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Construction : Cover Story | February 2018 | Source : CW-India

KNR CONSTRUCTIONS | Strong Execution

Owner of a large fleet of construction equipment, the company is known for its strong track record in execution, balance sheets, bidding prudence and asset-lightness.

With its EPC order book at around Rs 3,300 crore as of December 2017, the turnover of KNR Constructions (KNRCL) for FY2016-17 stood at Rs 1,541.11 crore, EBITDA at Rs 229.60 crore and PAT at Rs 168.20 crore.

Jalandhar Reddy, Executive Director, KNR Constructions, is projecting a turnover of approximately Rs 1,800 crore and EBITA of over 13 per cent for FY2017-18. CRISIL has also upgraded the company's ratings on bank facilities to CRISIL A+/Positive and short-term rating to CRISIL A1+.

Active in sectors such as roads and highways, irrigation and urban water infrastructure management, KNRCL's project execution strength lies primarily in road transportation engineering projects, such as construction and maintenance of roads, highways, flyovers and bridges. As Reddy says, (With 23 years of experience, we have completed 46 projects in time and executed 6,000 km of highways in 12 states. Moreover, the company has bagged an irrigation project worth Rs 884 crore in Telangana, where its execution portion is around Rs 560 crore. With an EPC order book of around Rs 3,300 crore, the company has also participated in three state HAM projects and three NHAI HAM projects in addition to the EPC projects, valued at Rs 4,000 crore, for which the bids are yet to be opened. (Hence, there is a lot of opportunity towards procurement of various resources,รท says Reddy.

KNR has a record of early completion and sustainable EBITDA margins, as well as ownership of a large fleet of sophisticated construction equipment and security of raw materials. To this, adds Reddy, (Our gross block is around Rs 680 crore. This year, we have budgetted Rs 135 crore towards capital investment for machinery and we will achieve our target. Cement and steel consumption is dependent on the nature of work, ie, bitumen road or concrete road. Normally, materials including aggregates, bitumen, steel and cement account for about 55-60 per cent. Further, he adds, (Subcontracting like bar-bending, transportation of materials, earthwork, etc, is only need-based and would not exceed 20 per cent.

Further, the company has a strong balance sheet and perhaps the best cash flow profile in the industry, which should enable it to fund equipment purchases as well as participate in HAM projects. It is known for its strong execution track record, balance sheet and bidding prudence as well as for being asset-light. As Reddy shares: (Our strong execution records are owing to ownership of equipment; minimal subcontracting, leading to greater control on project outcomes; and raw material security through ownership of mines or quarries for key raw materials.

The company does not face any challenges as (the execution and billing cycle is fast and corresponding realisation of bills is also prompt, except for some of the state projects, which take a little more time, says Reddy.
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