Kridhan Infra Ltd (formerly Readymade Steel Ltd) has executed major projects including transportation like Mumbai Monorail, Sahar Elevated Access Road and Nashik Elevated Corridor. Anil Agrawal spoke to Sandeep Menezes on the imperatives in the infrastructure sector and on what he expects from the new government in the coming years, which will act as a catalyst for the growth of the economy.
The government wants private companies to contribute half of the $1 trillion infrastructure investment target for the 12th Plan, especially in the road sector. 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. Maybe, the next one year will decide how realistically this can be achieved.
Land acquisition is 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 and this is the reason why projects are getting stuck. Most of the infrastructure companies started owning assets of roads with huge debt. But, because they were stuck, their revenues were less. Right-of-way and local issues are the reasons. I think the government is working towards resolving these issues and we should see some good results.
What are some of the reasons for project cost escalation, especially in road and highway construction?
Time delays, clearances, design approvals etc. are the major reasons for cost escalation in infrastructure development projects in India.
Do you intend to target any specific infrastructure segment?
We are looking at metros 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. Thus, we are adding to the bouquet of facilities that we can offer.
By adding pile foundation work, I am further strengthening the bouquet of services offered to the client.
We want to be an integrated infrastructure solutions player. We have been the pioneers in bringing readymade steel to the country when nobody had heard how this would be possible. We also see a lot of scope for growth in the ground engineering segment.
How do you see the infrastructure scenario evolving under the new government?
We are very bullish about Indian infrastructure. We are sure the new government understands that in the years ahead infrastructure will be a catalyst to the growth of the economy. The government must boost infrastructure spend and create confidence in the minds of people, and ensure that clearances will not be an issue and timely completion will be the target.
Which infrastructure segments will move faster than the others?
I think roads, bridges, highways and metro rail will move faster because public transportation infrastructure is something that we all require badly.
Government entities and public sector undertakings award contracts on L1 basis which, critics claim, kills quality.
Nowadays I don’t think it is always awarded on L1 basis. They have a two-phase process where 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 make sure that these contractors can deliver and only then is the price bid opened. Things are changing.
In Singapore, they have a different system. It is not always 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.
Singapore also looks at financial strength of the company because one may take the contract but may not be able to complete it; therefore, the government will not give it to you. If India evolves into using such a grading system, it will help everyone.
Tell us about the various business segments contributing to your current revenues. Going forward, do you foresee a 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.
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.
Since you are also active in real estate, do you feel most development will happen in tier two and tier three cities vis-à-vis metros?
I don’t think that the tier one cities are saturated but there has been a lot of oversupply. It will take at least two to three years for the oversupply to be consumed.
Also, because of growth in tier two cities and improvement 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, say, 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 centre has changed.
In fact, the maximum growth in real estate is happening in tier two cities. Now even out there, an oversupply situation is happening.