Gayatri Projects hits pause button on bidding for new road projects

Road projects constitute 65-67% of the order book of the company

Infrastructure company Gayatri Projects Limited has decided to hit the pause button on bidding for new road projects in the current financial year as its order book outgrew the targets in the first seven months. The order-book value of Gayatri has surpassed Rs 170 billion this year as compared to Rs 132 billion in the previous financial year, thanks to the road projects.   

The company on Wednesday bagged a new large order worth Rs 13.12 billion for the construction of the access-controlled Nagpur-Mumbai Super Communication Expressway package on EPC mode. 

"We are not going to bid for any more road projects as we have crossed our order book targets for the current fiscal. We will explore the new EPC opportunities only next year," T Rajiv Reddy, vice-president (operations) and in-charge of overall project controls and monitoring at Gayatri Projects, told Business Standard on Wednesday. 

Gayatri Projects has transformed itself into a pure-play EPC company following the demerger of BOOT and annuity road project portfolio into a separate entity last year. The new company, Gayatri Highways, was also listed on the bourses and started trading from June this year. The Centre's renewed focus on the road sector, this time using EPC and hybrid annuity modes in a big way, came at the right time for infrastructure companies such as Gayatri that were looking to increase the risk-free EPC business.

The company's EPC order book grew 40 per cent from Rs 92 billion in 2015-16 to Rs 129 billion in 2016-17 and stayed almost flat last year before rising 30 per cent at more than Rs 170 billion as on date. Today, road projects constitute 65-67 per cent of the order book of the company, while irrigation sector accounts for 22-25 per cent of the total order book. The timelines for the top 20 projects, mostly comprising road sector projects, within the company's order book fall between the first quarter of 2019 and the third quarter of 2021-22. 

On achieving the order book targets, Reddy said that the company has not gone for aggressive bidding at any point of time as they were conscious of the margins to sustain the business in the long run. The current Ebitda margins of 15-16 per cent and a 7-8 per cent net profit margin will be maintained going forward, according to him. The company has executed little over Rs 900 billion worth of road projects in the last five years, according to a recent filing of the company, which is currently executing road projects in 12 states. 

In 2017-18, the company's revenues stood at Rs 29 billion, as compared to Rs 21 billion in the previous year. The management aims to achieve an year-on-year revenue growth of 25-30 per cent in the next three years.