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The Big Interview

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In tune with the industry needs, Afcons Infrastructure Ltd has evolved with transformations from time to time, says K Subrahmanian, its Managing Director. Niranjan Mudholkar finds out more in this exclusive interview as Afcons celebrates its Golden Jubilee year

He has had a very fulfilling journey in the construction sector spanning almost three decades. And come to think of it, it was almost an accident that this industrial engineer joined this industry. His professor was taking up a project with HCC and asked K Subrahmanian to join in. “I am glad I said yes to him,” he says standing in front of the Afcons House.
K Subrahmanian went on to work with HCC for more than twenty years except for about a year (when he was with Lakshmi Mittal’s office). In 2002, the Shapoorji Pallonji Group brought him to Afcons with a clear objective of turning around its flagship Company.

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In your organization’s journey spanning five decades, it has participated actively in the nation’s infrastructure growth. How has Afcons evolved over the years vis-à-vis the transformations in the infrastructure industry and the overall economic dynamics?
Afcons was incorporated in the year 1959 as Rodio Hazarat & Company, a joint venture between Rodio of Switzerland and Hazarat Company of India. Essentially it was in geotechnical engineering, primarily doing piling and foundation engineering works. The Company entered into marine segment in 1966, in 1970s into bridges and made an overseas foray in Iraq.
In 1976, Rodio exited India and employees took over all the shares and renamed the Company as Asia Foundations & Constructions. The Company entered into the roads segment in the 1980s followed by LNG tank construction and other industrial structures in the 1990s. In 1996, the Company started calling itself Afcons Infrastructure. The Company was taken over by the Shapoorji Pallonji Group in 2000 and subsequently we entered into the hydro and the UG (underground) segments in 2002. Last year, we ventured into offshore construction in Oil & Gas. Thus, in tune with the needs of the industry, Afcons has evolved with transformations from time to time. Today, we can say that we are almost in all the segments of infrastructure construction.

How would you differentiate this evolution at organisational level vis-a-vis the other leading infrastructure companies in the country?
In the 1980s, there were very few big construction companies in the infra segment like L&T, HCC, Gammon and Afcons. Most of the other top companies of today were subsequent phenomena including firms like Nagarjuna Constructions, IVRCL, GMR, GVK etc. To answer your question, the other infra leaders at that time were general contractors while Afcons was a specialist construction company. Although Afcons did start the process of transforming into being a general contractor in the 1980s, it truly became a general contractor group only in 2000.

Did Afcons have to make major organizational or business policy changes as it grew?
We made four key changes as we grew. First, we changed our business mix. For any organization, change is the only constant. In tune with the expansion in multiple geographies and different segments within infrastructure, Afcons had to make changes from time to time. As we expanded into the new areas and to different geographies, changes of organizational structure became necessary. We organized ourselves into different strategic business units (SBUs), each headed by a Director.
Secondly, we restricted the number of the projects that we undertook. As we were growing, we decided that there cannot be too many projects. So we started undertaking projects of specific size. Thus, you have the turnover but you have less number of jobs to manage. Thus, we went for a size strategy.
Thirdly, we put in place a risk management frame work for the selection of our projects. For example, if a job does not have an arbitration clause, we do not go for it.
The fourth key change was the introduction of a comprehensive HR policy based on the total satisfaction module. This module encompassed key elements like salary & incentives, training & development, communication about the Company and branding.

What are the key issues & challenges facing the infrastructure sector in the country today? What are the possible solutions?
I believe there are several challenges facing the industry today. Huge shortage of skilled manpower in various categories is definitely one of them. To address this issue, the industry needs to undertake huge initiatives in training and development. We have to set up various training institutes for developing skilled manpower across the country. At Afcons, we follow the ‘Classroom at site’ system. We treat every project as a training laboratory where the expert and experienced employees train people working under them at the job site itself. In fact, each department at Afcons has a training in-charge. It has become a line function.
Using improper contract documents by various government agencies is another big hurdle for our industry. In this regard, adoption of internationally approved contract documents such as FIDIC documents, Standard Bidding Documents etc will go a long way. Government uses these documents for funded projects.
We suggest these documents should be used for non-funded projects as well. And experience shows that using these internationally approved documents has improved project implementation. In fact, there is direct evidence available to prove this. Ultimately, I believe that this is a mindset issue and the earlier we change the better.
The industry is also severely hampered due to the poor dispute resolution mechanism we have. This issue requires administrative reforms at the Government levels. It also requires measures such as proper delegation of powers to project directors and even creating special purpose vehicles within the Government departments with fully empowering project directors for project execution. Creating the right kind of Audit vigilance culture will also help.
Land acquisition is of course a well known problem faced by the infrastructure sector in India. This has to be dealt by passing and implementing some special laws while at the same time doing away with some of the archaic laws, which are impeding the land acquisition process. Obviously, this also requires political will and change of mindset. One more issue that needs to be resolved on priority basis is availability of credit for private players working on major infrastructure projects.
There are structural impediments in the financial system due to global credit crisis. These have to be addressed at every level possible by adopting models that encourage investments in infrastructure.