Mr. Avinash C. Gupta, CMD, Technofab Engineering Ltd.(TEL) has 49 years of experience in the engineering industry. He holds a Bachelor of Science degree from the Punjab University. Mr. Gupta has been associated with the engineering industry since 1960 and over the years he has acquired experience in the planning and execution of electro-mechanical contracts of a varied nature in the areas of power, refineries, fertilizer, steel, ports, etc. Mr. Gupta has spearheaded the company and provided directions for growth, thereby establishing it to be amongst the leading engineering companies in the country today.
Technofab Engineering Ltd.(TEL)is engaged in the business of providing Engineering Procurement and Construction (EPC) services, and executing a wide range of Balance-of-Plant (BoP) and electro-mechanical projects on a complete turnkey basis. It takes up individual turnkey packages relating to Low Pressure Piping Systems, Fuel Oil Handling Systems and Fire Protection Systems. It eventually executes comprehensive electro-mechanical packages involving all engineering disciplines viz. mechanical, electrical, control and instrumentation, environmental and civil. TEL provides EPC services to domestic and overseas markets across a number of industrial and infrastructure sectors which includes Conventional Power, Nuclear Power, Oil & Gas, Water & Waste Water Treatment, Electrical Distribution, Rural Electrification and other infrastructure sectors. Apart from India, the company has presence in international markets like Ethiopia, Kenya and Fiji.
In an exclusive interaction withHemant P. MaradiaofIIFLahead of the companyâs proposed IPO, Mr. Gupta says, "We have grown at a CAGR of over 35% in the past five years. We will of course look to maintain this momentum."
How much money are you raising from the IPO? How do you plan to use the same?
We are looking to hit the markets with our IPO in the second half of June. We are planning to raise Rs300mn for long-term working capital requirements and another Rs210mn for procurement, storage and maintenance of construction equipment. We are also planning to spend Rs54mn on setting up a proper training center. Then of course there are general corporate expenses. All these should add up to anywhere between Rs690-720mn.
What kind of opportunities do you foresee in the infrastructure space? What are your key strengths?
We broadly get our business from sectors like Power, Water and Oil & Gas. We do various electro-mechanical and turnkey projects. Investments coming up in each one of these sectors are pretty large. The opportunities are huge.
We have grown at a CAGR of over 35% in the past five years. We will of course look to maintain this momentum.
At the management level are Board is very strong. We have two whole-time Directors besides four other independent directors.
We have grown slowly and steadily. We have delivered our projects. We have established a very good track record. We have made profits in all but one year since our inception.
Sure there are a lot of new players who have grown faster than us but we have also seen a lot of players of the 1970s that no longer exist.
Our confidence comes from our track record and our management. We have a business model that has worked well over the years, particularly in the last few years.
We have always been cautious. We have never had an over-leveraged balance sheet.
Our distinguishing factor is our project management skills.
Also, we are focusing on multiple areas of infrastructure projects. We are into piping systems, fuel oil handling systems, fire protection systems, water systems, etc.
Over the years, we have been involved in a slew of power and industrial projects in the country. We must have been involved in setting up at least 40,000 MW of power capacity in the country.
Any new area(s) of infrastructure that you wish to enter?
Infrastructure is a big market in India and we are always looking for new opportunities. At any point in time, we are evaluating which new area we can enter. Water desalination is one such area. That is going to be a big market in future. We have formed tie-ups as we do not have an expertise in this particular area. We have bid for a couple of projects and we hope to attain some success in it sooner rather than later.
Another area we are looking at keenly is Mechanical Electrical and Plumbing (MEP) jobs in commercial establishments. We have the capability to execute such projects, but in our country the concept of awarding separate contracts for civil construction and MEP has not taken off. This is a common practice in other parts of the world.
In all the new areas that we are looking to tap in the future, we will not any tie-ups, barring water desalination.
Could you give us a break up of order book between public and private firms?
Today if you look at our order book, one-fifth comes from Indian private companies; another one-fifth comes from international customers and the balance 60% comes from the Indian government.
But, this mix keeps varying.
What is the order book mix in terms of various sectors?
This also keeps changing year after year. For eg, in one particular year 50% of our business came from the Oil & Gas sector. Water sectorâs contribution to our total revenue was nil five years ago. Last year, it touched 40%. Conventional power used to account for 100% of our business. Right now it is around 20-25%. Nuclear power is also around 20-25%.
We are not dependent on one particular sector, or one particular customer, or one area of activity or one geography.
What is the order book currently?
The unexecuted portion of the order book stood at around Rs5.33bn as of March 31, 2010. The timeline to complete these projects varies from 6-24 months. But, 18 months would be the average time for executing our projects. We have 41 outstanding bids worth Rs22bn. Out of these, we are the L1 bidder in five projects valued at Rs4bn.
What is the outlook going ahead?
The outlook is good. Lot of investments is taking place in India, both by corporates and the governments. Two big challenges going ahead will be inflation and currency.
Arenât you dependent on select customers?
The way you look at data is important. Prima facie it gives an impression that we are dependent on a few clients. NPCIL and Rashtriya Ispat were among the top five customers last year in terms of revenue but they gave us four different jobs.
Today no customer accounts for more than 20% of our order book. For eg, NPCILâs contribution is only about 10%.
Four other customers are below 10% in terms of contribution to the order book.
Do your contracts have any cost escalation clause?
Roughly 70-75% of contracts do not have any provision for cost escalation. But most jobs funded by multilateral agencies do have provision for cost escalation.
What is the debt-equity ratio?
Our debt-equity ratio is around 0.38.
Which are the new overseas markets that you are betting on?
Up until now, we have been focusing on the African continent. We have a presence in countries like Kenya, Zambia, Tanzania, Ghana and Ethiopia. We have bid for projects in other parts of Africa. We have recently taken up job in Fiji. But our focus continues to be the African region. We might look at countries in the erstwhile CSIR countries in the coming years.
What is the contribution of overseas business in topline?
In one year when we bagged a big job in Ghana, the contribution of the overseas operations was about 40%. Right now it is around 10-20%. Last year (FY10), the contribution of overseas operations was 15%. This year (FY11) it will be higher again.
