The big message that I wish to communicate is that the Company exceeded its revenueguidance in FY 2021-22. The Company exceeded this guidance by reporting revenues of Rs1748.76 Crore whuch was not only higher than the guidance provided but also 40.93%higher than the revenues of the previous financial year. The revenue was 16.64% higherthan the pre-pandemic revenue of Rs 1499.26 Crore and 16.64% higher than the previoushigh.
The revenue growth of 40.93% over the previous year also compared favourably with theconstruction sector's recorded growth of 17.1% and the national GDP growth of around 8.7%during the last financial year.
The principal reason for the Company's outperformance was organisational maturing. Afew years ago the Company recognised the need to graduate from a mere constructionreplicator of designs provided by its clients. PSP could have remained an efficientreplicator; the Company conclude from its construction experience that in many cases thebuilt outcomes could have been better had the design been improved. This observationextended the Company one critical step backward to design in its value chain. The otherreason for the Company performing better than its retrospective or sectorial performancewas its graduation towards turnkey/ EPC contracts. The ability to reconcile design andconstruction challenges at a single table enhanced our capacity in designing what could beconstructed and utilising our construction experience to influence design. This integratedapproach was responsible for a design cum construction proposition that was quicker andmore economical than the industry standard the basis of our businesssustainability.
We are pleased to report the positive outcomes of this turnkey/EPC-driven approach. Wedelivered the challenging Surat Diamond Bourse within 47 months against a generalexpectation that this would have taken longer; we delivered the complex Kashi VishwanathCorridor at Varanasi project with a minor overrun of 20 months against the initiallyestimated 18 months. Both these projects were delivered during the pandemic marked bydisrupted labour mobilisation work-from-home and social distancing.
At PSP we interpret the completion of larger ticket projects completion of thelargest number of projects generation of the highest EPC and turnkey projects during thelast financial and the highest proportion of revenues from turnkey & EPC projects (80%in FY 2021-22) as an index of our growing competence and emergence as a successfulmid-sized construction company.
The Company's revenue outperformance (cascading down the line into improvements acrossthe board) was a validation of a planned approach.
One the Company had articulated the need to graduate from just a construction Companyinto an institution warranting the need for different projects. The Company respondedwith an strategic business unit (SBU)-like approach where each project head was empoweredto act as if he or she owned' that part of the Company and was expected to deliverthe project on schedule without compromising quality and safety. The performance of theCompany during the last financial year represented a successful validation of this modularapproach resulting in an adequate control of project progress cost management andprofitability. By building profitability into the business from the ground level upwardswe have created a scalable model: the implementation at the ground level will be devotedto monitoring and reporting at the senior level combining project implementation withchecks and balances. This combination represents the core of our governance and theextension of the concept of one promoter-entrepreneur to several high-achievingintrapreneurs'.
Two we strengthened our process responsiveness. The construction sector is essentiallyone of uncertainties. Success in this space is derived from the capacity to addressunforeseens with speed and effectiveness. What we demonstrated successfully during thelast financial year was the ability to observe mistakes document them address themthrough superior processes extend these processes across the organisation and keepevolving our standard operating protocol. This capacity to learn on-the-go and respondwith a flexible workflow made it possible to address challenges with responsibility andresponsiveness. Three the Company deepened digitalisation during the last financial year.There is a wider acceptance that we are technology driven construction company as thevisible manifestation as opposed to being engaged in a construction business with amoderate technology component. Here again the role of technology moderated deviationsfrom the established mean strengthened controls and reinforced cost management. Thecombination of SOP and SAP established an operating discipline making it possible toprocure efficiently and build effectively.
PSP Precast: The Gamechanger
The biggest transformation in our business model was a forward-looking investment inpre-cast technology. This technology represents the future of the Indian constructionsector. By the virtue of its speed to invest in this technology even as the pandemic isnot completely over PSP capitalised on a timely opportunity window.
PSP made a long-term investment in this technology to graduate from the deployment ofmanual labour to the precast equivalent. This represents a watershed in the company'sexistence graduating it from the legacy to the modern. PSP commissioned its pre-casttechnology factory in December 2021. The upside will not only comprise an attractivelabour arbitrage; the upside will come from standardised construction constructionconsistency first-time right construction and quicker construction. The complement ofthese realities is expected to transform the competitiveness of India's constructionsector leading it from the legacy to the futuristic. At a time when India seeks toenhance its global competitiveness the pre-cast technology could play a crucial role ingetting companies faster into production. Besides the pre-cast business is workingcapital-negative; we are engaged in expanding manufacturing capacity during the currentfinancial year even before having achieved a high-capacity utilisation. Going ahead we donot just intend to merely provide a pre-cast technology service; we intend to do more. Weintend to build adequate capacity and democratise the use of pre-cast technologyaddressing a critical national need.
A new PSP
The ferment of these realities is that a new PSP is emerging.
This new PSP is being recognised as one of the most passionate and frontier-enhancingcompanies in India's construction sector. This new PSP embraces complex projects; the morecomplex and challenging the better.
This new PSP embraces size and focuses on exceeding expectations. This new PSP iscomfortable working on concurrent projects across locations having created multiplerevenue engines.
This new PSP is comfortable working outside Gujarat; during the year under review theCompany generated 25.22% of revenues and 62.62% of its order book from non-Gujaratprojects.
This new PSP is a pan-India construction player; it addressed 10 projects in UttarPradesh during the last financial year; it had a presence in Maharashtra with two projectsin addition to projects in Rajasthan Karnataka and New Delhi.
This new PSP is process driven; decisions that need to be taken on the ground acrosssites are addressed and resolved by the project head making response times quicker andmore informed.
This new PSP is more technology-agnostic than ever; the Company will graduate to thenext generation of technology across diverse functions resulting in quicker lower costand higher quality outcomes. This new PSP is focused on bidding for larger projects with ahigher profitability hurdle rate resulting in a larger profit inflow per projectjustifying investments in people and equipment.
This new PSP is open to making sizable investments in new technologies with amulti-year payback especially if this investment will deepen the Company's respect as athought leader.
This new PSP is empowered and pre-qualified to bid for projects up to Rs 2000-2500Crore in its own name strengthening its capacity to address large pan-India projects.
PSP is the right company at the right time with the right technology and in the rightplace.
India is emerging as one of the most exciting global economic stories. The country'sGDP of around USD 3 Trillion is expected to grow to an estimated USD 5 Trillion by thelater part of this decade. This indicates that the growth achieved by the country acrossthe last century is now expected to be replicated within the coming decade.
One of the features of this projected outperformance will be reflected in a distinctivevision to grow larger and faster.
A new India is emerging even as we speak: the large government projects of the Eightiesare being redeveloped for larger size and different scope; the operative direction forthese redevelopment projects comprises an adaptation for climate change and earthquakeresistance; this will warrant the re-appraisal of legacy construction through modern-dayconstruction perspectives; this will emphasise the role of fatigue-resistant constructionthat extends the life of these buildings across decades.
Besides new infrastructure coming up is no longer benchmarked around local or Indianstandards; there is clearly an emerging global standard. The Bullet Train from Ahmedabadto Mumbai is the most ambitious rail project undertaken in the country's existence; theCentral Vista in New Delhi is the most decisive infrastructure creation for the governmentin nearly a century; the Jewar airport in National Capital Region is expected to create anew reference point for the aviation infrastructure in the country; Housing for All is thelargest housing programme undertaken in the history of India; the complement of newairports being proposed is the largest such programme undertaken in independent India; theDelhi-Mumbai Industrial Corridor is likely to redefine the logistics sector in thecountry; the commissioning of 100 Smart Cities is likely to create the foundation of amodern India; the expansion of the IIM and IIT institutions is expected to lead India intothe future.
This disproportionate growth will need to be midwifed by India's construction sector.The better the build the faster it is created and the lower the cost could catalyseeconomic growth. More importantly it will provide India with a competitive cost structureon which to build for the decades.
Corporate social responsibility
PSP believes that CSR activities are not mere charity or donations they reflect themanner in which the business is conducted by directly focusing on the needs of society atlarge. We are a socially responsible entity not limited by the use of resources inactivities that increase only profits but rather it evolves appropriate businessprocesses a that to reflect its commitment to societal progress. PSP spent Rs 304.32 Lakhstowards promotion of healthcare and education during FY 2021-22.
PSP expects to capitalise on its unprecedented growth. The Company possesses a robustBalance Sheet debt-equity ratio attractively maintained at 0.15 at the close of FY2021-22 that makes it possible for the Company to grow profitably and sustainably.
The Company is present in the mid-tier of the construction sector where competition isrelatively limited; the Company expects to focus on Rs 500 Crore private sector projectsand Rs 1000 Crore public sector projects. The Company expects these realities to driverevenues 20-25% compounded for the next two years enhancing value for those associatedwith our Company.
|Prahaladbhai S. Patel |