- TV Sandeep Kumar Reddy, Promoter and Managing Director, Gayatri Projects

A leader in the construction industry for over 50 years, Gayatri Projects has a strategy for the long term. With over-aggressive bidding and a drop in awarded projects, the years 2010-2015 were most challenging for the company. However, it has already emerged as one of the top winners of highway construction projects over the past year-and-a-half and will continue to bid aggressively in this sector, while simultaneously broadening its horizons by entering new specialised sectors. TV Sandeep Kumar Reddy, Promoter and Managing Director, Gayatri Projects, shares more in conversation with SERAPHINA D´SOUZA.

From which of your three lines of businesses do you get maximum profit?
The company has three lines of businesses: The main EPC business, which is the standalone Gayatri projects, BOT road projects and power projects. For now, the focus is mainly on the EPC business, because the BOT and power assets have reached a mature stage and we are now waiting for dividends on our investment. Currently, the EPC business contributes to most of the profit of Gayatri Projects, but in a few years, the profits from power might eclipse the EPC.

With a focus on the EPC business, you have actually doubled your order book. Tell us about projects bagged in this space that you consider important for the company´s growth?
We have recently won four road projects outside Varanasi, which, if considered as a single mega-project, is the biggest road project in the company´s history- nearly Rs 3,300 crore. It is important for us to complete this project in a timely manner. Besides winning a lot of projects in our mainstay roads business, we are excited by the recent diversification we have been able to achieve. We are particularly happy about our foray into underground mining, where we have low competition and good margins.

Your views in bidding for projects under the hybrid annuity model...
For now, we prefer EPC projects, which do not require any investment from our side. The model of asset ownership of highways has not worked out well, mainly because of delays that cause accumulation of interest during construction (IDC), which forever eat into the value of the projects. While the hybrid annuity model reduces risk exposure, the risk still exists. So, we will take a careful and measured approach with these projects.

Earlier in the year, you were considering selling your entire road portfolio. But recently, the company bagged multiple orders worth Rs.3,318 crore from NHAI. We have never had any issues with actual execution of road works. We are hiving off the road portfolio because they are mature, fully completed highway projects. Our core competence is construction, not asset management, so we prefer to sell these projects and free up space in the balance sheet for future projects. All the new projects we have won recently are under the EPC model, so there is lower risk involved. But the Varanasi project I mentioned earlier has some challenges owing to large distances and other logistic issues. So, we are using state-of-the art telematics and IoT (Internet of Things) technology to keep track of activities and plan execution more efficiently.

The company forayed into the railway EPC sector this year, winning a Rs.4,744-crore contract for the Western DFCC and into the airports sector by bagging a Rs.700-crore contract for Navi Mumbai Airport. What is your scope of work in these?
Both projects are in line with work we have done before, so we are quite confident and comfortable about timely execution. In the DFCC project, our scope of work involves earthwork and structures, while in Navi Mumbai Airport we are only doing some site development work. However, we do intend on using these footholds to make major forays into these exciting sectors.

What is the opportunity you are looking at by entering new, specialised sectors where competition is low and margins are high and how are government initiatives supporting you?
Yes, the water supply and underground mining projects that we have entered are quite specialised and often require overseas technology tie-ups. Governments across the country are waking up to the need for proper water supply, so this will be one of the major opportunity sets in future. And, when it comes to underground mining, we expect major action in the upcoming years. The past few years saw a lot of turmoil in the mining industry owing to the misdeeds of a few. Now, as India continues growing at a fast pace, it needs access to a lot of resources. Underground mining is more eco-friendly and less conducive to local mafia situations, so it´s logical for the country to pursue it.

How are you strategising to overcome challenges in the execution of such projects, if any?
For all these specialised sectors we are entering, we are assembling top-notch expert teams in house, as well as tying up with other experienced partners. For the railway foray, we have tied up with L&T and Sojitz of Japan; for mining, we have tied up with a subsidiary of China Coal. We also have a team with a lot of experience working in Singareni Collieries.

You have tied up with China Coal Overseas Development Company to offer Longwall technology for mining. Tell us about this. Also, are you looking to enter more such JVs?
Longwall technology enables complete mechanised underground mining of coking coal. This is the resource used in steel and cement manufacturing, among others. As I mentioned earlier, underground mining of resources reduces pollution and is more eco-friendly. By going underground, we are also getting coal of higher calorific value, so we can extract more energy per tonne and achieve higher efficiencies. Yes, we are constantly evaluating JVs with various international companies who have accumulated technology and experience in various types of construction.

The company has witnessed a rise of 51 per cent in net profit to Rs.16.14 crore for the first quarter of the year. What are your growth prospects going forward?
The past few years have been challenging for us. The main reason being that the volume of work awarded by the government dropped and competition increased. We always bid for projects with a healthy margin, so we then saw a lean period without growth in turnover or order book. Now, it looks like we have finally weathered the storm and come to greener pastures. We have emerged as one of the top five civil construction companies in India in terms of new project awards and growth in turnover; and profit has once again returned. We are looking at greater than 30 per cent growth in turnover for the next few years and profitability will follow in an even stronger manner.

FACT SHEET
Year of Establishment: Gayatri Engineering Company (January 1975), and converted into Public Limited Company as Gayatri Projects Ltd (October 1994)

Areas of operation: Andhra Pradesh, Assam, Bihar, Chhattisgarh, Gujarat, Haryana, Maharashtra, Mizoram, Nagaland, Odisha, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal

Sectors: Highways and runways, irrigation and water works, reservoirs, dams, power projects, mines development, transmission and distribution

Centre of Operation: Hyderabad, Telangana

Completed projects: 5

ONGOING projects: 12

Turnover: Rs.1,807.2 crore (as on FY16)

For suggestions on leading contractors in India, write in at feedback@ConstructionWorld.in