Our MEP order book has grown by 25 per cent in the past year


Our MEP order book has grown by 25 per cent in the past year
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Our MEP order book has grown by 25 per cent in the past year

01 Feb 2020 Long Read
India's leading integrated MEP service provider with over 75 years of experience in providing expert solutions in the building, industrial and infrastructure segments, 
Blue Star has built an enviable reputation for being a one-stop turnkey provider for all MEP needs, with a strong record of delivering projects globally. Its potent blend of technical knowhow, talented workforce, design expertise, exceptional project execution capabilities and global footprint makes it the most preferred choice for MEP projects. The company offers integrated MEP services and is known for providing its services to renowned projects such as the Chhatrapati Shivaji International Airport in Mumbai, GIFT City in Ahmedabad and ITC in Guwahati, among others. PV Rao, President, Electro-Mechanical Projects and Customer Service, Blue Star, shares more on the company’s MEP business, its plans and services, in an exclusive interview with SERAPHINA D’SOUZA. Excerpts: 

How has the specialised services industry evolved? How did Blue Star get into the MEP business?

About 15 years ago, the word MEP was not known in India. Back then, HVAC and other services such as plumbing, electrical and firefighting, which form a part of MEP specialised services today, were standalone and localised contracting businesses with regional players. When we looked at the global market, we knew India, too, had to move towards MEP one day. We took the first step in 2008 by acquiring an electrical company to begin with; a year later, we acquired a plumbing company. That is how we grew from an HVAC player to an MEP player. The adaptation was also necessary as a lot of MNCs started coming into the country and when developers started building large commercial establishments for leasing or selling them out to these MNCs, they realised that the MNCs did not want to deal with too many players but wanted a single MEP contractor who could take on the responsibility of integrating all these services. Thus, it was imperative for large companies such as Blue Star to become an integrated MEP player because being a large HVAC player, we brought in a lot of engineering expertise. So, mechanical and electrical services, combined with an integrated management system, is what a professional MEP player like Blue Star can bring as a value addition for builders, developers and MNCs looking for professional expertise in this field. 

Which segments are driving demand for specialty services?

Initially it started with the IT space as infrastructure came in a bit late. This was followed by commercial buildings, large malls and infrastructure projects. Today, MEP services are required for a lot of infrastructure projects such as airports and metro-rails. Metro projects require a lot of complex design engineering and expertise, particularly when you are talking of tunnel ventilating system or electro-mechanical works related to tunnels as well as overhead stations, etc, and the HVAC related to all this.

When do you get involved with a project?

We get involved right from the initial or early stages of construction. In fact, some services like plumbing and firefighting start at the foundation stage itself. Once the foundation and initial earthwork is over and the basement work commences, plumbing and firefighting works commence, followed by electrical; HVAC comes in a bit late.

How much of the project cost does specialty contracting constitute?

It all depends on the design of the building and the kind of services it requires added to the specifications. While it is difficult to put a percentage to it, all MEP services put together would constitute anywhere between 20 per cent and 35 per cent of the overall building cost.

How is the company moving towards energy-efficiency?

We are looking at sustainability in multiple ways. Energy-efficiency, particularly in the HVAC, plays a major role for green building rating. Here, we add value in terms of what system should be chosen in the design stage itself. Besides, the VRF systems we manufacture are perhaps the most energy-efficient; we use a lot of inverter technology from a fixed speed kind of machine. We are also working on refrigerants to ensure they have the lowest Global Warming Potential (GWP). Further, we recently ventured into the solar space and are currently offering air-conditioning systems that use solar energy. This again is keeping sustainability in mind.  

The company follows an integrated business model of manufacturer, installer and after-sales service provider...

It is an advantage. We have five manufacturing plants and we manufacture over 200 different SKUs – room air-conditioners, chilled water systems including scroll, screw, centrifugal chillers, 
VRF systems, and other pieces of equipment that go into central air-conditioning. Being not just a contractor but also a manufacturer definitely gives us an edge.

What value-added services does the company offer clients?

For most MEP systems that we install, once the system is executed and is completely handed over and put to beneficial use, there is a defects liability period (DLP), which ranges anywhere between one and two years depending upon what we agree at the sales stage. This period is where you have to ensure that the systems are running properly and smoothly; overall operation has settled down; and teething issues, if any, are sorted out. This is where the customer service group comes into the picture. The advantage for Blue Star is that we are an end-to-end value service provider, right from manufacturing, design, engineering and procuring, to executing and handing over to the customer service group in handling this DLP. This gives customers the trust to hand over the after-sales maintenance contract to us. It means another 10 years of handholding the customer and handholding the system – and that’s a value-added service. 
We also offer engineering facilities management for various applications. This includes not only the MEP systems but all other mechanical and electrical services in a building, factory, airport or metro. It is not just the annual maintenance contract but even the ability to operate and maintain the overall mechanical, electrical and engineering facilities that a 
client has.

Last year, the firm celebrated 75 years of its journey. Tell us about your current order book. 

Our current MEP business order book is about `20 billion. It is healthy compared to a year ago. The order book has grown by 25 per cent in the past year. 
MEP currently contributes about 20 per cent of the revenues to Blue Star’s entire business.

What are your growth prospects and plans for the year?

The first half of FY2020 was quite healthy for the MEP business. Our order book has grown well in the past year. We are currently seeing a few challenges in terms of slowdown in commercial real estate owing to the liquidity crisis. In the factory MEP space, too, there are some Capex-related challenges. But with our presence across different segments – buildings, factories, infrastructure and industrial EPC projects, we are in a better position to handle these challenges. We expect our MEP projects business to do well with a growth rate between 15-20 per cent CAGR over the next three years. 

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