Powering India’s Future: Patel Engineering’s Legacy And Vision With Acting CFO, Rahul Agarwal

Tell us a bit about Patel Engineering? What services do you offer and how do you distinguish yourselves from competitors? In your opinion, how do your customers perceive your company?

Patel Engineering is an infrastructure company. We have been in this business for the last 75 years now and we are majorly into construction of various infrastructure projects mainly like hydropower, irrigation, tunnelling, roads. The company has experience in all types of infrastructure construction. We specialise majorly in hydropower and irrigation works and our clients are mainly in the likes of National Hydroelectric Power Corporation (NHPC), National Thermal Power Corporation (NTPC),  North Eastern Electric Power Corporation (NEEPCO) as well as other central Public Sector Undertakings (PSUs). These are mainly our clients for hydropower projects. We do EPC work for them and that is our main line of business. At Patel Engineering, we keep adapting new technology. We were the first Company to carry out Double Lake Tapping in India as well as the pioneers of RCC dam construction in India.

Patel Engineering has 75 years of legacy in the construction industry. How has the company evolved over the years to maintain its position in the market?

Over the years we have completed over 300 projects. We have done more than 100 dams, we have done more than 1,200 kilometres of roads and more than 5,00,000 acres of land irrigated. We have been in this industry for quite a long time and obviously there would have been ups and downs in the industry, in the business, but we have survived this through and today we have created a niche for ourselves. We have almost 45 per cent share in the construction of hydropower projects currently under execution in India today. So around 18,000 megawatts of hydropower projects are under construction today out of which we are involved in the construction of around 8,000 MW.

With a 45 per cent market share in hydro projects, what strategies have been most effective in achieving this position?

In terms of strategy, we stick to our basics. We have a experienced and professional management team. We try to capitalise on that. A lot of planning because hydropower projects are little complex as compared to a normal construction of a road or a building. There are a lot of studies required including geological studies and experience of working in the same geology because most of these projects come either in northeast India or J&K or Himachal Pradesh. That is the main belt for these projects and we have done multiple projects in these locations. We kind of know what kind of geology will be there and accordingly we prepare our quotes and bids and that helps us because we are able to plan what kind of machinery is required. And for example, if you are in J&K, some different kinds of Tunnel-boring Machine (TBMs) may be needed. We plan accordingly and that strategy helps us in completing so projects efficiently. The company also has strong established systems and processes in place, which helps in efficient project planning and monitoring.

The company saw consolidated profit growth of 78 per cent in the last quarter. What were the key factors behind this impressive growth?

On a consolidated basis last quarter our profit went up by 25 per cent. Standalone basis it was higher but the major thing which has been contributing to our growing profits is over the years what we are targeting is although our revenues are growing along with order book inflow and everything but correspondingly, we are monetising our non-core assets and raising funds through equity or otherwise and reducing our debt which is helping us to reduce our interest costs. Our debt at a peak level five – six years back was around 5,000 crores which has come down today to around 1500 crores. So that reduction in debt has helped us to reduce interest costs and that increase is showing on the bottom line.

How does Patel Engineering manage the challenges posed by fluctuating raw material prices and supply chains?

Yes, so we do not face too many challenges for the increase in price of raw material or supply chain management as we have strong relationships with all suppliers, local suppliers as well as large ones like UltraTech Cement or other major suppliers. Hence, Supply chain is not affected for us much. Now in terms of change in raw material prices our contracts have escalation clauses. Whatever is there, more than 90 per cent is a pass-through for us to the clients. So that negates our impact on the risk of the escalation.

Can you share your insights on the future of hydro projects in India and how Patel Engineering plans to capitalise on these opportunities?

The Government has given guidelines or they have given press releases to the ministry of power that almost 133 gigawatt of hydro potential is there in India out of which only 42 or 43 gigawatt is something which is completed today. Another 90 gigawatt of projects are expected to come up in the next decade or so. Now around 18 gigawatt hydropower projects are currently under construction. Another 30 to 35 gigawatts of projects are already lined up to come up for bidding. So these projects will come up for bidding and construction should start in the next one or two years and would be completed by 2030 – 31. Lot of projects are expected to come up in this segment and considering we have a large share in this sector we expect a lot to come to us.

Are there any plans to expand into new markets or diversify the company’s services?

We are not exploring new markets right now as we have a lot of projects coming up in India and so we are not looking to go beyond India but yes, we have some projects in Nepal also and because Nepal has tie up with power sale to India so most of the central PSUs have their subsidiaries formed in Nepal like Satluj Jal Vidyut Nigam Limited (SJVNL). We are doing one project for their subsidiary in Nepal for a project named Arun-III. So similarly there are other projects also expected to come up for NHPC or subsidiary of SJVNL in Nepal. If it is a project done by the central PSUs then we will look into projects there.