Captains Speak  ^{123    15}   

Published: Aug 29, 2019
Updated: Aug 29, 2019

Power Mech Projects: Strategy to quicken growth pace

“Power Mech Projects is on the growth path. It is devising strategies to quicken the pace of growth. Having established a name in the power sector, the company is exploring opportunities in the non-power infrastructure sector on a selective basis – particularly in areas like railways, transmission and distribution, and other industrial services. At the same time, it is also looking to expand its geographical reach in the Middle East, North Africa, East Africa and Bangladesh, among others.” Revealing this, J. Satish, CFO adds that “today, the company is pursuing opportunities of around Rs. 5,000 crore in the international market.”

Pointing out that “the company is expanding the services footprint and leveraging technical expertise to target highermargin contracts,” Mr. Satish adds, “During Q1 FY 2020, among the contracts, power accounted for 63% against 77% and non-power accounted for 37% against 23%. While domestic accounted for 84% of sales against 74%, international contributed 16% of sales against 26%. Now, the company is working on advanced project execution methodologies.”

Indicating that “the company plans to expand the O&M business as a recurring revenue model,” Mr. Satish adds that it is trying to increase its international O&M base. International business will be transformed for the O&M business with an installed base of 300 GW in the Middle East with 80% of oil/gas-fired units. It is deliberating on collaborations with international players in order to capture business opportunities in flue-gas desulfurization (FGD) and DeNOx projects for thermal power plants in India. The company is also focusing on petro-chemicals, piping & electrical, and desalination projects where it can exploit its expertise. NTPC is providing new opportunities of 4,000-5,000 MW per year for newly commissioned units in the form of long-term annual rate contracts.

OTHER SECTORS

Maintaining that the company is eyeing the non-power infra sector, Mr. Satish points out that annual investments in the oil and gas sector are in the range of Rs. 60,000-Rs. 80,000 crore. The construction scope of the business is expected to be in the range of Rs. 3,000-Rs. 4,000 crore per year. New management control of stressed steel assets in the private sector is throwing up opportunities. Power Mech has already forayed into this segment with work for 3 MT expansion works at Nagarnar, and blast furnace area of site structural and equipment installation at Angul for JSPL. The Indian Railways is planning massive investments in the next five years which could be over Rs 8,00,000 crore. This includes network decongestion, doubling of tracks, going for high speed networks and development of stations. There are also huge OHE and S&T opportunities for railway electrification and signalling. A robust order book gives strong revenue visibility for the next 3 years.

According to him, the order inflow during Q1 FY 20 was Rs. 748.1 crore and the order backlog as on 30th June 2019 stood at Rs. 7,153.0 crore. For Q2 FY 2020, till August 2020, the order inflow stood at Rs. 994.2 crore. The total order backlog as on 3rd August 2019 stood at Rs. 7,399.2 crore, with power accounting for 47% of this order backlog, while the remaining 53% was non-power. It is on track to achieve an order inflow target of Rs. 4,000 crore, with a domestic component of Rs. 3,600 crore and international orders of Rs. 400 crore.

The company is on track to achieve Rs. 1,000-crore order inflows in Q2. It has received a Rs. 250-crore order after June 2019 and expects another Rs. 750-crore order to materialize in 10-15 days. For one order of Sarva Siksha Abhiyan of Rs. 512 crore, only a survey was done and no real work started. So this order was cancelled by the new government of Andhra Pradesh. This order has also been removed from the order book of the company. For another order of Sarva Siksha Abhiyan of Rs. 875 crore, work is going on. The company has spent Rs. 10 crore-plus for this project for materials and advances given to contractors.

Another Rs. 1,235-crore AP irrigation project is on hold. The government has called the company for negotiations and there should be a clear picture in another 10-20 days. “Q3 and Q4 will see more traction, Q2 will be better than Q1, Q3 will be better than Q1 and Q2, while Q4 will be best,” says Mr. Satish.