ´While IPOs of some companies have received the SEBI nod, no dates have been announced yet. Domestic and foreign institutional investors have suffered losses in investments in some large EPC giants. They seem to be approaching this segment with caution, and are much more conservative towards new investments in EPC companies.´


Refinancing of projects would not only ensure reduction of cost of funds but help alignment of repayments in line with cash flows over the balance concession period. ´This would make assets self-sustainable and cash-positive, helping to elevate the credit ratings of such projects,´ says Bajrang Kumar Choudhary, CEO-Infrastructure Project Development, Srei Infrastructure Finance. He adds that projects commanding good rating (A to AA) can access capital or bond markets to bring further efficiency in cost of funds. This also enhances the viability of the IPO and brings back vibrancy in the capital market transaction for the highway sector.

The emergence of a new set of small and regional contractors is keeping the sector moving at a time when most big players are shying away from bidding. The big players are more focussed on reducing debt and completing existing projects rather than taking up new ones.

IL&FS Financial Services has its method of funding these contractors. Ramesh C Bawa, Managing Director & CEO, says, ´We do the background check through conventional methods. But we have adopted a method where, when we fund or give the contractor the money, we open an escrow account for them. So, when the contractor gets the payment for the construction, it comes into the escrow account, and as per the terms between IFIN and the contractors, our repayment is automatically taken care of from the escrow account.´

Srei empowers entrepreneurs by supporting their financing needs; it gives more credence to the asset quality and strength of the business model than just the size of the balance sheet. Choudhary adds, ´Our commitment remains towards contributing to the India growth story.´

Equipment shop
With these bold bidders taking centre stage, equipment, materials and related companies are becoming ancillary beneficiaries. ´However,´ Shyamal adds, ´there are other factors that have an impact, such as commodity price movements, equipment and asset base owned by EPC contractors and resale market in highway contracting equipment.´ And, Sharda adds, ´It will also enhance the business prospects of iron and steel companies (a borrower sector group that is a significant contributor to stressed assets of banks in India).´ Clearly, equipment companies have been experiencing growth.

Schwing Stetter hopes to consolidate this growth and augment capacity to ensure delivery to customers. Sakthikumar says, ´We are also expanding our after-sales network close to our job sites to ensure uninterrupted support in spare parts and services.´ Meanwhile, Wirtgen, a market leader for road building and rehabilitation machines, witnessed a growth of 50 per cent last year and is expecting 30 per cent this year. While the award of EPC projects has helped growth of road equipment, Ramesh Palagiri, Managing Director & CEO, Wirtgen India, expects a growth of 20 per cent in coming years for road building and rehabilitation machines.

He says, ´We are making the necessary investment now in our after-market and sales support to meet our motto, ´Close to Our Customers´.´

Schwing Stetter is happy to play a major role in supplying concrete batching plants, truck mixers, truck-mounted concrete boom pumps, concrete pumps, and recycling plants to highway projects. Besides, demand is also coming from contractors who have been awarded major bridges. Sakthikumar says, ´We have supplied customers a suitable plant that requires minimum setup time, less foundation or preparation at site and a machine that can be easily transported.´ These mobile plants are not likely to stay for more than two years in a single location. The company has also introduced no-foundation batching plants for the road-building industry in the capacity of 110 cu m per hour.

Current scenario All considered, what´s keeping the sector going?
While BOT takes a back seat and FY16 being dominated by the EPC sector, the HAM, owing to its risk-balancing approach, is expected to prevail for the next couple of years. According to a recent India Ratings report, 50 per cent of upcoming projects, in terms of project length, are likely to be awarded under HAM while EPC would be the preferred mode for 26 per cent.

Also, according to the NHAI data as on May 30, 2016, 86 per cent of projects in the request for proposal (RFP) stage are likely to be awarded on HAM or EPC, and for request for qualification (RFQ) state projects, HAM has accounted for 78 per cent. ´We have received a good response for HAM and have awarded around eight to nine projects,´ informs Pandey. ´In the EPC space, we are planning to award projects of about 7,000 km.´

Shyamal says, ´The sector is propelled by the government´s push, AAA-rated nodal agency (NHAI), investment and acquisitions of operating assets by foreign institutional investors, infrastructure funds and pension funds.´ While many highway developers are facing financial stress owing to underperformance of their BOT assets, interest remains high in the EPC and hybrid annuity space.

Sharda agrees, adding, ´Debt trouble has hit the BOT business of many developers and some have either come out of the space or stopped bidding for BOT projects. This has brought down the PPP market in the roads sector, especially national highways. As developers have limited equity to bid for PPP projects, more EPC projects are expected in the short term.´

Evidently, the government´s focus on EPC projects has paid off with many new projects getting awarded and increase in activity in the sector. Palagiri says, ´In the current year, the government is going for a mix of EPC and hybrid projects and I feel this trend will continue for a couple more years before the percentage of hybrid projects goes higher.´ And Sakthikumar adds with optimism, ´NHAI has awarded 8,500 km of national highways. Also, the government has a long-term focus on road projects like Bharatmala, Sagarmala and road infrastructure in the Northeast.´

Past lessons
In terms of competitive intensity, contracting companies need to be more pragmatic based on past learnings. Sharda points out, ´A major mistake by contractors has been to take a speculative view on traffic and bid aggressively.´

To this, Choudhary says, ´Although aggressive bidding for EPC projects was expected to come down owing to reduced competition and increased order flow, it is still a concern when you see some projects being outbid 25-35 per cent lower than the benchmark cost.´ Such aggressive bidding leads to rising working capital requirements and leaves contractors grappling with overleveraged balance sheets and shrinking margins.

´In such cases,´ he adds, ´capital requirement becomes an issue unless the bidding is backed by strong fundamentals.´
Contractors must take a more realistic approach, says Sharda. And, Shyamal adds, ´Optimally, EPC contractors today must remain focussed only on the EPC segment and practise financial prudence.´ With adequate business for all, he adds that there is no need for undercutting margins or bidding aggressively. On the contrary, bids should be computed after accounting of all execution risks. Also, diversification into other capital-intensive businesses such as BOT or real estate should be avoided if it comes at the cost of additional leverage on the balance sheet.

Indeed, in these exciting times, prudent players are bound to emerge as new market leaders.

Quick Bytes

  • Exit of some EPC players has created space for new players to garner market share.
  • Established regional players with strong execution capabilities are now being recognised as emerging pan-India EPC contractors.
  • Hybrid annuity projects could open up better prospects in the IPO market for EPC companies.

We are conservative bidders but aggressive executers.
- Devendra Jain, Executive Director & CEO, Dilip Buildcon


Bhopal-based Dilip Buildcon (DBL) boasts a current stock of EPC road projects worth about Rs 12,000 crore. The company primarily focuses on the roads sector and 85 per cent of its order book is from roads. Devendra Jain, Executive Director & CEO, Dilip Buildcon, shares more...
Strategies: Our strategy was clear - when companies were bidding aggressively for BOT projects, Dilip Buildcon operated as a focussed EPC company. The strategy was to not bid aggressively. We are conservative bidders but aggressive executers. Ninety-five per cent of our projects are always completed ahead of schedule. Now, when several contractors are bidding for EPC projects, we have started bidding in different states. The more projects we bid for, the possibility of bagging one increases. Recently bagged projects: We have a lot of projects where work is yet to commence. Recently, we bagged a big project worth about Rs 1,700 crore under the hybrid annuity model from Lucknow to Sultanpur. Apart from this, big projects include the Rs 800-crore Vijayawada-Machilipatnam road and Rs 750-crore Mahulia to Baharagora, which is close to Jamshedpur. Work on these NHAI projects will start soon. Also, we recently bagged India´s second longest cable bridge in Goa; its total cost is about Rs 1,600 crore.

Current and upcoming procurement plans: We own all our equipment and have about 7,000 pieces of equipment. Our current fleet is worth Rs 2,000 crore, and we buy machinery project-wise. As of now, we have almost Rs 5,000 crore worth of revenue-generating machinery. Caterpillar is our biggest vendor; we have already invested Rs 600 crore towards its equipment. Apart from that, we have invested in equipment from Wirtgen, Volvo and Ashok Leyland. However, investment towards procurement depends on the company´s revenue. Of the total revenue in March 2016, 30 per cent is invested in procuring material, which includes steel, cement and bitumen.

Buying or renting equipment: Going by company policy, we work with our own equipment bank; we neither work with rented equipment nor engage any sub-contractor to work with us.

Need for subcontractors: They don´t have enough trained manpower or equipment and end up subcontracting. As a company, we don´t subcontract at all. We have more than 20,000 people working full time for the company who we constantly keep training.

Projects on consortium or JV basis: We are always open for JV in new sectors. Government incentives: Every project comes with a contract clause. If the project is completed before 100 days, 3 per cent of the contract is a bonus. And we earn a bonus on almost every project.

´We will participate in upcoming HAM projects selectively and cautiously.
- Anil Kumar Singh, Managing Director, APCO Infratech


At present, Lucknow-based APCO Infratech is executing one EPC and two hybrid annuity model (HAM) road projects. The total order backlog pertaining to this category is to the tune of Rs 2,000 crore. Anil Kumar Singh, Managing Director, APCO Infratech, shares more...

Strategies and recently bagged projects: We are the first company to be awarded under HAM by NHAI for the Delhi-Meerut Package III and the Meerut-Bulanshahar package worth Rs 1,800 crore. APCO will participate in upcoming HAM projects selectively and cautiously. However, bankers are conservative in lending, owing to the macro issues concerning the banking sector, which need to be resolved to make HAM a success.

Current and upcoming procurement plans: APCO has procured around Rs 150 crore worth of equipment in FY2015-16 because we entered into a new venture, highway tunnelling, last year. We are expecting an average growth of 10 per cent YoY, which will add equipment worth Rs 25-30 crore every year. APCO has a net block of Rs 250 crore worth of equipment to date and is increasing the asset base proportionate to the overall business plan at an average 10 per cent YoY.

Buying or renting? We will prefer to buy equipment than hire it, except in a few cases where the equipment requirement is for a short duration and it is easily available in the market.

Need for subcontractors: Majority of works are executed in house; as and when a situation demands, we may go in for a subcontractor. However, all specialised works are given to subcontractors with sound technical and execution capabilities.

Raising funds and IPO market: At present, we have a consortium of bankers funding our requirements, both CAPEX as well as working capital. As our turnover increases, we may go in for an IPO in future. The present market conditions are not conducive for an IPO.

Projects on consortium or JV basis: No, we have enough resources and required bandwidth to accomplish these projects on time.

Focus on overseas market: In future, if some beneficial proposition comes up, it can be analysed.

Performance in FY2015-16 and expectations from 2016-17: We achieved growth of 10 per cent YoY in terms of top-line and bottom-line as per our business plan, which is considered good in present market conditions. We expect a better contribution in the growth rate from the roads sector in coming years.

During 2016-17, the company has proposed to invest Rs.65- 75 crore in equipment.´
- K Jalandhar Reddy, Executive Director, KNR Construction Ltd


Hyderabad-based KNR Construction Ltd (KNRCL) has recorded an order book position of Rs 4,550 crore as on June 11, 2016. K Jalandhar Reddy, Executive Director, KNRCL, shares more...
Strategies and recently bagged projects:
KNRCL, which is predominantly in roads and highways, flyovers and bridges, decided to primarily build its order book in EPC to keep up the top line and bottom line and beat the negative trend in the roads sector. As the BOT or annuity roads sector was encountering problems such as infusion of capital, dwindling toll collection and erosion of EPC margin, the company decided to keep away from these projects.

Current and upcoming procurement plans: During 2016-17, the company has proposed to invest Rs 65-75 crore in construction equipment, and around Rs 15 crore has been invested.

Buying or renting equipment: We prefer buying equipment. Our gross block as on March 31, 2016, is Rs 578 crore, of which Rs 470 crore is towards plant and machineries.

Need for subcontractors: Normally, in projects, around Rs 150-200 crore is considered in deploying to subcontractors. This is considering additional resources to be deployed. In the current order book, we may subcontract around Rs 1,000 crore to back subcontractors.

Raising funds: The company is judiciously utilising available working capital funds for EPC projects as this cycle is only 45-55 days.

Projects on consortium or JV basis: As per tender qualification, we bid on our own for projects costing around Rs 1,300 crore. Hence, there are no plans to execute projects through a consortium or JV.

Focus on overseas market: Not at present. Performance in FY2015-16 and expectations from FY2016-17: In FY2015-16, the income from operation amounted to Rs 902.54 crore, EBITDA Rs 155.41 crore and net profit at Rs 161.12 crore (standalone). In FY2016-17, the income guidance is given as Rs 1,100 plus with EBITDA of around 14 per cent.

´Our strategy is always to bag good projects at good prices.´
- Dilip Suryavanshi, Chairman & Managing Director, Dilip Buildcon


Ten years ago, Dilip Buildcon (DBL) was a small player that focused on quality and before-time delivery. Since then, it has grown almost 80 per cent YoY. Dilip Suryavanshi, Chairman & Managing Director, Dilip Buildcon, shares more.. Outlook on the current roads sector: Our outlook is extremely positive. Infrastructure is the main focus for the government and it will progressively work towards its development. Over the past two years, it has used a three-pronged approach to push road development in India. First, it kick-started stuck projects by addressing the causes for their delay and taking bold decisions quickly. Second, it identified new highways to be built based on traffic and designed the financial mechanism accordingly. Third, it tried to simplify and reduce the required regulatory approvals. Impact of the sector´s growth on the company: Today, because of the sector´s growth, DBL is one of the largest road-focused EPC players in India. Although we have grown exponentially, we don´t chase order-book growth. Our strategy is always to bag good projects at good prices. Usually, we keep a healthy two-and-a-half-year outlook on our orders to be in a comfortable position even if we lose out on orders. Currently, our gross order book stands at over Rs 17,000 crore, which we will execute over the next two years or so. We hope that with the continued push from the government for the sector, we can continue to expand our business.

Company´s game-changer project: Each project is unique and brings a different set of challenges and learnings. Today, DBL has worked in 15 states covering almost 75 per cent of land mass in India. We are the only company besides L&T with this kind of experience. There were many milestones along the way, one of which is the Ahmedabad Godhra project that we executed in Gujarat. It was almost four times larger than any project we had executed till then and had exciting structural challenges. This project propelled us into the big league.

Conducive IPO market: Absolutely, it is. There are two parts for a successful IPO - first, the condition of the specific industry and how investors and markets view it; second, the condition of the markets themselves. For the past two years, MoRTH, under the guidance of Nitin Gadkari, has been the best performing ministry of this government. Institutional investors have also taken notice of this and are excited. Adding to this is the fact that the Indian economy has started showing green shoots. And, right now we are at an inflection point. So overall, it´s a good environment and we feel that given where we want to be in the next five years, now is the time. We want to price it right so that our investors can make great returns.

Challenges in project execution: The challenges are almost the same as before. We feel that the government should move to a single-window system to clear projects and, in fact, award projects to companies only after they have acquired all necessary clearances. For the company´s part, delays happen owing to the lack of right vision or focus. Any company with its own engineering and construction strength will not face delays.

Focus on overseas market: DBL has a healthy order book and is extremely optimistic about the future potential of this sector in India. However, we are certainly looking at select opportunities abroad where we see future potential.

Performance in FY15-16: Compared to other infrastructure companies in India, DBL has done fantastic business for 2015-16, with a growth rate of almost 60 per cent owing to our focused strategy, planning, timely execution and employee dedication. We have grown from Rs 2,600 crore in FY15 to Rs 4,000 crore in FY16.

´We are targeting projects that are really good and challenging.´
- Kishor Viramgama, Chairman & Managing Director, Backbone Enterprises Ltd


Ahmedabad-based Backbone Enterprises enjoys a current order backlog (value of awarded work remains to be completed) for EPC projects of around Rs 1,000 crore and others around of Rs 750 crore. Kishor Viramgama, Chairman & Managing Director, Backbone Enterprises Ltd, shares more...
Strategies and recently bagged projects:
The strategy is simple - we are only targeting projects that are really good and challenging. NHAI´s recent EPC project bagged by us, Jharpokharia-Balasore, is one such project that we decided to bid for at the initial stage itself.

Current and upcoming procurement plans: We have sufficient machinery to work for orders in hand. But this fiscal, we plan to invest around Rs 10 crore in construction machinery.

Buying or renting? We mostly purchase plant and machinery as per the project´s requirement. Our fleet includes plant and machinery manufactured by Wirtgen, Caterpillar, Speco, JCB, Metso, Komatsu, Apollo, Core, Volvo, Kobelco, etc.

Need for subcontractors: We prefer executing projects by ourselves. At present, projects are being bid for aggressively, and maintaining quality along with aggressive bidding is not possible by appointing subcontractors.

Raising funds and IPO market: We have sufficient facilities available through multiple banking.
We will think of an IPO at the right time.

Projects on consortium or JV basis: We are also bidding for many EPC projects on consortium or JV basis. The main purpose is to fulfil the eligibility criteria at the bidding stage and get the advantage of the technical expertise of each JV member during the execution stage. For example, in a highway project, one company with expertise in the road portion and another with expertise in the structure portion, will bring significant savings in reduction in time and cost. Even sharing machineries and manpower shall result in additional technical support and knowledge. Focus on overseas market: There are several road projects at present as well as upcoming ones in the future, and there is no scarcity of work for road contractors in India.
But if any good project comes our way overseas, we are ready to grab the opportunity. Performance in FY2015-16 and expectations from 2016-17: FY2015-16 has provisionally closed at Rs 551 crore. And, with more orders in hand, we expect to cross Rs 650 crore during FY2016-17.

´We are building on our order book.´
- Mehttab Siddiqui, COO, GHV Group


Mumbai-based GHV Group is a 50 year-old company and as Mehttab Siddiqui, COO, GHV Group, says, ´We call ourselves lowest bidders and are aggressive in the market.´ He shares more...
Recently bagged projects: We are executing several projects for IL&FS Transportation Networks, NHAI, Kerala State Transport, Madhya Pradesh Road Development Corporation, etc. Our current order book size is worth Rs 2,500 crore.

Current and upcoming procurement plans:
Ten per cent of our annual turnover is put back into the company for reinvestment. Considerable amount from this in invested in procurement activities as well.

Buying or renting equipment: Nowadays, all equipment is available on lease. So, we prefer renting than spending thousands of crores on equipment.

Need for subcontractors: Subcontractors are available and we rope them in for small jobs. Otherwise, we have 1,000 employees in house; hence, most jobs are done in house, with less work outsourced.

Raising funds and the IPO market: We are a debt-free company. We are associated with good bankers who support and give us a bank guarantee. We do not require an IPO or any big funding from the bank.

Projects on consortium or JV basis: For projects we bid for, we have tied-up with a US-based company and they are partners for all technical assistance required. They operate from the US and, if required, the engineers come down to India. Again, for this, we pay them 1-2 per cent of the project cost. However, we are building on our order book and are not aggressively looking at JVs in the future. We are comfortable doing this business.

Focus on overseas market: We are bidding for one challenging project in Ethiopia in JV with a Dubai-based company. But there is plenty of work in India for the next 10 to 15 years and we are well-established here. Hence, at present, we are not keen to go abroad.

Performance in FY2015-16 and expectations from 2016-17: The company´s turnover in 2015-16 was Rs 550 crore. This year, we expect to reach Rs 750 crore to Rs 900 crore.

´Last year, our order book in EPC increased by Rs.5,000 crore.´
- Vinod Agarwal, Managing Director, GR Infra Projects


The Narendra Modi government coming into power two years ago has worked wonders for 50 year-old Udaipur-based GR Infra Projects. Vinod Agarwal, Managing Director, GR Infra Projects, shares more
Recently bagged projects:
We completed three BOT projects in the past three years, without any delay. However, we have been playing safe and cautiously bidding for projects. The market scenario today is such that people are focussing more on EPC projects. Going by the trend, last year our order book in EPC increased by Rs 5,000 crore. We bagged about 12-13 projects, which included NHAI and state projects. Except for one project, work on all projects has commenced.

Current and upcoming procurement plans: Procurement activities go on regularly as and when the requirement comes. The most common equipment we require includes excavators, pavers, compactors, batching plant, motor graders and concrete batching plant. Annually, we invest about Rs 200 crore in construction equipment.

Buying or renting equipment: We source equipment from companies such as Wirtgen, Volco, JCB, etc. We buy most of the equipment and have a fleet worth Rs 400 crore to Rs 500 crore.
Need for subcontractors: We do not opt for subcontracts for the jobs, unless it is some labour work in concrete or others.
Raising funds: In the case of EPC projects, you do not require a lot of funds. So, we work with bank limits. Plus, the government authority offers 10 per cent mobilisation in advance. So, in EPC, you need funds in mobilisation initially, after which you receive monthly payments.

Projects on consortium or JV basis: We can consider JVs because there are some big projects where our company does not qualify. So, to qualify for projects, we may consider JVs.
Focus on overseas market: With so much work in India, we don´t feel the need to go overseas.
Performance in FY2015-16 and expectations from 2016-17: For 2015-2016, our construction turnover is around Rs 1,900 crore. And for 2016-17, we are targeting 25 per cent growth.

´We don´t bid aggressively or conservatively, but play to our strengths and strongholds.´
- Yogesh Kumar Jain, Managing Director, PNC Infratech,

New Delhi New Delhi-based PNC Infratech enjoys a current order backlog for EPC road projects of over Rs 5,000 crore. Yogesh Kumar Jain, Managing Director, PNC Infratech, New Delhi, shares more..
Strategies and recently bagged projects
: During FY2015-16, our company bagged five national highway EPC projects at Rs 3,600 crore. We neither bid for projects aggressively nor conservatively, but play to our strengths and strongholds. EPC in roads will continue to be our focus area and we are also looking at good bidding opportunities under the hybrid annuity model.

Current and upcoming procurement plans: The majority of our road projects secured in the recent past are of rigid (cement concrete) pavement. For these, we are already procuring high-capacity concrete batch plants, slip-form pavers and other ancillary equipment. On the bulk material front, we have our own stone crushers spread across various states to adequately meet project requirements in a time-bound manner.

Buying or renting equipment: We own a huge fleet of construction equipment and logistic fleet. Strategic investment in equipment and fixed assets is a distinct advantage we have, that enables us to rapidly mobilise construction equipment at our project sites for achieving accelerated progress. The key factors to decide whether to rent or buy capital equipment for a given project include cost of hiring vis-a-vis owning, nature of work, possibility of redeployment, economic life of equipment, etc. Need for subcontractors: We engage subcontractors generally for non-core and allied construction activities that are not highly skilled and can run concurrently with core construction activities.

Raising funds: At present, we do not propose to raise any funds from the market. On a standalone basis, we are virtually ´debt free´, with a ´zero´ working capital loan. However, we may go for a certain working capital loan as newly secured projects progress towards the end of the current fiscal.

Focus on overseas market: With government plans to double the length of national highways to 2 lakh km, we see huge opportunities in the long term. Also, the government has set a target of 25,000 km of road projects to be awarded in FY17, which will bring enormous opportunities domestically in the short term too. As such, we are not focusing on overseas markets at present.

Performance in FY2015-16 and expectations from 2016-17: During FY2015-16, we reported a total income from operations of Rs 2,395 crore on a consolidated basis, with an annual growth of 28.7 per cent. Our consolidated EBITDA for the year was at Rs 407 crore and PAT at Rs 216 crore, recording a steep annual growth of 45.5 per cent and 136.7 per cent, respectively. On a standalone basis, we recorded total revenue of Rs 2,014 crore, with an annual growth of 29 per cent. Of the total EPC income of FY16, roads sector projects contributed to over 90 per cent revenue and we see a similar contribution from the roads EPC during the current fiscal too.

- SHRIYAL SETHUMADHAVAN To share your views on this article, write in at feedback@constructionworld.in

CW traces current trends in the roads sector and connects with EPC contractors with winning bids to delve into their procurement and expansion plans, strategies, and more. The roads sector continues to be the most action-packed in the infrastructure space. And, while it has been experiencing its own ´mode´ swings, a new set of contractors have emerged as significant players in the EPC space. Five years ago, these companies may have not been among the top bidders, but in the past couple of years, they have come out in the open, making bold bets and expanding. Some prominent names include Dilip Buildcon, APCO, PNC Infratech, Gayatri Projects, GR Infra, Oriental Structural Engineers, Uniquest Infra Venture, and others (see page 61-62 and read interviews). Consider this: According to National Highways Authority of India (NHAI) data as on May 31, 2016, from FY15-16 to FY16-17, a total of 86 projects worth 4,592 km has been awarded, of which 57 per cent (about 2,604 km worth about Rs 35,191 crore) have been bagged by these ´bold bidders´ (see table on page 61-62). The accelerators In a tough market scenario in the recent past, many contractor-turned-concessionaires burnt their profits in pursuit of BOT projects. Mukund Sapre, Executive Director, IL&FS Transportation Networks, says, ´Aggressive bidding in the initial phases has lowered the viability of projects. Also, obtaining funds from banks has become even more arduous for developers.´ Now, their strategy and focus remain on asset divestment and strengthening the balance sheet. Many have strategically chosen to participate selectively and conservatively in new highway bids. This has led to the emergence of new EPC players who are strengthening their order books. Vikash Sharda, Director, PricewaterhouseCoopers, agrees, saying, ´The exit of some players has created space for new players to garner market share.´ And RK Pandey, Member (Projects), NHAI, adds, ´Over the past four to five years, the whole emphasis was on BOT. So all the big contractors converted to developers and the vacuum created was filled up by new companies.´ Some of these are relatively large-sized companies with strong balance sheets and modest leverage. Sushi Shyamal, Partner, Ernst & Young, adds, ´They are established regional players with strong execution capabilities. They are now being recognised as emerging pan-India EPC contractors. Their financial strength is helping them bid and grab the plethora of contracts being awarded by the government.´ Most of these companies have been in the highway contracting space for over 10-15 years. What has changed is their role - from being subcontractors for the lead contractors and infrastructure developers to having developed pre-qualifications and independently bidding for new projects. ´The new bidding system tests execution and construction capability more and tolling capability less,´ shares Shyamal. ´Further, as most large infrastructure developers have taken a backseat, these companies have emerged as lead contractors for new projects.´ Barring two to three select players, most current bidders have limited BOT exposure or BOT exposure only to select regions and, hence, manageable debt pressures. Their balance sheet strength and low working capital have also given them the financial prowess to bid for larger new contracts. Certainly, lack of financial appetite among players whose presence was dominant in the BOT space has led to the emergence of these new players. However, VG Sakthikumar, Managing Director, Schwing Stetter Sales and Services, and Chairman of the Mechanisation Committee, Builders Association of India, adds that the new companies are dynamic and knowledgeable in selection of equipment, especially production machines such as concrete batching plants. He says, ´As cement and steel are major cost contributors in a road project (rigid pavement), careful selection of a batching plant is key to controlling project costs.´ For business growth EPC contractors have historically used the JV or consortium model to qualify for larger projects and for risk diversification. ´This strategy continues,´ says Shyamal, ´In case a bidder is unable to independently meet tender requirements, he opts for a JV or consortium for bidding and execution of big-ticket projects.´ To this, Sharda adds, ´While forming a JV or consortium depends on the size and location of a project, a large project would see more bidders in the form of a consortium.´ Further, with the new businesses being more EPC in nature, there is limited need for higher funding from the private sector. However, Sharda says, ´If there would be an EPC market from hybrid annuity projects (HAM), the overall scaling up of this sector would be triggered, opening up better prospects in the IPO market for EPC companies.´ He sees the situation being more conducive after a year or so. Road EPC contractors have not seen listing in the past 12 months, the last being that of PNC Infratech in May 2015. Shyamal avers, ´While IPOs of some companies have received the SEBI nod, no dates have been announced yet. Domestic and foreign institutional investors have suffered losses in investments in some large EPC giants. They seem to be approaching this segment with caution, and are much more conservative towards new investments in EPC companies.´ Refinancing of projects would not only ensure reduction of cost of funds but help alignment of repayments in line with cash flows over the balance concession period. ´This would make assets self-sustainable and cash-positive, helping to elevate the credit ratings of such projects,´ says Bajrang Kumar Choudhary, CEO-Infrastructure Project Development, Srei Infrastructure Finance. He adds that projects commanding good rating (A to AA) can access capital or bond markets to bring further efficiency in cost of funds. This also enhances the viability of the IPO and brings back vibrancy in the capital market transaction for the highway sector. The emergence of a new set of small and regional contractors is keeping the sector moving at a time when most big players are shying away from bidding. The big players are more focussed on reducing debt and completing existing projects rather than taking up new ones. IL&FS Financial Services has its method of funding these contractors. Ramesh C Bawa, Managing Director & CEO, says, ´We do the background check through conventional methods. But we have adopted a method where, when we fund or give the contractor the money, we open an escrow account for them. So, when the contractor gets the payment for the construction, it comes into the escrow account, and as per the terms between IFIN and the contractors, our repayment is automatically taken care of from the escrow account.´ Srei empowers entrepreneurs by supporting their financing needs; it gives more credence to the asset quality and strength of the business model than just the size of the balance sheet. Choudhary adds, ´Our commitment remains towards contributing to the India growth story.´ Equipment shop With these bold bidders taking centre stage, equipment, materials and related companies are becoming ancillary beneficiaries. ´However,´ Shyamal adds, ´there are other factors that have an impact, such as commodity price movements, equipment and asset base owned by EPC contractors and resale market in highway contracting equipment.´ And, Sharda adds, ´It will also enhance the business prospects of iron and steel companies (a borrower sector group that is a significant contributor to stressed assets of banks in India).´ Clearly, equipment companies have been experiencing growth. Schwing Stetter hopes to consolidate this growth and augment capacity to ensure delivery to customers. Sakthikumar says, ´We are also expanding our after-sales network close to our job sites to ensure uninterrupted support in spare parts and services.´ Meanwhile, Wirtgen, a market leader for road building and rehabilitation machines, witnessed a growth of 50 per cent last year and is expecting 30 per cent this year. While the award of EPC projects has helped growth of road equipment, Ramesh Palagiri, Managing Director & CEO, Wirtgen India, expects a growth of 20 per cent in coming years for road building and rehabilitation machines. He says, ´We are making the necessary investment now in our after-market and sales support to meet our motto, ´Close to Our Customers´.´ Schwing Stetter is happy to play a major role in supplying concrete batching plants, truck mixers, truck-mounted concrete boom pumps, concrete pumps, and recycling plants to highway projects. Besides, demand is also coming from contractors who have been awarded major bridges. Sakthikumar says, ´We have supplied customers a suitable plant that requires minimum setup time, less foundation or preparation at site and a machine that can be easily transported.´ These mobile plants are not likely to stay for more than two years in a single location. The company has also introduced no-foundation batching plants for the road-building industry in the capacity of 110 cu m per hour. Current scenario All considered, what´s keeping the sector going? While BOT takes a back seat and FY16 being dominated by the EPC sector, the HAM, owing to its risk-balancing approach, is expected to prevail for the next couple of years. According to a recent India Ratings report, 50 per cent of upcoming projects, in terms of project length, are likely to be awarded under HAM while EPC would be the preferred mode for 26 per cent. Also, according to the NHAI data as on May 30, 2016, 86 per cent of projects in the request for proposal (RFP) stage are likely to be awarded on HAM or EPC, and for request for qualification (RFQ) state projects, HAM has accounted for 78 per cent. ´We have received a good response for HAM and have awarded around eight to nine projects,´ informs Pandey. ´In the EPC space, we are planning to award projects of about 7,000 km.´ Shyamal says, ´The sector is propelled by the government´s push, AAA-rated nodal agency (NHAI), investment and acquisitions of operating assets by foreign institutional investors, infrastructure funds and pension funds.´ While many highway developers are facing financial stress owing to underperformance of their BOT assets, interest remains high in the EPC and hybrid annuity space. Sharda agrees, adding, ´Debt trouble has hit the BOT business of many developers and some have either come out of the space or stopped bidding for BOT projects. This has brought down the PPP market in the roads sector, especially national highways. As developers have limited equity to bid for PPP projects, more EPC projects are expected in the short term.´ Evidently, the government´s focus on EPC projects has paid off with many new projects getting awarded and increase in activity in the sector. Palagiri says, ´In the current year, the government is going for a mix of EPC and hybrid projects and I feel this trend will continue for a couple more years before the percentage of hybrid projects goes higher.´ And Sakthikumar adds with optimism, ´NHAI has awarded 8,500 km of national highways. Also, the government has a long-term focus on road projects like Bharatmala, Sagarmala and road infrastructure in the Northeast.´ Past lessons In terms of competitive intensity, contracting companies need to be more pragmatic based on past learnings. Sharda points out, ´A major mistake by contractors has been to take a speculative view on traffic and bid aggressively.´ To this, Choudhary says, ´Although aggressive bidding for EPC projects was expected to come down owing to reduced competition and increased order flow, it is still a concern when you see some projects being outbid 25-35 per cent lower than the benchmark cost.´ Such aggressive bidding leads to rising working capital requirements and leaves contractors grappling with overleveraged balance sheets and shrinking margins. ´In such cases,´ he adds, ´capital requirement becomes an issue unless the bidding is backed by strong fundamentals.´ Contractors must take a more realistic approach, says Sharda. And, Shyamal adds, ´Optimally, EPC contractors today must remain focussed only on the EPC segment and practise financial prudence.´ With adequate business for all, he adds that there is no need for undercutting margins or bidding aggressively. On the contrary, bids should be computed after accounting of all execution risks. Also, diversification into other capital-intensive businesses such as BOT or real estate should be avoided if it comes at the cost of additional leverage on the balance sheet. Indeed, in these exciting times, prudent players are bound to emerge as new market leaders. Quick Bytes Exit of some EPC players has created space for new players to garner market share. Established regional players with strong execution capabilities are now being recognised as emerging pan-India EPC contractors. Hybrid annuity projects could open up better prospects in the IPO market for EPC companies. We are conservative bidders but aggressive executers. - Devendra Jain, Executive Director & CEO, Dilip Buildcon Bhopal-based Dilip Buildcon (DBL) boasts a current stock of EPC road projects worth about Rs 12,000 crore. The company primarily focuses on the roads sector and 85 per cent of its order book is from roads. Devendra Jain, Executive Director & CEO, Dilip Buildcon, shares more... Strategies: Our strategy was clear - when companies were bidding aggressively for BOT projects, Dilip Buildcon operated as a focussed EPC company. The strategy was to not bid aggressively. We are conservative bidders but aggressive executers. Ninety-five per cent of our projects are always completed ahead of schedule. Now, when several contractors are bidding for EPC projects, we have started bidding in different states. The more projects we bid for, the possibility of bagging one increases. Recently bagged projects: We have a lot of projects where work is yet to commence. Recently, we bagged a big project worth about Rs 1,700 crore under the hybrid annuity model from Lucknow to Sultanpur. Apart from this, big projects include the Rs 800-crore Vijayawada-Machilipatnam road and Rs 750-crore Mahulia to Baharagora, which is close to Jamshedpur. Work on these NHAI projects will start soon. Also, we recently bagged India´s second longest cable bridge in Goa; its total cost is about Rs 1,600 crore. Current and upcoming procurement plans: We own all our equipment and have about 7,000 pieces of equipment. Our current fleet is worth Rs 2,000 crore, and we buy machinery project-wise. As of now, we have almost Rs 5,000 crore worth of revenue-generating machinery. Caterpillar is our biggest vendor; we have already invested Rs 600 crore towards its equipment. Apart from that, we have invested in equipment from Wirtgen, Volvo and Ashok Leyland. However, investment towards procurement depends on the company´s revenue. Of the total revenue in March 2016, 30 per cent is invested in procuring material, which includes steel, cement and bitumen. Buying or renting equipment: Going by company policy, we work with our own equipment bank; we neither work with rented equipment nor engage any sub-contractor to work with us. Need for subcontractors: They don´t have enough trained manpower or equipment and end up subcontracting. As a company, we don´t subcontract at all. We have more than 20,000 people working full time for the company who we constantly keep training. Projects on consortium or JV basis: We are always open for JV in new sectors. Government incentives: Every project comes with a contract clause. If the project is completed before 100 days, 3 per cent of the contract is a bonus. And we earn a bonus on almost every project. ´We will participate in upcoming HAM projects selectively and cautiously. - Anil Kumar Singh, Managing Director, APCO Infratech At present, Lucknow-based APCO Infratech is executing one EPC and two hybrid annuity model (HAM) road projects. The total order backlog pertaining to this category is to the tune of Rs 2,000 crore. Anil Kumar Singh, Managing Director, APCO Infratech, shares more... Strategies and recently bagged projects: We are the first company to be awarded under HAM by NHAI for the Delhi-Meerut Package III and the Meerut-Bulanshahar package worth Rs 1,800 crore. APCO will participate in upcoming HAM projects selectively and cautiously. However, bankers are conservative in lending, owing to the macro issues concerning the banking sector, which need to be resolved to make HAM a success. Current and upcoming procurement plans: APCO has procured around Rs 150 crore worth of equipment in FY2015-16 because we entered into a new venture, highway tunnelling, last year. We are expecting an average growth of 10 per cent YoY, which will add equipment worth Rs 25-30 crore every year. APCO has a net block of Rs 250 crore worth of equipment to date and is increasing the asset base proportionate to the overall business plan at an average 10 per cent YoY. Buying or renting? We will prefer to buy equipment than hire it, except in a few cases where the equipment requirement is for a short duration and it is easily available in the market. Need for subcontractors: Majority of works are executed in house; as and when a situation demands, we may go in for a subcontractor. However, all specialised works are given to subcontractors with sound technical and execution capabilities. Raising funds and IPO market: At present, we have a consortium of bankers funding our requirements, both CAPEX as well as working capital. As our turnover increases, we may go in for an IPO in future. The present market conditions are not conducive for an IPO. Projects on consortium or JV basis: No, we have enough resources and required bandwidth to accomplish these projects on time. Focus on overseas market: In future, if some beneficial proposition comes up, it can be analysed. Performance in FY2015-16 and expectations from 2016-17: We achieved growth of 10 per cent YoY in terms of top-line and bottom-line as per our business plan, which is considered good in present market conditions. We expect a better contribution in the growth rate from the roads sector in coming years. During 2016-17, the company has proposed to invest Rs.65- 75 crore in equipment.´ - K Jalandhar Reddy, Executive Director, KNR Construction Ltd Hyderabad-based KNR Construction Ltd (KNRCL) has recorded an order book position of Rs 4,550 crore as on June 11, 2016. K Jalandhar Reddy, Executive Director, KNRCL, shares more... Strategies and recently bagged projects: KNRCL, which is predominantly in roads and highways, flyovers and bridges, decided to primarily build its order book in EPC to keep up the top line and bottom line and beat the negative trend in the roads sector. As the BOT or annuity roads sector was encountering problems such as infusion of capital, dwindling toll collection and erosion of EPC margin, the company decided to keep away from these projects. Current and upcoming procurement plans: During 2016-17, the company has proposed to invest Rs 65-75 crore in construction equipment, and around Rs 15 crore has been invested. Buying or renting equipment: We prefer buying equipment. Our gross block as on March 31, 2016, is Rs 578 crore, of which Rs 470 crore is towards plant and machineries. Need for subcontractors: Normally, in projects, around Rs 150-200 crore is considered in deploying to subcontractors. This is considering additional resources to be deployed. In the current order book, we may subcontract around Rs 1,000 crore to back subcontractors. Raising funds: The company is judiciously utilising available working capital funds for EPC projects as this cycle is only 45-55 days. Projects on consortium or JV basis: As per tender qualification, we bid on our own for projects costing around Rs 1,300 crore. Hence, there are no plans to execute projects through a consortium or JV. Focus on overseas market: Not at present. Performance in FY2015-16 and expectations from FY2016-17: In FY2015-16, the income from operation amounted to Rs 902.54 crore, EBITDA Rs 155.41 crore and net profit at Rs 161.12 crore (standalone). In FY2016-17, the income guidance is given as Rs 1,100 plus with EBITDA of around 14 per cent. ´Our strategy is always to bag good projects at good prices.´ - Dilip Suryavanshi, Chairman & Managing Director, Dilip Buildcon Ten years ago, Dilip Buildcon (DBL) was a small player that focused on quality and before-time delivery. Since then, it has grown almost 80 per cent YoY. Dilip Suryavanshi, Chairman & Managing Director, Dilip Buildcon, shares more.. Outlook on the current roads sector: Our outlook is extremely positive. Infrastructure is the main focus for the government and it will progressively work towards its development. Over the past two years, it has used a three-pronged approach to push road development in India. First, it kick-started stuck projects by addressing the causes for their delay and taking bold decisions quickly. Second, it identified new highways to be built based on traffic and designed the financial mechanism accordingly. Third, it tried to simplify and reduce the required regulatory approvals. Impact of the sector´s growth on the company: Today, because of the sector´s growth, DBL is one of the largest road-focused EPC players in India. Although we have grown exponentially, we don´t chase order-book growth. Our strategy is always to bag good projects at good prices. Usually, we keep a healthy two-and-a-half-year outlook on our orders to be in a comfortable position even if we lose out on orders. Currently, our gross order book stands at over Rs 17,000 crore, which we will execute over the next two years or so. We hope that with the continued push from the government for the sector, we can continue to expand our business. Company´s game-changer project: Each project is unique and brings a different set of challenges and learnings. Today, DBL has worked in 15 states covering almost 75 per cent of land mass in India. We are the only company besides L&T with this kind of experience. There were many milestones along the way, one of which is the Ahmedabad Godhra project that we executed in Gujarat. It was almost four times larger than any project we had executed till then and had exciting structural challenges. This project propelled us into the big league. Conducive IPO market: Absolutely, it is. There are two parts for a successful IPO - first, the condition of the specific industry and how investors and markets view it; second, the condition of the markets themselves. For the past two years, MoRTH, under the guidance of Nitin Gadkari, has been the best performing ministry of this government. Institutional investors have also taken notice of this and are excited. Adding to this is the fact that the Indian economy has started showing green shoots. And, right now we are at an inflection point. So overall, it´s a good environment and we feel that given where we want to be in the next five years, now is the time. We want to price it right so that our investors can make great returns. Challenges in project execution: The challenges are almost the same as before. We feel that the government should move to a single-window system to clear projects and, in fact, award projects to companies only after they have acquired all necessary clearances. For the company´s part, delays happen owing to the lack of right vision or focus. Any company with its own engineering and construction strength will not face delays. Focus on overseas market: DBL has a healthy order book and is extremely optimistic about the future potential of this sector in India. However, we are certainly looking at select opportunities abroad where we see future potential. Performance in FY15-16: Compared to other infrastructure companies in India, DBL has done fantastic business for 2015-16, with a growth rate of almost 60 per cent owing to our focused strategy, planning, timely execution and employee dedication. We have grown from Rs 2,600 crore in FY15 to Rs 4,000 crore in FY16. ´We are targeting projects that are really good and challenging.´ - Kishor Viramgama, Chairman & Managing Director, Backbone Enterprises Ltd Ahmedabad-based Backbone Enterprises enjoys a current order backlog (value of awarded work remains to be completed) for EPC projects of around Rs 1,000 crore and others around of Rs 750 crore. Kishor Viramgama, Chairman & Managing Director, Backbone Enterprises Ltd, shares more... Strategies and recently bagged projects: The strategy is simple - we are only targeting projects that are really good and challenging. NHAI´s recent EPC project bagged by us, Jharpokharia-Balasore, is one such project that we decided to bid for at the initial stage itself. Current and upcoming procurement plans: We have sufficient machinery to work for orders in hand. But this fiscal, we plan to invest around Rs 10 crore in construction machinery. Buying or renting? We mostly purchase plant and machinery as per the project´s requirement. Our fleet includes plant and machinery manufactured by Wirtgen, Caterpillar, Speco, JCB, Metso, Komatsu, Apollo, Core, Volvo, Kobelco, etc. Need for subcontractors: We prefer executing projects by ourselves. At present, projects are being bid for aggressively, and maintaining quality along with aggressive bidding is not possible by appointing subcontractors. Raising funds and IPO market: We have sufficient facilities available through multiple banking. We will think of an IPO at the right time. Projects on consortium or JV basis: We are also bidding for many EPC projects on consortium or JV basis. The main purpose is to fulfil the eligibility criteria at the bidding stage and get the advantage of the technical expertise of each JV member during the execution stage. For example, in a highway project, one company with expertise in the road portion and another with expertise in the structure portion, will bring significant savings in reduction in time and cost. Even sharing machineries and manpower shall result in additional technical support and knowledge. Focus on overseas market: There are several road projects at present as well as upcoming ones in the future, and there is no scarcity of work for road contractors in India. But if any good project comes our way overseas, we are ready to grab the opportunity. Performance in FY2015-16 and expectations from 2016-17: FY2015-16 has provisionally closed at Rs 551 crore. And, with more orders in hand, we expect to cross Rs 650 crore during FY2016-17. ´We are building on our order book.´ - Mehttab Siddiqui, COO, GHV Group Mumbai-based GHV Group is a 50 year-old company and as Mehttab Siddiqui, COO, GHV Group, says, ´We call ourselves lowest bidders and are aggressive in the market.´ He shares more... Recently bagged projects: We are executing several projects for IL&FS Transportation Networks, NHAI, Kerala State Transport, Madhya Pradesh Road Development Corporation, etc. Our current order book size is worth Rs 2,500 crore. Current and upcoming procurement plans: Ten per cent of our annual turnover is put back into the company for reinvestment. Considerable amount from this in invested in procurement activities as well. Buying or renting equipment: Nowadays, all equipment is available on lease. So, we prefer renting than spending thousands of crores on equipment. Need for subcontractors: Subcontractors are available and we rope them in for small jobs. Otherwise, we have 1,000 employees in house; hence, most jobs are done in house, with less work outsourced. Raising funds and the IPO market: We are a debt-free company. We are associated with good bankers who support and give us a bank guarantee. We do not require an IPO or any big funding from the bank. Projects on consortium or JV basis: For projects we bid for, we have tied-up with a US-based company and they are partners for all technical assistance required. They operate from the US and, if required, the engineers come down to India. Again, for this, we pay them 1-2 per cent of the project cost. However, we are building on our order book and are not aggressively looking at JVs in the future. We are comfortable doing this business. Focus on overseas market: We are bidding for one challenging project in Ethiopia in JV with a Dubai-based company. But there is plenty of work in India for the next 10 to 15 years and we are well-established here. Hence, at present, we are not keen to go abroad. Performance in FY2015-16 and expectations from 2016-17: The company´s turnover in 2015-16 was Rs 550 crore. This year, we expect to reach Rs 750 crore to Rs 900 crore. ´Last year, our order book in EPC increased by Rs.5,000 crore.´ - Vinod Agarwal, Managing Director, GR Infra Projects The Narendra Modi government coming into power two years ago has worked wonders for 50 year-old Udaipur-based GR Infra Projects. Vinod Agarwal, Managing Director, GR Infra Projects, shares more Recently bagged projects: We completed three BOT projects in the past three years, without any delay. However, we have been playing safe and cautiously bidding for projects. The market scenario today is such that people are focussing more on EPC projects. Going by the trend, last year our order book in EPC increased by Rs 5,000 crore. We bagged about 12-13 projects, which included NHAI and state projects. Except for one project, work on all projects has commenced. Current and upcoming procurement plans: Procurement activities go on regularly as and when the requirement comes. The most common equipment we require includes excavators, pavers, compactors, batching plant, motor graders and concrete batching plant. Annually, we invest about Rs 200 crore in construction equipment. Buying or renting equipment: We source equipment from companies such as Wirtgen, Volco, JCB, etc. We buy most of the equipment and have a fleet worth Rs 400 crore to Rs 500 crore. Need for subcontractors: We do not opt for subcontracts for the jobs, unless it is some labour work in concrete or others. Raising funds: In the case of EPC projects, you do not require a lot of funds. So, we work with bank limits. Plus, the government authority offers 10 per cent mobilisation in advance. So, in EPC, you need funds in mobilisation initially, after which you receive monthly payments. Projects on consortium or JV basis: We can consider JVs because there are some big projects where our company does not qualify. So, to qualify for projects, we may consider JVs. Focus on overseas market: With so much work in India, we don´t feel the need to go overseas. Performance in FY2015-16 and expectations from 2016-17: For 2015-2016, our construction turnover is around Rs 1,900 crore. And for 2016-17, we are targeting 25 per cent growth. ´We don´t bid aggressively or conservatively, but play to our strengths and strongholds.´ - Yogesh Kumar Jain, Managing Director, PNC Infratech, New Delhi New Delhi-based PNC Infratech enjoys a current order backlog for EPC road projects of over Rs 5,000 crore. Yogesh Kumar Jain, Managing Director, PNC Infratech, New Delhi, shares more.. Strategies and recently bagged projects: During FY2015-16, our company bagged five national highway EPC projects at Rs 3,600 crore. We neither bid for projects aggressively nor conservatively, but play to our strengths and strongholds. EPC in roads will continue to be our focus area and we are also looking at good bidding opportunities under the hybrid annuity model. Current and upcoming procurement plans: The majority of our road projects secured in the recent past are of rigid (cement concrete) pavement. For these, we are already procuring high-capacity concrete batch plants, slip-form pavers and other ancillary equipment. On the bulk material front, we have our own stone crushers spread across various states to adequately meet project requirements in a time-bound manner. Buying or renting equipment: We own a huge fleet of construction equipment and logistic fleet. Strategic investment in equipment and fixed assets is a distinct advantage we have, that enables us to rapidly mobilise construction equipment at our project sites for achieving accelerated progress. The key factors to decide whether to rent or buy capital equipment for a given project include cost of hiring vis-a-vis owning, nature of work, possibility of redeployment, economic life of equipment, etc. Need for subcontractors: We engage subcontractors generally for non-core and allied construction activities that are not highly skilled and can run concurrently with core construction activities. Raising funds: At present, we do not propose to raise any funds from the market. On a standalone basis, we are virtually ´debt free´, with a ´zero´ working capital loan. However, we may go for a certain working capital loan as newly secured projects progress towards the end of the current fiscal. Focus on overseas market: With government plans to double the length of national highways to 2 lakh km, we see huge opportunities in the long term. Also, the government has set a target of 25,000 km of road projects to be awarded in FY17, which will bring enormous opportunities domestically in the short term too. As such, we are not focusing on overseas markets at present. Performance in FY2015-16 and expectations from 2016-17: During FY2015-16, we reported a total income from operations of Rs 2,395 crore on a consolidated basis, with an annual growth of 28.7 per cent. Our consolidated EBITDA for the year was at Rs 407 crore and PAT at Rs 216 crore, recording a steep annual growth of 45.5 per cent and 136.7 per cent, respectively. On a standalone basis, we recorded total revenue of Rs 2,014 crore, with an annual growth of 29 per cent. Of the total EPC income of FY16, roads sector projects contributed to over 90 per cent revenue and we see a similar contribution from the roads EPC during the current fiscal too. - SHRIYAL SETHUMADHAVAN To share your views on this article, write in at feedback@constructionworld.in

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