On Contract

My target revenue for 2014 is Rs 300 crore

August 2012
Dr VK Sukumaran, Chairman and Managing Director, VKS Projects Ltd

Named after its founder, Dr VK Sukumaran, Chairman and Managing Director, VKS Projects has made a mark for itself in specialist piping contracts. Many years of hard work since it was set up during which Sukumaran donned many hats – of entrepreneur, boss, leader, engineer – culminated in the company going public in July 2012 with an IPO of Rs 55 crore. A dream realised for this dynamic entrepreneur, who plans to use it to scale up operations. Sukumaran speaks to Charu Bahri about the company’s journey and future.

Humble beginnings

I began working in the EPC industry in 1988, straight after acquiring a BTech in Mechanical Engineering (Production) from TKM College of Engineering, Quilon (University of Kerala). In the ensuing decade, I gained significant experience in industrial infrastructure in India, Yemen and across South-East Asia. I worked with Gannon Dunkerley Ltd, Aker Solutions Ltd, Consolidated Contractors Company and Hindustan Dorr Oliver Ltd. During these years, I developed a vision for a design-based global EPC contracting company. In 1998, I planted the seed to convert this vision into reality and floated VKS Projects Ltd. Having entered the industry without a godfather and no financial support, my savings of Rs 1 lakh were my only capital! Stalwarts in the chemical, petrochemical and pharmaceutical industries took a chance with me and gave my organisation the first few contracts; these include Hikal Ltd, Taloja and Deepak Fertilisers and Petrochemicals Ltd.

I donned many hats during the first decade of operations – as an entrepreneur, a boss, leader, engineer and so on. My own growth came from practice-based learning. I resumed formal education a few years ago wherein I pursued a Masters in Philosophy in renewable energy and completed a PhD in green construction – particularly industrial and commercial construction – last year.

Managing finance

Finance in the form of working capital is the lifeline of our business. It is not easy for new entrants to get the required finance. But, our strong client list and potential to perform enabled us to secure the required funds from the State Bank of India in the early years of our operations. Today, post listing, the IPO has increased our net worth besides strengthening our financial qualifications. This has also helped us bid for large projects and avail of finance from MNCs and banks. The same organisations would not have backed an unknown newcomer.

Competitive spirit

Primarily an industrial EPC contractor, our specialty is CS, SS, alloy steel, nickel, chromium piping, structural fabrication and erection, critical heavy equipment erection and IBR piping jobs. We are amongst a handful of players that execute very high-precision piping work.

Industrial piping relies on strong joints that are capable of withstanding high pressure. Few players have the know-how for such specialised critical welding. Limited competition puts us in a good space. We compete for the most lucrative chemical plant projects from the best chemical, petrochemical and pharmaceutical players. We enjoy a high rate of repeat orders from reputed clients such as Thermax India Ltd, Punj Lloyd Ltd, Deepak Fertilizers & Petrochemicals Ltd, Reliance Industries Ltd, Shriram EPC and many others. Our top five clients provided three-fourth of our total revenue in FY 2011, which speaks volumes about our work. In future, we will focus on other civil infrastructure projects as well.

Retaining good people

Technology drives our operations and this expertise lies not only in the state-of-the-art machinery we employ but also within our people. Our team includes qualified and experienced engineers, design draftsmen and technicians. We also have some IITians working with us. Having the best people on board is a feather in the cap, but it is important to give them opportunities to grow. I believe that offering a conducive work environment is vital to retaining good employees. Salary is secondary.
People like to work with a considerate boss. When we recruit engineers, we test their skills before deciding whether to put each person in the engineering, procurement or construction division. There is so much scope in an EPC company; choosing the right person for the right job is the key to increasing productivity.

We also emphasise on strong project management systems and safety measures because, regardless of how much we contract and sub-contract, we believe that the responsibility for the safety of the worker on-site remains ours. We are an ISO 9001-2008, OHSAS 18001:2007, ISO 14001:2004 certified quality management company and remain committed to their standards.

Future vision

My long-term vision is to grow to be as successful an EPC player like L&T. Currently, it is unfair to club us with bigger players in the EPC sector. My strongest vision is for the next few years – especially the next couple of years – during which we will be executing the longest projects that we are presently taking up.

So far, we had been concentrating on projects that are six to 12 months long. Every month, few projects were completed and few more were added on. In the past few years, we have obtained the necessary pre-qualifications to bid for larger projects. This has led to strong traction in new order flows. Our average order book size has increased from Rs 2 to 3 crore to almost Rs 40 to 50 crore! For example, we have orders worth Rs 49 crore from Lanco Infra and Rs 45 crore from PACL India Ltd.
A business slowly builds its capabilities to take on larger projects of longer durations. This process matches the long-term vision with the actual work in progress. Our revenue grew threefold from Rs 3.3 crore to Rs 10.78 crore between 2007 and 2009. It grew six-fold in the next two- year period to Rs 60 crore in 2011. As we continue to grow at unprecedented rates, my target revenue for 2014 is Rs 300 crore.

Getting listed

It was always my dream to get VKS Projects listed as that is a passport to the capital markets. Even so, the key to success in the capital market is to be a long-term player and not just to raise funds and vanish from the scene. Ultimately, the share value depends on a good turnover and strong fundamentals, which is our aim.

We propose to use the net proceeds of the Rs 55 crore issue primarily to purchase construction equipment, meet our working capital requirements and open a local engineering design studio/office and training centres in Chennai, Kochi, Ahmedabad, Hyderabad and New Delhi. A wider presence across the country would help deliver project execution efficiencies as well as strengthen business development in these regions.

Our EPC orderbook is currently worth Rs 100 crore and includes projects in Madhya Pradesh, Maharashtra and New Delhi. Past projects have been success fully executed in West Bengal, Karnataka, Punjab, Tamil Nadu, Uttar Pradesh and Uttarakhand. We thus have a pan-India foot­print and plan to keep it that way. I believe that a diversified strategy is healthy for business.

Success mantra

The ‘VKS’ in ‘VKS Projects’ is from my name. But, I like to think of it as denoting the three leading ethics of the company – vision, knowledge and sincerity. I have come so far on the back of my vision, which we have translated into action by applying appropriate know-how with sincerity.

Fact sheet

Year of establishment: 1998
Corporate office: CBD Belapur, Navi Mumbai.
Employees: 405 (on and off site)
Payroll: 34 employees
Contracted/sub-contracted labour: 371
Current order book: Rs 100 crore
Current revenue: Rs 146 crore
Target revenue (2014): Rs 300 crore

Key clients:

• Oil and refineries: Deepak Fertilizers and Petrochemicals, Lubrizol India, ONGC, Rashtriya Chemicaland Fertilizers, Reliance Petroleum
• Textiles: Reliance Industries Ltd, Mandhana Industries, Indorama Synthetics
• Petrochemicals: Monsanto Chemicals, Sabero Organic Gujarat, Rohm & Hass (I) Ltd, Reliance Petrochemicals, Albright & Wilson Chemicals
• Pharmaceuticals, food and beverages: Hikal, Atul Ltd, Hindustan Latex, Rexam HTW Beverage Can (I), Hindustan Tin Works
• Power: Fuji Technical Services, Wartsila NSD India, Thermax Instrumentation,Thermax Engineering Construction, BLA Power
• Steel: Sona Alloys
• Air conditioning and refrigeration: Luwa Ltd/Reliance Industries.
• Glass, port and other industries: Float Glass India Ltd, JNPT, Kvaerner Powergas (I), Punj Lloyd, Dura Build

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