Kolkata based McNally Bharat Engineering Company Ltd, which started way back in 1961 as an equipment manufacturer for coal and mining industry today has grown into a large multi product and multi location group. At present, McNally Bharat is a top notch EPC Project implementers with over 300 projects under its belt. The company caters to wide array of segments like Power, Steel, Coal & Mining, Ports, Material Handling, Aluminum and Mineral Processing and other infrastructure sectors.Srinivash Singh, Managing Director of the company in an interview with Rahul Kamat talks about the gaining momentum of EPC contracting in India and the strategies adopted by the company to avail the opportunities.
Let me begin with asking you the current state of Indian infrastructure on par with its counterpart nations?
The current Indian infrastructure like Roads, Ports, Railways, Power, Oil & Gas, Airports etc. are still far behind the developed world. If we yearn to be a leading global economy we have to develop our infrastructure at par with the developed world luring leading global companies to set up operations here.
Many contractors are excited about particular areas in infrastructure sector like power, roads, oil and gas etc. As an infra contractor which sector in India excites your company more and which sector helps you to get more revenue? Kindly give some numbers
As an infrastructure contractor, MBE focuses on projects for Power, Ports, Steel, Mining, non- Ferrous Metals. Recently we have ventured into Cement, Oil & Gas and Nuclear Power. We have also obtained orders for two BOP projects for Ideal Power, Nagpur and Satpura PS for MPGENCO, totaling to a value of around Rs1,250 crore. We hope to achieve a Group turnover of around Rs2,000crore in 2009-10.
Well, a lot has been said about the economic slowdown in recent time, but some reports mentioned that the only untouched sector was infrastructure. How far do you agree or do you feel the same? To add more did you feel the heat?
We agree that the recent slowdown had no impact on the Infrastructure industries as the Government spending on this sector remained unaffected. To a certain extent investments in Steel, aluminum and other non ferrous metals were affected due to drop in metal prices, which affected the investment climate in this sector.
Do you think that the method of EPC contracting gaining the momentum in India and how?
Today, the thinking of the customer has changed. They don’t want to be responsible for project management on a day to day basis and prefer to appoint an EPC contractor, who takes single point responsibility for the entire project. This helps the client to save on time for project execution, system integration is easier, there is one contractor who is to be contacted for all issues involving the project and the client needs to maintain only a skeletal staff for project monitoring.
What issues or challenges according to you are holding up the growth of Indian infrastructure? What are the major challenges a contractor faces while delivering a project?
In the past the growth of the Infrastructure sector was hampered due to the non existence of clear cut policies for this sector. Presently the situation has improved and government guidelines and policies have been framed to boost the growth of this sector through PPP and other models. Some of the challenges that a contractor faces while delivering a project:
a) Land acquisition issues. b) Poor infrastructure at most project sites. c) Shortage of skilled workers like welders, carpenters, bar benders, etc at project sites.
When we are talking about challenges, we cannot overlook shortage of skilled manpower. What has been your company’s experience? How is your company dealing with such a situation?
We have instituted a Graduate engineering training program for the last 4 years to meet the future requirement of trained manpower and managers for various projects. We have also developed a number of labour sub-contractors having skilled workmen, who work closely with us as partners and move from site to site. MBE is also planning to set-up a training institute, similar to ITIs to train skilled technicians like welders, machinists, fitters.
While delivering projects, it requires multiple skills set and evolve high risk owing to the size and complexity of the projects. Can you elaborate the risks involved in projects and how you handle those?
In EPC projects, estimating the cost and tendering requires very high skill sets to ensure we do not run into a financial loss in executing a project and at the same time are competitive in winning contracts. Our team of highly experienced Marketing Managers ensures this. Project Management is very critical in executing complex projects. We use modern programming tools integrated to our Oracle ERP system to track progress of all projects to ensure timely completion within budgeted costs. Site management is another critical factor. We have highly experienced site managers who ensure that construction activity happens as per schedule.
What are the effective Risk Planning and Management Strategy developed by your company to overcome negative eventualities?
We are choosy in selecting projects where we want to quote. We usually work with Public Sector companies and in the Private sector, with a few reputed groups with whom we have worked on a number of projects earlier. We do not opt for risky projects, even if the profit margins may be higher. Our Project Finance team keeps track of actual costs against budgeted costs and raise alarm signals, wherever there is cost over runs. So far we have been quite successful in managing our risks.
Kindly tell us about your company’s operation in the field of contracting? Which are the projects that the company is currently involved in?
The Company is engaged in providing turnkey EPC solutions in the areas of Power, Steel, Coal & Mining, Ports, Aluminum, Material Handling, Mineral Beneficiation and other infrastructure sectors. Apart from above, we are actively endeavoring for EPC projects in Cement, Oil & Gas & Nuclear Power.
Some of the major projects that we are currently undertaking inlcude: a) Raw Material Handling and By Product Separation plant for SAIL IISCo, Burnpur. b) 1 X 270 MW, Balance of Plant project for Ideal Power, Nagpur c) Sinter Plant 3 for RINL, Vizag d) Water Pre Treatment Package plants for NTPC at Barh, Mahuda and Rihand. e) Green Anode Plant for Hindalco Industries Ltd at Sambalpur and Mahan. f) Material Handling Plant for NTPC, Bongaigaon.
The company has recently completed the process of acquisition of the Coal and Mineral Technology Division of KHD Humboldt Wedag, Germany through its subsidiary company, MBE Holdings Pte Ltd, Singapore. Can you give us some more update on the same?
KHD Humboldt Wedag is a 165 year old company and a global leader in Coal & Mineral processing. They have operations in a number of countries, including Germany, South Africa, India, Russia, China & Brazil. The factory at Colonge, Germany manufactures critical equipment for the Cement industry and we will be using the facilities to manufacture other heavy equipment meeting European quality standards to supply to markets in Europe & neighbouring countries. By March 2012, we expect the benefits of the German acquisition to show good results in terms of our global business activities.
It was reported that the McNally Bharat is in talks with a Vietnamese company to explore possibilities of jointly building a power plant in the South-East Asian country. What has been the progress so far?
As of nowthere has been no progress in this area
What is the current order book of the company? Which are the major infra projects for which company have bid for? Any major acquisition lined up for the next financial year?
McNally Bharat Engineering Co Ltd presently has an order backlog of Rs3500 crore. Currently we have around Rs1100 crore of orders where we are L1. We hope these will get finalized by May 2010.
Although we are looking at various acquisition proposals, they are all at a very preliminary stage.
Also give us an idea of what kind of margin improvement one might see because there is an expectation that with the completion of old contracts and new contracts coming in could contribute a better figure?
You are very aware that EPC business is very competitive and all players operate at low margins, but volumes are high. We are always looking for opportunities to improve our margins by value engineering, cost cutting, bulk purchasing to achieve economies of scale.
Do you see any significant impact on margins due to price escalation clauses for major projects?
Some projects are also on a fixed price basis. With prices of steel & cement hardening, there could be a marginal effect on such projects but where there is price escalation clause we do not expect any effect.
How was the year 2009 for your company in terms of revenue growth? How was the trend, is it upward or downward?
We expect revenue of around Rs2000 crore in 2009-10 which will be nearly an 80% growth over the previous year.
Recently you have announced that the company is aiming for Rs7000 croreturnover by 2015. How you have planned for it? Any new strategies?
MBE will continue to focus on its core competence in executing EPC Projects in the core sectors of the economy including Power, Steel, Mining, Coal, Material Handling, Mineral Processing, Ports, Aluminum, Water & other Infrastructure Projects. With the investments planned in these sectors we expect sufficient order inflows to meet our growth targets. In addition we plan to foray into other sectors such as Cement, Oil & Gas, Nuclear Power & Roads to meet our growth targets. In manufacturing, we are expanding our capacity in Baroda, Asansol& Bangalore units, where we plan to manufacture additional new products through joint ventures & collaborations. We are always looking for growing inorganically through acquisitions where there is a strategic fit. Hopefully by 2015 we are also successful in this area which will help us achieve our target.
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| Posted on:8/18/2010 at 7:20 AM