‘We are bullish about the Indian infrastructure play’

Kridhan Infra Limited is the new avatar of Readymade Steel India Limited. RMS has executed prestigious projects like Mumbai Mono Rail, Sahar Elevated Access Road, Nashik Elevated Corridor, Palais Royale, Mumbai, Phoenix market City, Mumbai, World Crest, Mumbai, Orchid Crown, Mumbai.

Anil Agrawal, Managing Director – Kridhan Infra told Sandeep Menezes that he was sure the new government understands that in years ahead infrastructure will be a catalyst to the growth of Indian economy.

Anil Agrawal

Anil Agrawal

Excerpts from the interview:

Tell us about the various business segments contributing to your current revenues? Going forward, do you foresee any significant shift in revenue mix?

Around 10 to 15 per cent of our revenues come from Indian operations while the rest is from our global operation which is primarily Singapore.

Going forward, we are looking forward to India contributing an additional 50 per cent in times to come. To achieve this, we are changing our product mix in the Indian cycle. In India, our product mix is mainly steel based while globally – it is foundation engineering. Therefore, we are looking at doing more foundation engineering work in India.

Therefore our product mix will change. Though we are involved in all projects, our offerings are very low volume. By changing the size and offerings we offer – I intend to scale it up.

In near future, are you intending to target any specific infrastructure segment?

We are looking at metro’s and tall buildings wherein our company is already present. If I do steel solutions for a monorail project – my contract value will be around Rs 10 crore, while if I do the piling work then the contract value will be at least Rs 150 crore. Therefore we are adding to the bouquet of facilities that we can offer.

Therefore by adding pile foundation work, I am further strengthening the bouquet of services offered to the client – the client remains the same but the offering increases.

We want to be an integrated infrastructure solutions player. We have been the pioneers to bring readymade steel to the country when nobody had heard how this would be possible. We also see lots of scope for growth in the ground engineering segment.

The government wants private companies to contribute half of the $1 trillion investment target over five years to 2017 to alleviate clogged-up roads and improve infrastructure. How realistic is this?

It will take some time for India to deliver it. But the way India is moving now – I don’t think that it is totally unrealistic. The private sector does contribute everywhere – the numbers are not real everywhere. Therefore maybe the next one year will decide how realistically this can be achieved.

Land acquisition has been a major hurdle in highway development across India. How can this problem be tackled?

Clearances have been a major issue in the past few years why projects were getting stuck. Most of the infrastructure companies started owing assets of roads having huge debts – but because it was stuck – their revenue was less. As you rightly said right-of-way and local issues are a reason. I think the government is working now to resolve these issues and we should see some good results.

Tell us about the various reasons for project cost escalations especially in roads and highway construction?

Time delays, clearances, design approvals etc are the major reasons for cost escalations in infrastructure development projects in India.

Government entities, PSUs award contracts on L1 basis. Critics claim L1 kills quality. Comment.

Nowadays, I don’t think it is always awarded on L1 basis. They have two phase process wherein they first evaluate the technical credentials of contractors, while the second phase is on the price.

I think when the government authorities check out the technical credentials of contractors – they are sure that these contractors can deliver and then only the price bid is opened. Things are changing.

In Singapore, they have a different system – it is not always the L1 which bags orders. They have a composite grading system which includes safety because in India no one talks about safety at all. They have ratings based on accidents in the last few years that happen in companies.

It also looks at financial strength of the company because one may take the contract but not be able to complete it therefore the government will not give it to you. If India ultimately evolves into using such grading system, it will help everyone.

Since the new government has come in with absolute majority, how do you foresee the infrastructure scenario evolving?

We are very bullish about the Indian infrastructure play. We are sure that the new government understands that in the years ahead infrastructure will be a catalyst to the growth of Indian economy. Unless, the government boost the infrastructure spend and create confidence in the minds of people – that clearances will not be an issue and timely completion is the target. The economy cannot strengthen because it is a major pillar for the Indian economy.

Which infrastructure segments will move faster than the others?

I think roads, bridges, highways and metros because public transportation infrastructure is something that we all require badly.

As you are also active in the real estate segment, going forward do you feel most development will happen in tier two and three cities vis-à-vis metros?

I don’t think that the tier one cities are saturated but there has been lots of oversupply that has happened. It will take at least two to three years for the oversupply to be consumed.

Also because of growth in tier two cities and improvements in facilities out there, I feel that movement into tier one cities has somewhat reduced. Lifestyle has become somewhat comfortable in tier two and tier three cities. Therefore why would one come to Mumbai leaving a city like Pune?

Information technology has changed the way to do business. You can be in any part of the world and still do business – one need not be in Mumbai to do business. Therefore the need to be in a commercial capital or business center has changed.

Therefore the maximum growth in real estate is happening in tier two cities. Now even out there, an oversupply situation is happening.

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