CLOSING THE GAP
Having gained the trust of stakeholders for efficient PMC, coupled with a distinct method of working has helped bag multi-crore deals, says Dr Anoop Kumar Mittal, CMD, NBCC.
By Jayashree Kini Mendes
Few would have guessed that a central public sector enterprise bestowed with a Mini-Navratna status would go on to compete with large established private construction and infrastructure companies. Not only compete, but also successfully diversify its portfolio, secure business in overseas markets and partner strongly in the flagship programmes of the central government. Since establishment in 1960, this PSU has grown strongly and
Dr Ambedkar International Centre at Janpath.
steadily and today has an order book that stands at Rs 80,000 crore, larger than any construction or infrastructure company! Notwithstanding the workload, Dr Anoop Kumar Mittal, chairman & managing director, NBCC, appears confident that the company should register a consistent CAGR growth of 30-40%. He is banking on completing the high-value projects, besides taking forward its redevelopment model, while continuing its contribution to the infrastructure development of the country.
The consistent growth rate can also be attributed to the humble disposition of the company. There are no projects that the company does not take up. Today, Mittal strongly believes that there is no single entity in the country that is as multi-faceted as NBCC. The lynchpin of its success is to maintain an overflowing order book and continue with a risk-free business model. Its strong track record of timely projects completion is making it the frontrunner to take over stalled projects. Maintaining transparency in its bidding process has only added to it trustworthiness. The firm ensures that there is little human intervention between its team and bidders, and bidding and payments too are made online.
Although mainly known for executing works as PMC, NBCC has also looked outside its portfolio and today has a strong base in real estate and EPC and created several subsidiaries while marching towards a refulgent future.
A aerial view of the Charbagh Station. NBCC was entrusted withthe redevelopment of several railway stations.
As a public sector, NBCC is assured of government projects on a nomination basis with fixed margins. And considering that the government is looking developing vacant land to promote affordable housing and redeveloping dilapidated properties, Mittal says, “Currently, we are preparing detailed project reports (DPRs) for affordable housing across the country. Overall, we are working on five to seven land parcels of 50 to 100 acres each. By the end of this year, we expect to start working on projects in NCR, Kolkata and Hyderabad. Together they will offer a mix of affordable houses, higher category homes and commercial space.”
Besides this, NBCC has its own land parcels of more than 200 acres. “These were bought at market rates for commercial purposes. Though we have plans, they can only be executed based on market requirements and take us to higher profitability. Work is underway in Kochi, Bhubaneswar, Lucknow, and Kolkata, and we hope to complete those by the end of the year. There are 32 land parcels and, hopefully, we should look at raking in revenue within the next four to five years,” he adds.
Over the last few months alone, NBCC has bagged several prestigious large projects to construct convention centres in 10 African countries as part of the Indian government’s Rs 2,500 crore project. It is executing redevelopment of nine railway stations in Gomti Nagar, Charbagh, Tirupati, Goa, and Pondicherry. Besides, there are 10 big-size redevelopment projects of Rs₹40,000-50,000 crore. Pocketing projects in the overseas market was a feather in the cap for the company. He says,
The Pragati Maidan Complex is set to get a new face with its upcoming redevelopment into a world-class state-of-the-art Integrated Exhibition-cum-Convention Centre (IECC).
“There are 2-3 ways of bagging overseas projects. One is to participate in global tenders for PMC, which is our core business. In the 80s, we would also bid as an EPC, and that is a second method. The third, and one that helps us, is to participate in projects being constructed through a grant given by the Indian government or extending a Line of Credit (LoC) to other countries. Our focus is to bag those projects being funded by the government of India. That is how we have ventured into Maldives, Mauritius, South Africa, etc. More often, bilateral relations compel the government to give grants and help the development there. This helps us bag projects in those countries.”
The myriad projects contracts have also helped the team at NBCC hone their skills. Importantly, its proven track record at managing large projects has made it the government’s agency of choice for outsourcing projects. NBCC already has offices in Oman, Maldives, Turkey, Mauritius and Botswana. It has executed many diverse projects over the past 37 years in Mauritius, Nepal, Maldives, Libya, Iraq, Yemen, and Turkey and Botswana.
Considering that PMC is NBCC’s strongest point, Mittal would like to continue with projects that offer PMC than real estate or EPC. Not that the company is averse to taking up such projects. According to him, “Contract or project management calls for certain skills. At the end of the project, effective project management skills can help turn a project around and ensure its timely completion and lasting effect. We offer services from inception to completion. Efficiency in management is needed to gain a higher level in competitiveness. We have achieved that.” Little surprise that PMC and redevelopment contributes 87% to the revenue, while EPC and real estate bring in the remaining 13%.
In terms of road projects, Mittal says that NBCC sticks to PMC similar to what it does with other projects. It has bagged the PMC worth Rs 380 crore from the Odisha government for executing 168 roads and six bridges. Similarly, he affirms that its real estate portfolio will be confined to developing its own land parcels and “it will not purchase any more land as it sees little opportunity in real estate”. However, recently, the company announced that it plans to invest Rs 500 crore to acquire majority stake in two loss-making PSUs and considering that they are in the construction business, these acquisitions are quite strategic in nature.
Knowing well that analysts are keenly tracking the company’s growth, NBCC is aware that not only does the company need to bag multiple projects, but also be distinct in the marketplace. There is a conscientious technique to working methodically. When a contract is awarded, Mittal ensures that his team gets the DPR ready, prepares the financial plan and awards the tender to contractors of repute such as Shapoorji Pallonji, Larsen & Toubro, Nagarjuna Constructions, Ahluwalia Contracts, Tata Projects, among others. Completion dates are taken seriously and any delays are due to late permissions or force majeure. Quality of construction, materials, technology, are all factors that NBCC looks into when it takes on a project.
Overall, in the last few decades, most government projects have seen consistent delays, with unreliable contractors not delivering projects on time, excelling in bad governance, thus resulting in poor quality projects. What has also been irksome is that most often money given to a particular project has often found its way elsewhere thus leading to project delays of 2-3 years or more. Mittal says that the emergence of NBCC has changed all that.
The redevelopment of GPRA colony in Netaji Nagar is the most powerful expression of transforming and greening of the national capital.
TO THE BRAINY, THE SPOILS
At a time when remuneration and profit is the ultimate (if not sole) motive of contractors and others involved in projects, Mittal’s statement comes as a surprise. “Most often, private players don’t undertake projects if the margins are less than 25%. We have no such interest. There’s little ambition to make profit, and that helps us. We charge a slab of 8-10% and if there is any sale component, then we take 1.5-2% as market charges,” he adds.
The cost-plus-margins model has stayed with NBCC for a long time now. Over the years, the new projects are self-revenue generation models since the government has been finding it difficult to budget all the projects. The model has now become popular and NBCC is, perhaps, the only company in the public sector who does this kind of work. The shrewd CMD has also decided that as long as projects continue to flow in, the company will retain its margins share and might increase margins a couple of years down the line.
For a PSU, NBCC does adopt some modern technologies for construction. In the last six months, it has begun using structural steel and composite structures. Considering the pollution level in Delhi, where it is executing a majority of projects, the company prefers to build steel structures. “Dry construction is our motive, and in some places we prefer pre-fabricated or pre-cast technology. For WTC, we are using pre-stress technology. Slipform, sheer wall construction, are other methods that we deploy,” adds Mittal.
STRATEGY FOR SUCCESS
The government has engaged NBCC as the implementing and marketing agency for redevelopment of three colonies – Nauroji Nagar, Netaji Nagar and Sarojini Nagar. This is an aerial view of Nauroji Nagar.
Mittal does not believe in resting on his laurels. There’s a continuous drive to bite at more projects, which to others may seem, more than he can chew. In his words, “I am hopeful of accruing orders from all the states. Recently, we have got an order from the Assam government which is typically different as far as infrastructure is concerned. We have signed an agreement with Assam government to construct the World Trade Centre, an iconic building, at a cost of Rs 2,000 crore. After Assam, I am hopeful to bag substantial orders from Uttar Pradesh, Odisha, West Bengal and Madhya Pradesh. We are also overseeing the development of WTC at Nauroji Nagar in the national capital, which is being built on approximately 60 lakh sq-ft of built-up area, and will house 12 commercial towers in a state-of-the-art commercial hub spread across 25 acres. It will have all the modern facilities, an aesthetically-designed façade and a pleasing landscape.”
NBCC has a lot of activities going on in Delhi NCR. There is the redevelopment of Kidwai Nagar, Nauroji Nagar, Sarojini Nagar, Netaji Nagar, and the ambitious project redevelopment of Pragati Maidan scheduled to be completed next year. We are also constructing South Delhi Municipal Corporation headquarters, another signature tower.
The state-owned PMC firm is also planning to build more than one lakh affordable homes on its own land parcels, and on plots owned by the government and PSUs. “We are looking to build these homes over the next five years to support the government’s objective of Housing for All by 2022. This would entail a cost of Rs 10,000 crore, which will be shared between all the stakeholders. The housing projects would offer residential apartments with prices starting from Rs 10 lakh going up to Rs 50-60 lakh depending on the location of the project. We hope to make a profit margin of around 8-10% through these projects,” adds Mittal.
Its own land parcels are spread across the country in cities such as Alwar, Jaipur, Faridabad, Kochi, Patna, Kolkata, Bhubaneswar and Coimbatore that would be utilised to build affordable houses apart from land allotted by the government.
An edge that NBCC has is that it was made the land management agency for sick government companies like HMT, Hindustan Photo Films and ITI. Its efficient methods has led to HMT Watches offering NBCC a land parcel of 30 acre in Nainital for affordable housing. In Mumbai’s Wadala, NBCC is soon expected to start work on a 40-acre land parcel of the Finance Ministry to develop housing and office space. There will be a total of 2,000 houses of which, 30% will be for general public. Besides this, the firm continues to scout for work using land of sick PSUs, government departments and Railways for housing.
Mittal is happy that it has also gained the AIIMS project in Himachal Pradesh for planning, designing and construction worth Rs 1,138 crore. Its experience in building health infrastructure only added this to its kitty.
Mittal has recently been granted a one year extension in tenure. He ends the interview with a promise. “I hope to complete all the projects that have a deadline of Q1 2019.” Amen to that.