On Contract

In 2009-10, we invested in equipment worth Rs 305 crore

June 2010

TV Sandeep Kumar Reddy, Managing Director, Gayatri Projects Ltd.

Gayatri Projects Ltd is growing from strength to strength under the able leadership of its TV Sandeep Kumar Reddy, Managing Director. In conversation with Charu Bahri, Reddy shares his outlook for his company’s future growth and what goes into sustaining its veritable bull run…

Growth story

Gayatri Projects Ltd is an ISO 9001-2000 contracting and infrastructure development company incorporated in 1989. My father T Subbarami Reddy earlier established Gayatri Engineering Company in 1975 to tap the growing opportunities in building robust infrastructure in Andhra Pradesh initially, and then across the country. The company was involved with large irrigation projects in the mid-1970s; then we took on site levelling projects and approach roads for Visakhapatnam Steel Plant towards the late 70s, and subsequently diversified our operations in the 1990s. Our diversification was an outcome of the growing investments in nation-building by public-sector companies such as National Thermal Power Corporation, National Aluminium Company and South Eastern Railways. We clearly saw the growth potential in different sectors of infrastructure like highways, irrigation projects, mass excavation, ports, airports and industrial civil engineering. At the same time, we grew into a pan-Indian company by taking up projects in different regions of the country. From being an Andhra Pradesh-centric company until the mid-1980s, we are now operational in a number of states, including Assam, Chhattisgarh, Karnataka, Orissa, Tamil Nadu, Uttar Pradesh and West Bengal. The trend to diversify our business gained momentum after I joined the company in 1989.

No slowdown

Frankly, the global economic turmoil of 2008-09 did not have an adverse impact on the investment potential of infrastructure projects in the public sector. The Indian Government did everything possible to ease the crisis and continued to award big ticket projects. As our company is mostly engaged with public-sector projects, we were able to achieve significant growth during the crucial year as well, continuing a bull run of 30 per cent growth in year-on-year revenues that started five years ago. Our turnover for the year ended March 31, 2009, was Rs 100,459.47 lakh against Rs 75,235.64 lakh for the previous financial year; that is, we registered a growth rate of 33.53 per cent over the previous year in what was hailed as a recessionary year.

Domain expertise

We have sufficient domain expertise and our professionalism starts from the top down. I myself joined the company in 1989, after completing a master’s in construction engineering and management from the University of Michigan at Ann Arbor, USA, and a bachelor’s in civil engineering from Purdue University, USA. We see our domain expertise as a major factor enabling us to deliver projects not only on schedule but also before time, such as the Outer Ring Road project in Hyderabad. Recruiting appropriate human resources is always a challenge, especially when you are operational in diverse sectors of infrastructure development, but we recruit our engineers from colleges and train them to meet the highest standards. The key to having sufficient qualified and trained manpower is to have an ongoing process of recruitment and training. Additionally, besides being focused on customer satisfaction, a company must also emphasise employee satisfaction by using the latest engineering practices in a safe and healthy work environment and continuously work towards improving its quality management systems involving all its employees.

Key strengths

Our significant experience across various sectors of infrastructure development and regions and our track record are our key strengths. In the course of our business over the past two decades, we have constructed about 731 km of highways and 1,119 km of irrigation canals. We have executed 22 irrigation projects amounting to Rs 51,684 lakh, including prestigious construction projects such as five packages of Narmada Main Canal (length 50.60 km), Upper Krishna Project (length 44 km), Sriram Sagar Project (length 954 km) and KC Canal (length 64 km). We have executed 10 projects for the construction of dams and reservoir amounting to Rs 8,882 lakh. We have executed 14 highway and runway projects, nine site levelling projects and four industrial projects amounting to Rs 58,909 lakh, Rs 10,724 lakh and Rs 4,893 lakh respectively. This body of work allows me to confidently say that we have acquired strong execution capabilities; that is, adequate experience to handle construction projects in any part of the country.

Mechanisation and cost control

Technology is the key to staying competitive in a cut-throat environment. There is no doubt about that. We own most of the plant and machinery we use and to this end we make significant investments in plant and machinery. In 2009-10, we invested in equipment worth Rs 305 crore. As materials comprise a major component of the costs of construction work, our strategy for cost control focuses on managing the local environment in which materials are procured. If you can keep tabs on local procurement, your costs will stay within budgeted limits.

Going public

We were listed three years ago. Going public has helped us tap a new source of funds and has strengthened our operations as well as our outlook for the future. It was a natural progression of our growth story. We seek to deliver maximum value to our shareholders.

Future outlook

The way we see it, the participation of the private sector in infrastructure - roads, ports, civil aviation and airports - has resulted in significant improvements in the quality of service, and reduced time taken to implement projects as well as costs. Considering that the government is planning huge investments to meet the country’s growing infrastructure needs to achieve targeted growth rates (the Planning Commission of India has estimated a need for $ 500 billion for financing infrastructure projects during the Eleventh Plan period), the opportunities for private and foreign investments in infrastructure projects across the country in coming years will be immense. The construction industry in India has grown at a CAGR of 14 per cent over the past five years. In the next five years, it is estimated that the total construction opportunity for companies in India will be around Rs 34,385 billion with a CAGR of 20 per cent.

At present, we are one of the leading road construction companies and intend to continue to be active in the road building sector. We will tap growing opportunities to build as well as operate toll roads. In fact, we have formed a subsidiary venture, Gayatri Infra Ventures, for this very purpose. We have also formed Gayatri Energy, a power holding company for the better management of our endeavours in the power sector, such as Thermal Powertech Associates Corporation (India) Ltd, which is setting up the Krishnapatnam 1,320 MW thermal power plant. And, at this point in time, we are not looking to create a global footprint. We would like to focus on opportunities in India.

Wishlist for the government

The roads, airports and ports sectors will receive a major boost when the Indian Government sets up the special dedicated fund it has been talking about, to provide loans to infrastructure projects being developed by both private companies and government-private JVs. The Planning Commission has recently proposed several remedial measures to ease the liquidity crunch, including raising money through public-private partnership (PPP) models for the infrastructure sector. These measures should be introduced without delay.

Facts & Figures

Present order book: Rs 6,095 crore
Sector wise break-up of order book: Roads (item rate contracts): Rs 836.56 crore
Roads (BOT): Rs 1,408.69 crore
Irrigation and dams: Rs 3,701.93 crore
Other sectors: Rs 147.94 crore
Equipment in hand as on March 31, 2010: Rs 305 crore
Turnover (2009-10): Rs 1,252 crore
Net profit (2009-10): Rs 52.31 crore
Number of employees: 1,550