Schneider

On Contract

Our order book stands at around Rs 535 crore

July 2010

Avinash Gupta, Chairman and Managing Director, Technofab Engineering Ltd.

With a track record of over 38 years, which includes 120 completed and 35 ongoing projects, Technofab Engineering Ltd is steadily moving up the value chain. Providing EPC services, the company is executing a wide range of balance-of-plant (BoP) and electro-mechanical projects on a complete turnkey basis. With ongoing projects in diverse sectors, the company has offices in Ethiopia and Kenya, apart from India.

Avinash Gupta, Chairman and Managing Director, and Arun Kochhar, Vice-President (Special Projects), speak to Jayanthi Nararyan about their growth strategies…

Big ticket projects

In the recent past, our new assignments have been in power: one in Tarapur and three in Kalpakkam. We are roughly halfway through this project and securing more jobs on it. We have also been successful in securing projects in the field of water treatment in Fiji. The industrial sector has become very important for us. We have projects for the steel plant in Visakhapatnam, Rashtriya ISPAT, SAIL, National Mineral Development Corporation and National Aluminium Company (NALCO). We are working in a diverse set of sectors and different types of projects as well as geographies. We are very well spread out. Our order book position now stands at around Rs 535 crore.

Historically, we have been doing individual packages under the broad umbrella of a balanced plant. In time to come, customers are beginning to change their packaging philosophy - they want a single contractor - and that's how the EPC business is growing. There are opportunities for medium-sized coal-based and gas-based power plants. Our first big ticket job will be a gas-based power plant abroad where we have already submitted a report. The bid is a part of a larger bid where we would do a BoP assignment. If successful, our portion of the work would be much larger than any job we have done so far. It is worth about Rs 200 crore.

Core strengths

Our core strength is the ability to work in a wide range of sectors. We have the requisite expertise and ability to offer services for a range of BoP and other systems under one roof. The same skill set serving diverse systems and sectors reduces dependence on any one sector and provides the distinct advantage of executing multiple packages for a single project. Skills and project management are our core strengths.

Growth strategies

About 20 per cent of our business comes from the power sector, 50 per cent is from the industrial sector and the other significant portion is from the water sector. Beginning in 2007, we diversified in the field of electrical distribution and rural electrification. We are no longer dependent on the power sector, including the nuclear power sector as was the case earlier. For nuclear power projects, we have four assignments on hand. The company's strategy is to continue to drive profitable growth and control costs by eliminating unnecessary product features, procuring equipment and materials in a cost-efficient manner, optimising logistics and maximising labour efficiency.

Roads projects

Roads are not one of our core areas of competence but there are huge investments coming in this sector and the government is facing a shortage of contractors. We did set up a small group in our company to look at this sector and the end objective is not only the road sector in India but also overseas, in Africa. We have succeeded in getting a project worth Rs 100 crore from Gammon; we see this as a very good opportunity to get into this sector. When we say opportunity, it is not just a matter of being able to secure business but to execute it while having a fair margin. We do not want to be restricted to one sector. This will insulate us from a slowdown in a particular area while having a very wide basket of assignments.

Industrial infrastructure projects

These have become more important in recent years. We are also working on a sugar plant in Ethiopia but the nature of the work is more electrical and the project is financed by the Indian Government. Our other foreign projects are mostly water-related. In Fiji and Kenya, we have on hand a project for rehabilitation of a sewage treatment plant. In Ethiopia, we are well advanced and close to completing the water supply project in the city of Harar, which involves many elements like pumping stations, piping and distribution. Last year, we completed what I call the single largest project the company has done, that is in Ghana for an oil refinery where we worked on a seawater pumping station. Residential construction is not on our radar at this point of time. In future if we enter this segment, we will be more interested in the non-civil part of it, i.e. MEP. We are yet to bid or secure any assignment but we are certainly looking at it.

Financial growth

We first crossed Rs 50 crore as annual turnover in fiscal 2005 after 30 years of existence. Since then, we have been growing rapidly and in fiscal 2009 our turnover was around Rs 150 crore; we are maintaining a good growth with a good order book. Most of our orders have to be completed in 18 to 24 months. This gives us the opportunity to rapidly increase our turnover. We have entered the capital markets with an IPO of 2,990,000 equity shares of face value of Rs 10 each for cash at a price band of Rs 230 to Rs 240.

Equipment

The business we are in is not really a fixed asset-based business. The only assets we need are competent people and certain construction equipments. Till recently, the degree of mechanisation in India was not too high. If we needed equipment on site, we did use some of our own but we largely depended upon hiring. In time to come, we will have a much higher proportion of company-owned equipment on sites. In the next few months, we plan to spend close to Rs 15 crore on heavy construction equipment. It is not just a matter of buying and deploying it at the site. Looking ahead, once you are done with the site, you need to re-service the equipment for use at the next site. There are occasions when you may not have immediate need for deployment and you need to store the equipment. Apart from investing in fresh construction equipment, we will invest around Rs 3-4 crore on a centre where we can store, refurbish and service this equipment.

Future watch

Our future strategy is to grow well. In the past if you see the growth of the company, it has been slow and steady. It has become far more rapid in the past few years. Business opportunities have improved. And if you look at it in terms of power management, our chairman has run the company and been the main promoter since 1971; in essence, he has been running it all alone. Now this imposes a limitation on span of control; in the past five years, we have had two full-time directors. Both are his sons: Arjun Gupta and Nakul Gupta, one a mechanical engineer and the other a Harvard graduate. So now we can envision much more rapid growth than in the past.

Management mantras

We are aware that lack of skilled manpower could come in the way of expansion, considering the demand in infrastructure and construction companies. So we are proud of the fact that we have many people with us who have been with the company from the day we started operations. We appoint engineers straight out of college and train them in all the different areas of our operations, including design and engineering, project management, construction management, procurement and proposal preparations. Then, based on their aptitude we decide where they would fit the best. We intend to continue this by increasing the number of intake of freshers. We will set up a centre to train at least 30 fresh graduates every year and upgrade skills of existing personnel in different disciplines. When we get dedicated employees at a younger age, we give them more attention; thus their desire to continue with us becomes greater.

We are happy to be where we are today. We are proud that we have been involved in the growth of the Indian industrial and infrastructure story for more than 38 years. We would like to see the flag of our operations fly higher and higher. We believe we have a significant role to play in the globalisation of our country; it is a good feeling.

Facts & figures

Established: 1971
Top management : Avinash C Gupta, CMD; Arjun Gupta, Director; and Nakul Gupta, Director
No. of employees : 211
Projects completed recently : 1. New seawater intake pumping station and fibreglass pipeline, TEMA oil refinery, Ghana, valued at Rs 625 million.
2. Fuel oil system and LP piping package at Korba (East) for BHEL, valued at about Rs 170 million.
Ongoing projects : Over 35 ongoing assignments at 26 locations in India and abroad. The outstanding value of these orders is around Rs 5.3 billion.
Centres of operation : Corporate office in Faridabad, Haryana; site offices at various project locations. Company has offices in Ethiopia and Kenya too.
Turnover : Rs 1,495.67 million (2009); Rs 2,003.70 million (2010)