EPC to regain momentum An analysis of Top EPC firms in India

EPC business has been able to clinch new height in the infrastructure building. Here, we present a few big names from this growing sector
Engineering, Procurement and Construction (EPC) is a common form of contracting arrangement within the construction industry. With the increasing need for accelerating infrastructure development to fuel economic growth, the Indian EPC sector holds tremendous opportunity. Today, with its rising prominence and changing dynamics, the sector has established itself having over 150 participants and a multitude of stakeholders.
With the rapid urbanisation and industrialisation, the nation anticipates a renaissance in its infrastructure building. The Government of India plans to spend $ 1 trillion during 12th Five Year Plan commencing this year and it is estimated that almost one-third of this amount will be spend in EPC sector.
During the last few years, with the introduction of PPP in the infrastructure sector, the focus was shifted to the project execution through PPP. However, the things are changing once again – the Government started giving more emphasis on EPC. In a recent attempt, the government has expressed its plans to award road construction projects of 4,000 km length in the present financial year via EPC mode.
Here, we’ll discuss about the performance of few big Indian players in the EPC segment. The sequence of their appearance hereunder doesn’t represent any ranking; it’s purely on alphabetical order.
Gammon IndiaFrom the Gateway of India to India’s first indigenously designed fast breeder reactor, Gammon has become one of the world’s leading construction companies, diversified into areas including infrastructure management, transmission lines and power sector. The company makes concrete contributions by designing and constructing bridges, ports, thermal and nuclear power station, dams, high-rise structures, international airports, cross country water, oil and gas pipelines, highways, chemical and fertiliser complexes and environmental structures.
Gammon India has recorded a net loss of Rs 19.6 crore in the quarter ended June 2012 as against profit of Rs 28.9 crore in a year ago period. Net sales declined 9.2 per cent to Rs 1,262 crore from Rs 1,390 crore during the same period. The company has also reported a foreign exchange loss of Rs 1.38 crore in the first quarter of FY13. However, the company announced a strong order book of around Rs 15,000 crore.
GMR Infrastructure GMR Infrastructure is one of the fastest growing infrastructure enterprises in the country with interests in airports, energy, highways and urban infrastructure sectors. Employing the Public Private Partnership model, the Group has successfully implemented several iconic infrastructure projects in India. The Group also has a global presence with infrastructure operating assets and projects in several countries including Turkey, South Africa, Indonesia, Singapore and the Maldives.
GMR has 16 power generation assets of which 6 are operational and 10 are under various stages of implementation and 10 road assets, of which 6 are operational and 4 are under construction. In the airports sector, it has developed and commissioned the Greenfield International Airport at Hyderabad. The company, besides operating the existing Delhi International Airport, has also built a brand new integrated terminal T3 which was commissioned before Commonwealth Games in October 2010. The company has upgraded and is operating the Istanbul Sabiha Gökçen International Airport and has also acquired the Ibrahim Nasir International Airport, Male.
GMR Infrastructure reported a consolidated net loss of Rs 94 crore for the quarter ended June 30, 2012, mainly on account of losses at DIAL and one-time tax asset reversal at GVPGL (Vemagiri power plant). Gross revenues of the company rose to Rs 2,562 crore in the quarter under review from Rs 2,090 crore in the same quarter last year. According to the company, the losses at DIAL have shown a significant downturn post sanction of ADF (Airport Development Fee) and revision of tariff rates.
Recently, it has been reported that the GMR would like to take over the equity stakes of its joint venture partners German airport giant Fraport and Eraman Malaysia who want to pull out of Delhi International Airport Ltd (DIAL) – the company that runs Delhi airport. DIAL is a joint venture consortium in which GMR Group has about 54 per cent stake, the state-owned Airports Authority of India (AAI) has 26 per cent, and Fraport and Malaysian airport company Eraman Malaysia – through Malaysia Airports (Mauritius) Pvt Ltd – have 10 per cent each. Though, there are few other minor investors, GMR is the major member of the consortium whereas Fraport AG is the airport operator and Eraman Malaysia is the retail advisor.
GVKGVK is a leading Indian conglomerate with diversified interests across various sectors including energy, resources, airports, transportation, hospitality and life sciences. It has taken pioneering initiatives across many sectors that it operates in and has overcome every challenge to provide reliable infrastructure to contribute to the country’s growth. GVK’s collaboration with global infrastructure leaders has brought international expertise to India reflecting excellence and advancement in its endeavours. GVK would develop two airports in Indonesia. Having already invested over $ 3.3 billion, GVK has projects worth over another $6.6 billion in the pipeline in India.
Recently, GVK through its subsidiary Hancock Coal Infrastructure Pty. Ltd signed a construction contract with leading international construction major, Samsung C&T Corporation, a subsidiary of the Korean conglomerate Samsung and Australian based Smithbridge Group Pty. Ltd to build a 60  mtpa T3 Port Terminal  Port for the Alpha Coal project at Abbot Point, North Queensland Australia. Announced as one of the key projects during  the visit of  Hon Julia Gillard MP, Prime Minister of Australia to New Delhi,  the award of construction contract comes after GVK received all the Tier 1 approvals for the Alpha Project. This is a ‘pit-to-port’ project being built at a cost of US $10 billion. The first phase of the project involves a 30 mtpa mine, a 500 km railway line and a 60 mtpa port. The other construction contracts for the project such as mine infrastructure, the wash plant and rail will be announced in the next few months.
Hindustan Construction CompanyHCC is a business group of global scale developing and building responsible infrastructure through next practices. With an engineering heritage of nearly 100 years, HCC has executed a majority of India’s landmark infrastructure projects, having constructed 25 per cent of India’s hydel power generation and over 50 per cent of India’s Nuclear Power generation capacities, over 3,100 lane km of Expressways and Highways, more than 200 km of complex Tunneling and over 324 Bridges. HCC’s landmark projects include the Bandra-Worli Sea Link, Mumbai – India’s first and longest open sea cable-stayed bridge; the Calcutta Metro, Farraka Barrage and India’s largest nuclear power plant at Kudankulam – Tamil Nadu, to name a few. Today, HCC Ltd. serves the infrastructure sectors of Transportation, Power and Water. The HCC Group, with a group turnover of Rs 8,157 Cr (US $ 1.603 billion), comprises of HCC Ltd, HCC Infrastructure Co. Ltd, HCC Real Estate Ltd, Lavasa Corporation Ltd and Steiner AG in Switzerland.
HCC has registered a standalone turnover of Rs 969.4 crore in the first quarter of financial year 2012-13 compared to Rs 1,059.6 crore in the corresponding period last year. HCC audited standalone financial results highlights for the quarter ended June 30, 2012: Turnover at Rs 969.4 crore versus Rs 1,059.6 crore same period last year. Operating profit at Rs 69.1 crore. Net loss at Rs 30.9 crore. Order book at Rs 15,020 crore; additionally L1 contracts worth Rs 3,439 crore. The Corporate Debt Restructuring EG has approved the restructuring of HCC’s debt of approximately Rs 3,200 crore.
The timely restructuring of HCC debt is expected to improve cash flow and provide room for operating during this challenging period.
Commenting on the performance, Praveen Sood, Group Chief Finance Officer, HCC said, “Our quarterly performance reflects the stress faced by the infrastructure sector. Delays in decision making and in environmental clearances have caused a sharp drop in the visible order book for the sector. HCC is addressing these challenges through comprehensive cost and claims management in addition to faster execution, the effects of which should bear fruit soon. Additionally, recent government announcements give us reason to be optimistic on faster clearances and new projects announcements.”
HCC has received two major orders worth Rs 1,534 crore. The first order from IRCON International for contruction of a 10.3 tunnel on the Uhampur Srinagar Baramulla railway line in Jammu & Kashmir. The value of the contract is Rs 884 crore. The project has to be completed in 60 months.
The second order, with a value of Rs 650 crore, is an EPC Contract from HCC Concessions Ltd, subsidiary of Hindustan Construction Company Ltd in respect of the contract for six laning of a section of NH-8 between Vadodara and Surat, which was awarded to HCC Concessions Ltd by National Highways Authority of India.
Lanco InfratechLanco Infratech Limited has been driving growth in the domains of EPC, power, solar, natural resources and infrastructure over the last two-and-a-half decades. Its continuous focus on innovation and expansion together with its commitment to quality and excellence has contributed significantly to the progress that the company has made over a short span of time. The 25-year-old LANCO group is, today, uniquely poised to attain leadership position in its areas of operation.
Lanco Infratech Ltd on a consolidated basis registered gross revenue growth (before elimination) of 36 per cent up from Rs 11,305 crore in the previous year to Rs 15,398 crore in FY12. This growth can be attributed to the development in EPC and Resources business. EPC revenue grew primarily on account of Babandh, Vidarbha, Moser Baer, Amarkantak (Unit III & IV) and Kondapalli (Unit III) power projects. PAT including profit eliminated witnessed a decrease of 27.6 per cent for the full year from Rs 945 crore to Rs 684 crore in FY12. The company achieved a growth of 13 per cent in Cash profit for the full year from Rs 1,218 crore to Rs 1,378 crore. The company operates in a capital intensive industry where there is constant need for both debt and equity to maintain the pace of execution of on-going projects as well as for the future projects. The company is taking active steps to raise capital to help maintain the growth momentum as well as to handle the various issues that the entire power sector is facing.
During the year, Lanco’s EPC segment entered into new arenas of operation namely: acquisition of maiden international EPC order in Iraq worth Rs 365.30 crore for AKAZ Power Plant of capacity 2 x 125 MW in Al-Anbar Province. Construction of Metro Rail for Chennai and Delhi Metro. 3 Transmission line projects for Power Grid Corporation of India Limited. As on March 31, 2012, the EPC order book was Rs 26,554 crore with power projects contributing a majority to the order book. During the year, the 2 x 600 MW Anpara Thermal Power Project was completed by EPC and is operational now.
Larsen & TourboLarsen & Toubro is a US$ 12.8 billion technology, engineering, construction, manufacturing and financial services conglomerate, with global operations. It is one of the largest companies in India’s private sector.
L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its global footprint, with offices and manufacturing facilities in multiple countries. The company’s businesses are supported by a wide marketing and distribution network, and have established a reputation for strong customer support.
In September, the L&T Construction’s Buildings and Factories IC (B&F IC) has bagged new orders worth Rs 1,439 crore from leading developers for the design and construction of major residential building projects in the National Capital Region, Delhi. L&T Construction’s B&F IC has been offering pioneering solutions in residential buildings that cover design and construction of large townships and high rise apartments.
The division has bagged new orders worth Rs 1,650 crore for the construction of multi-storeyed residential towers in Mumbai from a leading developer. New orders have also been secured for design and construction of a hospital building and additional works from ongoing projects across India. L&T Construction has also secured additional orders aggregating Rs 480 crore from various ongoing projects in the infrastructure IC and other business units.
Punj LloydPunj Lloyd is a diversified international conglomerate offering EPC services in Energy and Infrastructure along with engineering and manufacturing capabilities in the Defence sector. The second largest engineering company in India, Punj Lloyd has operations spread across 21 countries, a mix across the Middle East, Africa, the Caspian, Europe, Asia Pacific and South Asia.
Punj Lloyd Group’s consolidate revenues for Q1 FY2013 stood at Rs 2,776 crore as compared to Rs 2,263 crore during Q1 FY2012. EBIDTA stood at Rs 288 crore compared to Rs 199 crore in Q1 FY2012. PBT is at Rs 15 crore compared to Rs 9 crore in Q1 FY2012. PAT at Rs 15 crore compared to Rs 13 crore in Q1 FY2012 (as tax provision of Rs 30 crores has been made).
As on August 07, 2012, Punj Lloyd Group has an order backlog of Rs 26,206 crore. This is the total value of unexecuted orders as on June 30, 2012, and new orders received after that day. Key developments during the quarter: EPC of Qatar’s first polysilicon plant (Phase 2) from Qatar Solar Technologies (QSTEC). Main plant air-conditioning and ventilation package for Rajasthan Atomic Power Project 7 and 8.
Commenting on the company’s performance for Q1 FY2013, Atul Punj, Chairman, Punj Lloyd Group, said, “While the macro environment continues to present challenges, we see a gradual improvement. Large capex spends are being embarked upon by oil & gas majors and we expect volume of work to increase in the Middle East. The pace of execution too has been encouraging. The developments in Libya, after the elections, have been positive and we are happy to commence work of our upstream operations. High interest costs continue to be a concern for the industry. We are seized of our high cost of borrowings and are intensely exploring opportunities to align our debt and revenue profile. This will both reduce our interest costs and minimise exchange rate risk. I look forward to improved performance going forward.”

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