‘Private participation in hydropower is not large enough’

Om Metals Infraprojects Ltd plans to expand its reach in domestic as well as overseas markets. Its executive director Vikas Kothari speaks to Moneylife’s Amritha Pillay on his expansion plans and order-book growth for the coming years

Amritha Pillay (ML): What kind of turnover does the company expect in this fiscal and in the years to come?
Vikas Kothari (VK):
Last year we did around Rs100 crore, this year we expect to reach more than Rs220 crore. In our engineering construction (segment), our current outstanding order book is Rs600 crore. These will be completed over the next two years. In FY11 we are expecting to do over Rs300 crore plus sales from the engineering segment alone. Going forward, it would be another Rs400 crore as we plan to add another Rs200 crore to our order book soon.

Real-estate revenue would be coming in. Revenue from Mumbai and Hyderabad will start by the next two to three financial years. Real estate would contribute 25% to 30% to our top-line contribution.

ML: Do you have any fund-raising plans for your expansions?
VK:
We do not have any fund-raising plans at the moment. It depends on what we decide to foray into. At the same time, we also have enough reserves of our own, so first we will have to utilise them.

ML: You started with irrigation projects, and then diversified into hydropower. What kind of opportunity do you envisage in the hydropower segment?
VK:
There was a plan of 50,000 megawatts (MW) of hydropower generation by the Indian government over the next two-five years. I think 2017 onwards we will be achieving only 25,000 MW of this. However, even this 25,000MW is a huge opportunity.

ML: Your major clients in hydro-mechanical equipment are state-run units. Is there any particular reason for this?
VK:
At present, private participation in the hydropower sector is not large enough. Despite the same being talked about, nothing is actually happening at the ground level. Thermal projects are easier to implement and the cost of building a hydropower (unit) is much more than a thermal power plant. Thus, we want to focus on the projects from state-run units.

ML: Any there any updates on your plans to acquire engineering, procurement and construction (EPC) companies in India?
VK:
We are looking at it in a two-fold manner—one, by entering into EPC through civil contracts or by supplying electro-mechanical equipment. In hydropower projects, there are three main components—civil construction, electro mechanical equipment, and hydro-mechanical equipment. Therefore, while we are addressing the need for hydro-mechanical equipment, we also plan to venture into the civil and mechanical segments. The second is using the existing hydro-mechanical manufacturing facilities to expand our product profile covering thermal power projects, marine projects and others, which would require the same infrastructure that we currently own. We have now grown to become the largest player in the hydro-mechanical business in India and in the world in terms of the size of order book, technical (requirements) and revenues. While we have achieved our leadership in this particular segment we also want to look at other avenues for growth.

ML: Aren’t you also planning to enter into a joint venture as one of the routes for expansion?
VK:
It depends on how we structure our expansion. We could look at acquisition opportunities as well as joint ventures. So we are quite flexible at this point of time, it could be in the form of acquisition and then (we could) grow thereon. If it is a joint venture, we will have set up a different company altogether. We will be doing this over the next one year.{break}

ML: Tell us more about the joint venture you plan with foreign companies?
VK:
For joint ventures, we are looking at some of the European players. There are two contributions that we expect the foreign player will bring in—technical expertise and a large overseas order book. We wish to balance our order book in terms of domestic and overseas orders. Any European company will have a global presence and will definitely help us. At present, our overseas presence is very marginal. This would be a strategic joint venture to increase our presence globally.

ML: Could you share with us more details on the greenfield project that you are planning?
VK:
Considering the growth that we are envisaging, we are looking at setting up this greenfield project in heavy engineering. Over the next one year, we intend to spend around Rs15 crore to Rs20 crore in this greenfield project. However, it depends on whether it is a joint venture or an acquisition. If it is a joint venture, it would be a greenfield project.

ML: How is your investment in real-estate faring?
VK:
We have investments that we have made across Delhi, Mumbai, Kota, Jaipur and Hyderabad. Our Kota residential project is being completed in this year. We are now in the process of signing a co-development agreement for our residential projects in Mumbai and Hyderabad.

ML: What is your vision on your other investment in the development of the Puducherry port?
VK:
We are expecting that it will take at least a year for financial closure. Currently the environmental study is being conducted. We have building a larger port at the existing one with six container terminals. It would be a phased development in the next five to six years along with the SEZ. We surely see the port contributing phenomenally after five years to our company topline.

ML: What is your take on the volumes expected at this port?
VK:
We are focussed on the container segment. The Chennai and Karaikal port are bulk based. The container cargo segment is increasing and has a huge future growth. With the congestion in Chennai city and other issues, we feel we will have enough business coming to our port from Chennai. We will be able to have enough volumes from the container segment alone.

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