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Source-Business standard
Q&A: Ashok K Purwaha, CMD, EIL
'Our sectoral competence is of global capability'
Jyoti Mukul / New Delhi July 12, 2010, 0:32 IST
In 1965, when the government collaborated with Bechtel to establish Engineers India Ltd (EIL), it was embarking on one of the few such collaborations with Americans. Bechtel moved out in 1967 and EIL became fully government owned, filling the space for a specialised engineering and consultancy company across the entire hydrocarbon value chain. Now heading for a follow-on public issue, it is still one of its kind in India, claims its chairman and managing director, Ashok K Purwaha, in an interview with Jyoti Mukul. Edited excerpts.
Public issues of government companies have not done well in the recent past and the perception is that the issues are overpriced because of their small public float. What are your views?
Each case has to be looked according to a company’s strength. One like ours, with 45 years of experience in the hydrocarbon and metallurgical business, an extremely competent and knowledgeable workforce of 2,300 people, of which 80 per cent are highly trained technical people, has strong fundamentals. We have to our credit many big projects in refinery and aluminium sectors. Looking at India’s anticipated growth rate of 8-9 per cent, the energy sector is expected to boom. There will be development in refining, petrochemical, oil and gas sectors. And, lot of opportunity abroad.
The government will be disinvesting 10 per cent equity in the company from its existing 90.4 per cent holding. How will the issue be priced?
The price band will be decided by a group of ministers a day before the issue opens on July 27. We are a fundamentally strong engineering consultancy that has grown to take up lump sum turnkey (LSTK) projects. Last year, we did business of Rs 2,000 crore and made profit of Rs 440 crore. Our order book position as on March 31 was Rs 6,300 crore and since then we have added more projects, so our book is full for the next three to four years.
What opportunity is the company eyeing?
We are present in upstream, midstream and downstream sectors of the hydrocarbon sector, whether design of the well and process platform, shore connectivity, pipeline, refinery and petrochemicals. We will continue to be focused on this. We will also be looking at projects in the non-ferrous sector.
Are you planning to diversify?
We plan to get into city gas distribution and also provide a broad range of engineering consultancy and EPC (engineering, procurement and construction) services for gas-based fertiliser plants. We have a background for fertiliser plants, so we are looking at designing consultancy, project management and, if there is an opportunity, do a plant as an LSTK project. We had done the Bhatinda and Panipat plants of National Fertilizers Ltd. We have done fertiliser plants in Australia and Malaysia.
Will the company be picking up equity in some of these projects?
In city gas distribution, we will take equity stake as a partner or, may be, go on our own. Since gas will available on a pan-India basis and there will be a lot of opportunity for us for providing engineering consultancy for gas transmission and distribution through pipelines.
How big is your EPC business compared to consultancy?
EPC was earlier 53 per cent but now 60 per cent of our business is from LSTK, while 40 per cent is consultancy.
What kind of expansion are you planning for the overseas market?
Ten per cent of our consultancy business comes from overseas. We are concentrating on consultancy in the hydrocarbon sector and a small bit in aluminium for the overseas business. We are looking more widely at different geographies. We have been working in the Middle East and are looking for more opportunities in Qatar, Kuwait, Bahrain and Saudi Arabia. We will be working in Algeria in North Africa, Sudan and Ghana. In medium to long term, we will also be looking at Brazil and Venezuela.
EIL has been involved with creation of strategic crude oil storage in the country. Would you be looking at similar business overseas?
We are the project management consultants for all the three projects in Visakhapatnam, Mangalore and Padur. Sixty per cent of the work has been completed in Visakhapatnam and work on the other two started early this year and is expected to be over by 2013.
We have formed a talent and knowledge pool for such work. If there are some opportunities overseas in this, we will definitely take it up.
What kind of power business are you eyeing? Are you looking at joint ventures?
We have done captive power plants for refineries and petrochemicals. We have engineering capabilities in gas, thermal and nuclear-based power plants. If there is some opportunity for us in the power sector, we will like to take it up for balance of power (BOP) because whether it is petrochemicals or refinery, BOP remains the same. We are not averse to joint ventures.
Does the company still enjoy a niche or has the competition increased?
There are many companies in engineering and EPC in India but we are the only company that has total in-house capability of engineering and designing in the hydrocarbon sector. We are comparable with companies like Ford, Foster Wheeler and Bechtel. That is the level of our competency. There are currently three petrochemical plants being constructed in the country—Panipat, Dahej and Assam—and all three are being done by us. We have 45 years of a strong base and competent manpower, a strong order book position and a good physical and financial track record.
Zerodha (Trading & Demat Account)
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