It is my pleasure and privilege to present your Company's 21st Annual Report. In thisunprecedented era of COVID-19 presenting this report gives me a sense of satisfaction atwhat we could accomplish despite the huge headwinds we had to face. Perhaps for the firsttime in our history of over two decades I am more constrained to talk about theadversities we face.
2020 is clearly destined to go down as an exceptional year in human history. COVID-19has already delivered a severe blow to every business infrastructure constructiontransport hospitality industry corporate administration services governance sportsand even religion. Nothing has been spared! It is in this scenario that your Company isemerging almost unscathed - to our expectation delight and desire - but of course notto our surprise. The impact of the Corona virus started casting its shadows during thelast quarter of FY 2019-20 and started intensifying and spilling over to the next.However your Company understood the fact that our thinking and strategy had to bedifferent and our reflexes had to be faster for emerging stronger on the other side!
We did everything possible under the sun and regrouped ourselves to face the situation.Being manpower oriented there was no escape from the physical presence of manpower andmachines at places of execution. It was truly a huge task demanding a lot of planningskill and manoeuvring. The migration of workers back to their native places made thingsdoubly difficult right from remobilization to resuming work. In this situation ouremployees have shown exemplary courage and were smart in their delivery pattern and gotthings moving.
Early birds get their worms'. In our case we seldom slept!
It was a disappointing year for the business world! Your Company also had to swimagainst a stream of challenges and adversities. With restricted movement of men andmaterial we were struggling in keeping the projects moving. However we wereexperimenting
As your Company marches into the third decade we need to look back at our achievementsand look forward to drive the Company ahead with a vision and direction during the currentdecade 2020-30. As we have discussed the business environment has undergone sweepingchanges and business profiles and many sectors of business had varied contribution withthe changing market dynamics. We had way back diversified our fields of operation andventured into new businesses and expanded geographically too. FY 2019-20 can be seen as acontinuity to the previous financial years where we had discussed about opportunities incertain new avenues. Some of the potential fields included
Petrochemical Railways Civil O&M Erection Testing and Commissioning (ETC)Electrical installations Material handling Water treatment Irrigation Steel CrossCountry Pipeline etc. The new initiatives are showing good dividends. I am happy to notethat there are visible results arising out of our strategic planning for long terminvestments. There is an impressive progress in the Steel Petrochemical Irrigation etc.sectors and I am hopeful that there will be a healthy competition between these segmentsfor superior showing in revenue shares of the Company. The day is not far off when thesesegments shall become independent entities for compulsive and competitive survival. Likethe branches of a Banyan tree reaching the ground and holding the tree together these newventures will be shouldering the Company and progressing at the same time.
The Company's growth and profitability have to be aligned with the changing marketenvironment which is why we are focusing our business on sectors other than the powersector.
The non-power sector is the key for charting the Company's growth in view of hugeinvestments planned as part of National Infrastructure Pipeline (NIP) worth Rs 111 lac Crin the next 5 to 6 years by the Government of India. The Company has already been in thefray in many segments where investments are taking place as per the NIP document. TheCompany is also synergizing the resources and expertise to dwell across the new segmentsof business without additional investments in manpower and capital. The Company will aimand transform the business to the new areas being made available as per the NIP plandocument. Transforming the Company into an engineering and manufacturing base withbackward integration will be our priority to bring in value addition . higher sales andprofitability Further expansion to business related to Railways Roads Steel Plant worksMaterial Handling works Oil and Gas sector Cross Country Pipe lines UrbanInfrastructure projects is on the anvil. O&M will continue to be our key driverdoubling in the next 4 to 5 years. Apart from O&M increased penetration into thedomestic sector of IPP base Utilities of Central and State Captive Thermal power baseintegrating the spares business through in-house manufacturing and to make concertedefforts for more penetration into the non-power sector is strategically planned.
The Company has strongly established its presence in the Middle East and Africaundertaking ETC projects. In the last 2 years the Company has also established itspresence in the O&M space in the Middle East and North Africa.
The beginning was made in the previous year in view of the huge installed base of about300 GW. The initial opportunities were related to manpower supply for some of the shutdownjobs followed by overhauls repair capital overhauls etc. The focus is to expand withcountry wise profile in the Middle East as the first stage for similar works and thenlook for major opportunities for long term contracts.
A good amount of experience has been gained in civil works for power projects and alsofor some of the infra projects in the last 8 years and your Company has established an SBUwith an experienced organization structure for the implementation of civil works. Theadvent into the non-power and infra sectors has boosted the civil share of the businessand currently it stands at 29% of the total revenue in a hugely diversified serviceprofile encompassing Power Irrigation Technology Parks Railways and Industry includingother non-power business. A similar approach also will be adopted in the case of othernon-power sectors related to Refineries Steel Plants Fertilizer Plants Roads CrossCountry Pipe Line Works Material Handling Contracts etc.
The Government of India has plans to make massiveinvestmentsinthemodernizationoftheIndianRailways and track doubling expansion of therailway network launching of the Mumbai-Delhi Bullet Tain High-Speed Network andestablishing new workshops for repair station modernization works and electrificationworks. Railways had a capital budget of Rs 160000 Cr in FY19-20 and in the current yearof 2020-21 the planned spending is Rs 161042 cr. The major thrust for this year and thenext two years is related to gauge conversion for 3750 kms broad gauge electrificationof 6000 kms and 4 station redevelopment plans. Your Company has made major strides inundertaking as many railway projects. It is a pleasure to note that when projects likerailways are very demanding in quality your Company is able to complete them on time andit even claimed incentives for early completion of the project at Gudivada A.P. With 7projects on hand in railway Power Mech is poised for aggressive growth and make 15%revenue from this business in the next 3 years.
Another potential opportunity is in the Roads and Airports segment. Road networkexpansion is taking place at breakneck speed and there are opportunities available forchoosing. However such a foray will be done on a selective basis based on feasibility ofexecution and managing all the risks.
As per the NIP document the investment planned for the current year is about Rs383283 Cr in the road sector and Rs 21633 Cr for the airport investment.
Your Company has been making efforts to enter the road sector on EPC Model. The firstsuccess has been achieved for Hassan Channarayanapatna bypass road project beingimplemented by NHAI in Karnataka involving a bypass road and connected roads of about 77kms with a contract value of Rs 555 cr and the second success has been achieved for theAizawl-Tuipang Section of NH-54 in the state of Mizoram involving widening and upgradationto 2 lanes with paved shoulder configuration and geometric improvement awarded by NHIDCLfor a contract value of Rs 446 cr.
In the case of airports the policy of the government is to improve the airconnectivity with the development of new airports expansion of existing airports andultimately having airports and air connectivity to each of the District centres under 4categories of A B C and D. The area of interest to the Company is in the category C andD with investments in the range of Rs 300 Cr to 1000 cr and some opportunitieshave been identified.
The Company has made good progress in the electrical business. The Company hassuccessfully completed a distribution works project of 33 KV lines 33/11 KV substationsand 11 KV and LT lines under the DDUGJY scheme before schedule in MPMKVVCL. The Company isalso successfully executing some major projects like railway electrification works for 727TKM under Central Railways 220 KV and 132 KV transmission lines in Assam and 132 KVsubstation works in Nagaland under Power Grid Corporation of India Ltd. Your Company iscapable of undertaking complete EPC jobs of transmission and distribution linessubstations up to 765 KV and railway electrification works. However the Company is quiteselective in its approach for bidding the projects to suit to our requirements in terms profitabilitycash flow and client financial conditions.
Interestingly the Company has taken initiative in water systems particularly in thefield of Sewage Treatment Plant (STP) and work involving about Rs 153 Cr is being executedat Palwal and Karnal. At present 65% of the urban needs still have to be brought underthe STP scheme and this has thrown up huge opportunities across the country.
The latest efforts have been focussed on entering into the EPC business related toturnkey material handling contracts in Power Minerals Coal and other sectors. It isimportant to note that the Company has established excellent construction skills andmanagement of execution of large contracts and the idea is to integrate the engineeringand procurement functions. Coal India Ltd through its subsidiaries has initiated plansfor mine side coal handling plants for conveying coal to the railway wagons for fastermovement of coal from the mining locations to various end-users with the total investmentplanned to be around Rs 15000 cr to be spent in the next 3 to 4 years. At present theCompany having tied up with Thyssenkrupp India Ltd. (TKII) and Promac Engg IndustriesLtd. (PEIL) is planning to bid for about 4 projects coming up in the states ofChhattisgarh Jharkhand and Odisha.
This model is also being planned in segments related to thermal power plants and othersegments as per mutual agreement with JV Partners. Since there are considerableopportunities in mineral and coal segment it is expected that the Company will foray intothe EPC business of material handling contracts with a substantial impact.
I would like to conclude with a higher degree of optimistic note for the future. I canvouch from my heart that we will be encountering one of the brightest years ahead. I canforesee some drastic developments in all fields and areas of business and social order.The need for the hour is some attitudinal changes in our way of conducting ourselves.Almost gone are the days when the usual ways would win dividends. May be unusual ways! Maybe untried paths! May be an unfamiliar world order!
I am confident that your Company shall sprout and blossom for which I seek yoursupport. I take this opportunity to thank all my employees whom I referred earlier withprofuse tributes for their untiring support and for being by my side. I also thank mycolleagues in the board who have been extending extraordinary encouragements. I amgrateful to all the financial institutions banks central and state government officialsfrom different departments auditors and scores of our vendors and dependents. I expressmy explicit gratitude to all the shareholders for their watchful support guidance andgood wishes.
Sajja Kishore Babu
Chairman and Managing Director