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Construction : Spotlight | April 2016 | Source : CW-India

Ace of Ports

Whether it is the economic scenario or weak infrastructure spending, ITD Cementation has overcome every challenge and now views the ports sector as significant to its expansion and growth.

When Indian infrastructure reported one of its weakest years in 2014, this company reported a credible performance. What´s more, it reported the highest order book accretion in its existence that year. Little wonder then, that ITD Cementation India was awarded by CW for being one of India´s Top Challengers for two consecutive years (2014 and 2015).

Current scenario
With an improvement in order inflows and a strong order book, the company´s revenue is expected to grow by 15-20 per cent in CY16.

Commenting on the company´s performance from January to December 2015, Adun Saraban, Managing Director, ITD Cementation India Ltd (ITD) (full interview on following page), says ¨We are above Rs 3,000 crore this year compared to last year´s Rs 1,700 crore, which is a doubled growth. The work in hand position is more than Rs 6,000 crore compared to last year´s December, which was about Rs 4,700 crore, ie, a growth of 26 per cent, and with L1 in the pipeline for big ticket projects such as the Mumbai Metro and Udangudi Power Project in the South, our shares are about Rs 2,500 crore. So, it´s a total of Rs 8,500 crore in the first quarter itself.¨ Now, that´s growth!

Industry position
With an order book of Rs 57,922 million as on September 30, 2015, executable over a period of 30 months, this is the only construction company with a sustained presence in India with an MNC parentage. With a pedigree of strong management systems and recall among clients, ITD Cementation India boasts an employee strength of 1,809.

A subsidiary of Thailand-based
Italian-Thai Development Public Company Ltd, the company is engaged in the construction of marine works, highways and bridges, metros, airports, hydro-tunnelling, dams and canals, water and sewage, industrial structures and specialist foundation engineering projects. It enjoys a leadership position in marine construction, foundation and specialist works and significant presence in MRTS; hydro, dams, tunnels, irrigation; and transportation segments. Moreover, it is one of the few construction companies to conform to ISO standards for quality management systems, occupational health and safety management system, and environmental management system.

Priority projects
The construction of maritime structures and ports has contributed to the company´s growth in the past couple of years and is expected to play a major role for the next two, considering the proposed expansion of a few ports as well as some greenfield projects on the anvil. As S Ramnath, CFO, ITD, says, ¨For the next two years, we expect ports to continue to play a significant role in our expansion plans; as we are a leader in that area, we expect a fair share of expansion will fall in our lap.¨ Saraban sees this being followed by MRT such as the Mumbai Metro or Delhi Metro, categorising these as ¨high-value projects¨. While for marine projects, he is confident that the company will participate in all tenders, for projects such as the underground metro in Mumbai and others, he says, ¨It depends on resources. We may participate for maybe two or three projects at the most; otherwise it is a huge investment.¨ The third high-growth segment for the company is water. Saraban avers, ¨We might tie-up with a potential technical party for this; there are huge opportunities.¨ And, though there is good opportunity for building roads and flyovers, the company plans to work selectively.

Plans to collaborate
ITD Cem is looking for constructive collaborations with larger players to be selective and bid for projects where the competitive intensity will be lower. To this, Ramnath adds, ¨We are looking for large and international players who want to invest. Whether it is the coastal highway, Mumbai´s elevated metro or the trans-harbour link, these are projects we are looking at with interest.¨ He agrees that the actual progress of these projects in Mumbai have been lagging way behind. Apart from these, the company is looking to form constructive collaborations to take up water projects, which is expected to be a major activity in India. ¨Access to clean water resources is going to be the big area for us and we have to see how to build that up,¨ affirms Ramnath. And, the ticket size of projects the company will opt for, is expected to go up. These opportunities are expected to take ITD Cem to the second level of growth.

Future glimpse
ITD Cem´s mission is set: To be India´s leading construction company in customer choice, quality and safety. And, with the focused aim of having a satisfied client, strong and proactive workforce, and quality product finished on time and to budget, there is no looking back for this company.

¨From a Rs 3,000-3,500 crore company, we are now aiming to grow to the next level of a Rs 5,000 crore company,¨ says Ramnath. And addressing the company´s immediate growth plans, Saraban says, ¨We have set the target for 2016 at about 16 per cent. In fact, this will be a good year for our company because we have an order book of Rs 6,000 crore. Of this, 90 per cent is good; it is the 10 per cent of challenging projects that has to go first. We are hoping for a successful 2016-17.¨ CW wishes the company the best of luck!

Key clientele
Government: DMRC, RVNL, Kolkata Metro Rail Corporation, Bangalore Metro Rail Corporation, NHAI, Mazagaon Dock Ltd, Garden Reach Ship Builders, AAI, Indian Railways, Government of Andhra Pradesh, Rites Ltd, and CPWD, Noida.

Private: Reliance-ADAG Group, IHI Corporation, Nhava Sheva Gateway Terminal, Tata Power, PSA (Singapore), Adani Group, Jindal Steel, Samsung, SICAL Iron Ore Terminal, L&T, Jindal Power, Mundra Port Trust, Ennore Port Ltd, Gangavaram Port Ltd, Marg Ltd, and ABG Shipyard, etc.

Analyst zone
Varun Awtani, Analyst-Corporate Ratings, India Ratings & Research û a Fitch Group Company, shares his analysis on ITD Cementation India´s growth, in conversation with SHRIYAL SETHUMADHAVAN.

In the current scenario, ITD Cementation is among the better performing companies. The company´s revenue has grown in double-digits in 2015. If we look at the listed companies in this segment, most of them are facing issues such as project delays, cost overruns, etc, with majority of the companies being highly leveraged. ITD Cementation has also faced similar issues, which impacted its margins. However, one would probably see an improvement in margins over the next couple of quarters, as most of the legacy orders will move out of the order book.

Also, the company´s order book has grown substantially over the last 12-18 months and there has been a change in the kind of orders they are bidding for. From a mix of marine, hydro, road, MRTS and other orders, half their orders now come from the marine segment, and the company is totally out of roads.

Last year, the company´s cash flows were stretched. But, with the legacy orders moving out, the situation is likely to improve. Nonetheless, the kind of improvement would depend on the working capital requirement of incremental orders along with execution.

A differentiator in this company´s case is the competitive advantage it enjoys when bidding or participating in complex projects. In case of complex projects, the Indian entity has participated in projects along with its parent, through JVs. Execution of complex projects in the JVs has benefited ITD, in terms of meeting the eligibility criteria for new projects of similar types.

Strategies to build a stronger organisation

  • A progressive deleverage of balance sheet.
  • A focus on large Indian projects.
  • A diversification into new geographies through piling, foundation engineering and maritime structures.
  • Strengthening of financial capabilities and net worth with the objective to enhance the company´s project bidding appetite.
  • Focus on bagging large, complex projects with lower competition and attractive margins.
  • An expansion into construction segments with significant potential (maritime structures, transportation and urban infrastructure).
  • Improving equipment uptime and execution productivity.
  • Skilling and re-skilling of human resources with the objective to enrich intellectual capital and project productivity.
  • Forging JVs and strategic partnerships with leading global infrastructure companies with the objective to assimilate competencies that make it possible to bid for prestigious projects.
  • Continued enrichment of project execution capabilities to complete and monetise projects quicker, strengthening the company´s cash flows.

Equipment and manpower base

  • Strong and experienced work force of 1,809 employees.
  • Additionally, around 3,017 labour workforce.
  • Strong equipment base to execute order book.
Order Book: Sector Breakup

As on September 30, 2015

Size No. (major) %
Hydro/dams/tunnels/irrigation 9,415 8 16
Urban infrastructure/MRTS 6,431 8 11
Marine 30,438 9 53
Specialist works 1,678 15 3
Airport 12 1 -
Industrial 824 3 2
Buildings 3,150 3 5
Transportation 5,974 6 10
Total 57,922* 53

Excluding L1 projects*

Key Financials

Standalone                                                                Rs.million

9M September 2015 2014 2013
Turnover 17,454 13,524 12,248
PBIDT* (131) 1,773 1,584
PBT* (1,209) 280 93
PAT (894) 194 93
Cash profit (711) 488 428
EPS (5.76) 15.14 8.08
Net worth 4,782 5,678 4,084
DEBTS 5,656 6,708 6,950
Dividend% - - 10%

*After exceptional loss of `1,240 million from NHAI OTS (considered in quarter March 2015)

Key Financials

Consolidated                                                                 Rs.million

9M September 2015 2014 2013
Turnover 20,060 17,124 15,784
PBIDT* 175 2,051 1,965
PBT* (1,178) 269 239
PAT (894) 194 93
Cash profit (601) 621 535
EPS (5.76) 15.14 8.08
Net worth 4,782 5,678 4,084
DEBTS 6,762 7,653 7,695
*After exceptional loss of Rs.1,240 million from NHAI OTS (considered in quarter March 2015)

Equipment Base

Equipment No. of
Hydraulic and rotatory rigs 38
Cranes 34
Excavators 39
Crushers 3
Batching plants 34
Sensor pavers 8
Hot mix plants 4
Launching segment girder 3
TBM (including micro tunnelling machines) 8
Cantilever gantry 6
Hydraulic RCD rig 1

- SHRIYAL SETHUMADHAVAN and Seraphina D´souza

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