Q&A: AK Purwaha, CMD, Engineers India

'We will maintain our growth momentum'

Engineers India Ltd (EIL) Chairman and Managing Director A K Purwaha talks to Priya Kansara Pandya about the new growth opportunities and financial performance outlook. Edited excerpts:

Since EIL is mainly focused on the Indian hydrocarbon sector, what is the outlook and opportunities in the coming years?
The Indian oil and gas sector has enormous potential in the coming years, as it will continue to play a pre-eminent role in meeting the country’s energy requirements and will be the key driver, after infrastructure, of India’s economic growth. The strong momentum in the refining sector is expected to continue, since India has emerged as a major export-oriented refining destination and because of the growing domestic demand on the back of a robust economic growth. The gas sector will also attract parallel investments in areas like regasification, pipeline transmission, distribution infrastructure and city gas distribution (CGD).

How is the competitive scenario in this space?
We are the only player in the Indian hydrocarbon sector to provide complete ‘concept to commissioning’ services under one umbrella and have emerged as the only ‘total solution’ engineering consultancy company, principally focused on the oil and gas and petrochemical industries. With an experience of four-and-a-half decades, we have developed an extensive track record of working with almost all the major players present in the entire value chain (upstream, midstream and downstream).

Then why do you want to diversify into other sectors? How much will those contribute to the company’s financial performance and by when?
As part of strategic initiatives for enhanced growth and to leverage our strong engineering consultancy and EPC capabilities and track record, we intend to selectively diversify where we believe there is high growth potential and we enjoy competitive advantage.

We intend to explore opportunities in sectors like renewable energy, nuclear power, infrastructure, CGD and fertiliser. The Indian infrastructure sector provides attractive opportunities, given the expected $1-trillion investment in the next five years. The new sectors will contribute considerably to the top line and bottom line of the company in the next three-five years. This will be followed by healthy margins. However, our focus will continue to be in the hydrocarbon sector, as that is our area of core competency.

What about competition in these new sectors?
The competition is prevalent across the potential sectors, but there is an immense opportunity. For example, India is going to be a large market for renewable energy, as it is increasingly gaining attention from companies, both in terms of doing business and protecting the environment. The National Solar Mission aims at the generation of 20,000 Mw solar power by 2020. This entails an investment of around $16 billion in the coming years. We will focus on providing professional and value-added services to clients in the diversified areas by leveraging our knowledge bank, skill sets and project management capabilities.

Will EIL continue to grow at a robust rate recorded between 2006-07 and 2010-11 (CAGR of 45 per cent, 56 per cent and 40 per cent in sales, operating profit and net profit, respectively)? What are the targets for 2011-12?
We are confident of maintaining the growth momentum in the next decade, given our planned investments, leadership position in the hydrocarbon sector and diversification initiatives. For 2011-12, we will strive to maintain the growth and margins seen in 2010-11.