Reliance Infra targets new sectors with EPC offerings

Reliance Infrastructure Ltd, an Anil Dhirubhai Ambani Group company, is planning to expand its engineering, procurement and construction (EPC) portfolio to segments other than power, where it is currently active, to leverage on its expertise in construction, Director Lalit Jalan said.

“We have nine infrastructure projects where EPC is done by someone else...we are thinking we should move to infrastructure project EPC by adding skill sets in airport, metro rail, nuclear power, and steel sectors,” Jalan said.

The company is working on tying up with technology partners for these new segments for EPC operations. It would be setting up a joint venture with China Metallurgical Group Corp for EPC projects in steel.

The company’s EPC business executes power generation and transmission projects. Its other division, Reliance Infraventures, executes turnkey infrastructure projects.

The company, earlier known as Reliance Energy, is transforming itself from a regulated-return power generation and distribution company into a infrastructure player with market-determined returns, Jalan said.

The company’s EPC business is seen clocking revenue of Rs 3,000 crore in the current year to March, Jalan said. As a strategy, the company is planning to bid for projects with ticket size of over Rs 2,000 crore and targeting a net profit margin of 8-10 per cent in these projects.

The company is implementing power projects with an aggregate capacity of over 3,500 MW and is also executing EPC work for the 4,000 MW ultra mega power project being set up by Reliance Power at Sasan. Order book of the company may rise to Rs 35,000 crore as against Rs 21,000 crore now if the company is able to clinch the Rs 12,000 crore EPC contract for Reliance Power’s Krishnapatnam ultra mega power project, Jalan said.

The company has so far safeguarded margins from rising input costs by back-to-back transactions with vendors. However, “given the volatility of the commodity market, we are going to include the price escalation clause when we bid for projects,” Jalan said.

Group company Reliance Natural Resources Ltd’s planned foray into shipping and manufacturing steel and cement may help Reliance Infrastructure secure firm raw material supplies at reasonable rates, analysts believe.

As for potential slowdown in the sector, Jalan said, “I have Reliance Power,” indicating that Reliance Infrastructure expects to be the key beneficiary of projects being undertaken by the former.