Cover Story

Published: Jan 15, 2022
Updated: Jan 15, 2022

PSP Projects Ltd

Emerging Czar in EPC Construction Space

The Ahmedabad-based construction major PSP Projects is knocking on the doors of the big league with the completion of more than 180 projects and with an order book of more than Rs 4,000 crore in hand. Offering the A-Z of construction services, the company has made its mark in major Indian states like Gujarat, Rajasthan, Karnataka, Uttar Pradesh, Maharashtra and New Delhi, and is well on course to acquire a pan-India footprint.

Its dynamic and visionary promoter and CMD-cum-CEO PS Patel proudly points to several feathers in its cap, including the Surat Diamond Bourse mega project and the prestigious Kashi Vishwanath Dham Corridor project in Varanasi,.

Neither is it only a matter of big bucks for the company, as Mr Patel avers that adhering to the highest quality standards and strictest time schedules are of equal importance to maintain PPL’s commitment to customer satisfaction.

From tiny acorns do mighty oaks grow. That in a nutshell sums up the amazing success story of Ahmedabad-based PSP Projects, a first-gen NSE- and BSE-listed company. Stewarded by its visionary and dynamic Chairman, MD and CEO PS Patel, the company, which started its journey as a civil contractor, today offers a diversified range of construction and allied services across industrial, institutional, government, Govt. Residential and residential projects. In its bid to become a pan-India player, the company has spread its footprint to six major states of Gujarat, Rajasthan, Karnataka, Uttar Pradesh, Maharashtra and New Delhi.

It is now a leading integrated EPC company of high repute across the construction value chain, from design, construction, mechanical, electrical and plumbing (MEP) to interior and O&M services. The Turnkey & EPC Projects contributes almost 90 per cent to its revenues.

In the last 13 years, the company has completed 174 projects worth Rs 4,000 crore and has earned a reputation on par with the likes of Larsen & Toubro and Shapoorji Pallonji, to mention a few. The company’s driving force, PS Patel, a civil engineer by qualification with a wide experience of 36 years. Among his leadership qualities, he is hard-working, far-sighted, a very good team leader and a firm believer in using modern technology.

In a wide-ranging conversation with Corporate India, Mr Patel said, “FY21 was a unique year, scarred by unprecedented and unforeseen circumstances caused by the Covid-19 pandemic. The construction sector per se suffered a setback, including our company, but I must say that we remained resilient amidst the barrage of economic disruptions — we registered very negligible de-growth and were far less affected than our peers in the industry.”

BUMPER ORDERS

PPL currently sits on an order book of Rs 4,150 crore to be executed in two years’ time. This includes Rs 1700 crore worth of prestigious orders from the Uttar Pradesh government for constructing six medical colleges, one university and one residential colony for ‘Mahila’ police constables. The company is currently working on 46 projects and had a fresh order inflow of Rs 637.22 crore during the first half of the current fiscal.

Commenting on the order book, Mr Patel said, “We keep a little conservative, selective and protective approach while taking new orders, even though we are highly capable of executing projects with a lot of speed and accuracy. However, this conservative approach helps us in concentrating and focusing meticulously in quality, which we have never compromised on till date. Very large players carry order books of 4x-5x, while we remain at 1.5x-2x. It’s a conscious decision. Alongwith the 25-30 per cent annual growth, we are equally keen to maintain customer goodwill from our higher standards, which we are known for.

“Similarly, we also ensure good operating margins. We don’t rush into projects where margins are not up to the mark. In my opinion, it is important to work with reasonably good profits especially when we adhere to the best quality standards and stringent time schedules without any compromise. Otherwise, it doesn’t make sense. We aspire to a 13-14 per cent EBIDTA on an average,” he quips.

Providing an interesting analysis of project size and the competition, Mr. Patel observed, “There is a vacuum of good players in bidding for an order size between Rs 50 crore and Rs 200 crore, because usually bigger players keep away from participating such tenders. They prefer, and become more active and aggressive when it comes to Rs 1,000 crore and above. However, there is huge competition for government projects ranging from Rs 200 crore to Rs 500 crore.”

MEGA BOURSE

PPL recently successfully completed its most challenging and complex mega project of Rs 1,575 crore for the Surat Diamond Bourse, for which it has already received the completion certificate. “This will be our turning point and a game changer, as with the completion of this big and prestigious project we are now absolutely eligible and qualified to participate in a project size of Rs 2,500 crore, which can take the company into an altogether new orbit.

VARANASI CHALLENGE

Another feather in the company’s cap is the marquee Shri Kashi Vishwanath Dham Corridor project in Varanasi. PPL took on the challenging project, valued at Rs 339 crore, and in a record time of 20 months completed the development of the ancient temple which stands on the western bank of the Ganga. The scope of work included expansion and beautification of the temple spread across 11.6 acres (30,000 sq metres), the redevelopment of the entire stretch from the temple to the Ganga, and building upgraded amenities for pilgrims.

Elaborating on this particular project, Mr Patel said, ”It was altogether a different experience. We were awarded the project in January 2020. We started working in February 2020 and in March 2020, the corona pandemic put everything on hold. More importantly, the location was in the heart of the city and we were allowed to take materials only between 12 and 4 in the night. Almost all local authorities and others concerned had given up. However, despite these adversities, to everyone’s surprise we completed the project on time and to their total satisfaction, and have become the talk of the town. I heartily congratulate my entire team for this great achievement.”

STRESS ON TECH

On the importance of using the latest technology in construction, Mr Patel said, “It is the need of the hour. It is just not possible to get good quality, coupled with a time deadline, without using modern technology. For example, we have recently invested Rs 105 crore in setting up a state-of-the-art precast plant spread over 60 acres near Sanand, Ahmedabad, with an initial per annum capacity to produce one million Sq.Ft, expandable to 6 million million Sq.Ft.”

The ultra-modern plant was procured from M/s Elematic of the Finland, the global leader in precast production technology for the last six decades. “This has altogether changed our dynamics of executing projects,” said Sagar Patel, Executive Director and a B.E. in civil engineering, who oversees work at the precast plant, including reconciliation of individual projects and a complete audit on a quarterly basis.

Mr Sagar Patel pointed out, “A precast RCC structure is 10-12 per cent costlier than the conventional method. However, in terms of quality, it is far superior and saves a lot of time as well. Seen in totality, the cost increase is negligible and the client would not mind seeing its important benefits. For example, for completing 10 lakh sq ft of RCC construction via the conventional method, you need 2,000 workers, whereas with the help of a precast plant you need only 150 people to do the same work. The difference is huge – you can do both erection and production simultaneously. It’s a continuous process with great advantages.”

He added, “In India, currently there are hardly 20 such precast plants in operation for captive use. Undoubtedly, precast technology will be a necessity in the coming years because the quality of skills is decreasing day-byday. Hence, if India has to grow exponentially, it must go for the latest technology, which is the only answer.”

PPL has many firsts to its credit in innovation, compared to many of its peers. For instance, it was the first to bring tower cranes for construction work in Gujarat. Mr Patel firmly believes that “If you are serious in achieving 25-30 per cent annual growth, it is necessary to invest at least 3-4 per cent of your revenue on capex every year. This has been my experience and the practice my company is pursuing for the last several years.”

Manpower constraint is an area of concern where Mr Patel feels that “in general, I see a lot of decline in sincerity, dedication and commitment of technical personnel, in addition to their availability. Again, to a major extent, the answer to this problem is mechanisation. Honestly, we are not left with any other workable options. On one hand, overall volumes are going up. Simultaneously, the expectations from clients are also increasing equally. Under the circumstances, we need to gear up by using the latest machinery.”

CENTRAL VISTA PROJECT

The Government of India’s ambitious project, titled ‘Project of National Importance’, aims to redevelop a 3.2 km stretch called the Central Vista that lies at the heart of Lutyens’ Delhi built by the British in the 1930s. The total project cost is Rs 20,000 crore of which work to the tune of Rs 5,000 crore work has been announced so far. PPL intends to continue actively participating in the CVP and is keen on exploring the different business opportunities arising therein.

FINANCIALS

The company achieved revenues of Rs 1,241 crore in FY21 and a net profit of Rs 81 crore. In the first half of the current fiscal, it has reported Rs 708 crore in revenues with a net profit of Rs 61.72 crore, against Rs 350 crore and Rs 12.19 crore during the same period in the previous year, translating into an EPS of Rs 17.13 on equity capital of Rs 36 crore for shares of a face value of Rs 10.

The company has performed impressively during the last 5 years. Its revenue from operations has grown at a 32.01% CAGR, EBIDTA at 19.58% and PAT at 18.21% during this period. Its longterm and short-term debt remains at Rs 23.10 crore and Rs 162.35 crore respectively as of September 2021. It plans to repay about Rs 15 crore in due course and gradually thereafter. The promoter group currently holds 69.89 per cent of the equity as on September 2021.

The company‘s credit rating status is CARE A+ stable and CARE A1+ and it enjoys a total credit facility of Rs 1,047 crore, of which the actual utilization is Rs 563 crore.

Since the break out of the Covid pandemic, the government has relaxed the norms for submission of bank guarantees. This has benefited the company. Moreover, due to an impressive credit rating, the company’s average cost of funds is also low at 6.5 per cent per annum. Overall, this helps PPL in containing credit requirements and finance cost, despite an increase in the volume of work.

BRIGHT HORIZON

Commenting on the business outlook in general, Mr Patel said, “The enquiry pace has gone up substantially for quite some time and I am bullish and see a lot of new opportunities coming up. But our company is not too inclined to bid aggressively everywhere. We are quite selective and evaluate properly on a project-to-project basis before participating. Our current bid pipeline is around Rs 3,000 crore and we are very positive about bagging some of these projects.

Furthermore, Mr Patel revealed,”The government’s push to bolster growth in the construction sector is commendable. High-speed bullet trains and metro rail, construction of the Delhi-Mumbai industrial corridor, hospitals, 100 new airports by 2024, the Pradhan Mantri Awas Yojana (PMAY) programme, extension of tax holidays to increase the supply of affordable housing units, a national infrastructure pipeline earmarking 7,400 projects of national importance, and allocation of Rs 6,450 crore for the Smart Cities mission have widened the prospects for our sector.

“More importantly, we have also started experiencing the comeback of private sector investments, especially in industrial and residential projects, in addition to institutional projects like construction of buildings for hospitals and healthcare services, educational institutes, malls, hospitality services and corporate offices. These are the real bright spots for leading players like us,” averred Mr Patel with optimism.

In his concluding remarks, Mr Patel said, “Our business model enables us to de-risk the order book by diversifying across solutions and segments. With a holistic experience in the construction industry, we are a one-stop solution provider for all building construction needs and are optimizing our project mix. We have reached the stage where our clients just have to give us possession of cleartitle land and we will do the rest. We have cultivated immense capabilities.”

PPL is well-equipped with all the necessary physical infrastructure, experienced manpower and proven capabilities. Considering the performance in the first half of the current fiscal and the projects very near to completion, it appears that PPL will achieve growth of at least 25-30 per cent for the full year. Likewise, it is sure that from the next financial year, the company will further accelerate its pace of growth to reach an ambitious mark of Rs 5,000 crore in revenues by 2025, taking the company truly into the big league.