- Yogesh Kumar Jain, Managing Director, PNC Infratech Ltd
Think globally and act locally - that´s PNC Infratech Ltd´s philosophy. The Agra-based company is an expert in the execution of major infrastructure projects, including highways, bridges, flyovers, power transmission lines, airport runways, industrial area development and other infrastructure activities. Offering end-to-end infrastructure implementation solutions including EPC services on a fixed-sum turnkey basis as well as on an item rate basis, PNC Infratech Ltd also executes and implements projects on DBFOT, OMT and other PPP formats. Having recently raised around Rs 480 crore through its IPO, Yogesh Kumar Jain, Managing Director, PNC Infratech Ltd, shares more on the IPO and the company´s strategies with CW.
With the IPO, which projects will see an infusion of funds?
The details of gross proceeds of the IPO amounting to Rs 488 crore are as follows: Rs 53.7 crore goes to offer for sale; Rs 150 crore for funding working capital requirements; Rs 65 crore for investment in our subsidiary, PNC Raebareli Highways Pvt Ltd for part-financing our Raebareli-Jaunpur annuity project; Rs 85 crore for investment in capital equipment; Rs 35 crore for prepayment of certain indebtedness; Rs 81 crore for general corporate purposes; and Rs 18.4 crore towards offer expenses.
Is IPO the way forward for contracting companies in India, and why?
IPOs would certainly help emerging construction companies provide additional liquidity for augmenting resources for accelerated delivery of projects and expansion of business activities. However, with the experience of successful closure of our IPO recently, we believe investors expect the money raised through IPOs to be utilised in a positive manner to stimulate growth rather than repair the already strained balance sheets of companies.
Tell us more about your projects.
Our company has successfully completed 42 major projects and is currently executing 23 projects; the majority are from the road and airport runway sectors. Our core specialisation and focus will continue to be the roads and highway sector, including bridges, flyovers and airport runways. We are already executing one project of railway track construction for a section of the Eastern Dedicated Freight Corridor as a lead member in JV with BF Infrastructure and we look forward to expanding further in this sector. We have completed a comprehensive redevelopment of the existing industrial area in Narela in Delhi and are currently providing O&M services for the same on annuity basis. This is another area where we are looking at the right avenues for expansion. In both rail freight corridor construction and industrial area development, we find significant synergy with our core areas of expertise.
Do you own your own fleet of equipment?
We own a huge fleet of construction equipment and believe our strategic investment in equipment and fixed assets is an advantage that enables us to rapidly mobilise equipment to project sites as needs arise. This asset base helps deliver complex construction projects in a time-bound manner. The right balance and optimal mix between owning and outsourcing equipment including deployment through subcontractors is a key success factor in construction.
Introduce us to the challenges faced in project execution. How do you overcome these?
Major challenges faced by the roads sector in general include ambitious timelines for project implementation; overlooking ground realities by project sponsors; prolonged delay in land acquisition; environmental and forest clearances; approvals for RoB or RuBs; shifting of utilities; and lack of preparedness and adequate planning before award and execution. Most of these challenges are common for both EPC and BOT projects. In the case of BOT, in projects seeing high economic growth from 2005 to 2010, the majority of players became unduly exuberant, leading to aggressive pitching by some players with highly unworkable bids. Aggressive bidding, delays in implementation, consequent time and cost overruns, steep increase in input costs and decline in traffic revenues owing to economic slowdown snowballed into a crisis. Our company always plans resource deployment and project implementation schedules in a way that the effects of delays are minimal. We believe in expediting implementation in both BOT and EPC formats amid challenging situations to mitigate financial implications owing to inflation in input costs.
Another significant competency is end-to-end construction capabilities in-house, from mining to the final product stage. This gives us great control over execution, quality, time and cost even in challenging situations and times. Further, we undertake construction activities of our entire fund-based projects (BOT-Toll and BOT-Annuity) on our own, making us the least dependent on third parties for implementation and delivery.
How do you view the government´s exit policy for developers in roads projects?
It´s an encouraging measure by the government to reawaken the sector and unleash its potential. Increased liquidity will help many stressed road developers reduce their debt and increase availability of funds to invest in new projects.
You have plans to expand the company´s concession portfolio and look for suitable avenues in the DBFOT space.....
Through our subsidiaries and associate or JV companies, we have a portfolio of eight projects in the DBFOT or OMT space, of which the following six projects are already in operation:
The remaining two projects - Bareilly-Almora section of Uttar Pradesh SH-47 (100 per cent owned BOT toll project). and Raebareli-Jaunpur section of NH-231 (100 per cent owned BOT annuity project) - are in advanced stages of construction. We are looking at the right opportunities in the DBFOT space for active pitching, including projects on hybrid annuity model that will be launched soon. DBFOT projects will certainly have a positive impact on our company´s growth in both short term - in the form of more EPC contracts - and long term, in the form of sustained toll or annuity revenues.
With the Ministry of Road Transport and Highways (MoRTH) shifting its focus towards EPC projects, how do you view the company´s growth prospects next fiscal?
We could see very promising growth prospects in coming years. Given the challenges and constraints faced by many BOT projects in the sector, the decision of MoRTH to prefer and promote the EPC model for road construction is expected to accelerate development. Unlike BOT projects, the investment requirements for EPC are minimal and the majority of road construction firms will be in a position to meet their working capital and other financial needs without difficulty. Further, timely approvals and release of payments by project sponsors will help ease cash flow requirements of EPC projects.
Year of establishment: PNC Construction Co Pvt Ltd-1999; converted to Public Ltd Co-2001; name changed to PNC Infratech Ltd-2007.
Top management: Pradeep Kumar Jain, Chairman & Managing Director; Chakresh Kumar Jain, Managing Director; Yogesh Kumar Jain, Managing Director; Naveen Kumar Jain, Whole Time Director; Shri Anil Kumar Rao, Whole Time Director (Technical).
Areas of operations: New Delhi, Uttar Pradesh
No. of employees: Over 3,700
Completed projects: 42 projects
Ongoing projects: EPC-23; BOT/OMT-Eight (Six in operation)
Upcoming projects: Runway at Kanpur Air Force Station; also has bid for quite a few road projects
Turnover: Rs.1,860 crore (FY15); `1,360 crore (FY14) û 37 per cent growth Order book: Rs.78,000 million, as on March 31, 2015 (Total value of ongoing contracts including Escalation)
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