Tata Projects reinvented
After three decades of a near- inconspicuous presence, Tata Projects Ltd (TPL) is currently growing at an enviable pace to become one of the fastest-growing EPC companies in the country. Vinayak Deshpande, MD, TPL shares the secret behind the company’s success.
BY IMRAN MIRZA
"Being a low capital-intensive company, with no manufacturing plants, our entire focus is on people skills and competencies," says Deshpande, cutting straight to the chase. "Getting good quality people and retaining them is what drives our growth.”
After finding the key to TPL’s phenomenal success, Deshpande has quickly learned the ropes and consolidated the company’s position since he took over the reins of the company in 2011. Not surprising then that, defying the slowdown and near-paralysis in new infrastructure development in the country, TPL is on a growth trajectory. At a time when its competitors are struggling to add to their order books and maintain top and bottomlines, TPL has managed to bag some big-ticket projects.
And this success is not an overnight phenomenon. The foundation for this growth was laid much earlier in 2005, when the company made disruptive changes in its organisational structure and business processes.
Although TPL has been around since 1979, it’s only recently that it has been making headlines. The Hyderabad-based EPC firm has been outperforming its peers by growing at an enviable CAGR of 23 per cent in the last five years.
Prior to 2005, TPL was a small entity in the $100-billion-plus, salt-to-software conglomerate Tata Group, taking up mid- to large-sized EPC projects of about Rs50 crore -500 crore. At that time, the company lacked focus and was taking up projects in as many as 14 different verticals, which included construction of hotels and food processing plants.
When Deshpande joined TPL, he had the tough task of not just sustaining this growth momentum in an economic season that was shrouded with clouds of slowdown and drought of new projects, but also taking the company to new frontiers. Much to his credit, TPL continued its growth streak.
Deshpande attributes the success of the company to its strong fundamentals. “Our strategic focus has indeed helped us. We have anticipated the needs of specific sectors and their technical requirements, and accordingly augmented our teams with the best skilled technical manpower, while improving our processes,” he asserts.
To streamline its competencies, TPL decided to focus on seven core infrastructure sectors and set up strategic business units (SBUs) for each of these sectors. After limiting itself to power and construction for many years, TPL ventured into oil, gas and hydrocarbon (OGH), metals and minerals, and railways in view of the investments planned by government, PSUs and private players. The result: TPL managed a topline CAGR of over 60 per cent during the years 2006 to 2008—its best since inception.
TPL managed to achieve this growth by working on developing competencies in its core focus sectors through a well-structured process. The company first did an assessment of market needs. Simultaneously, it worked on developing multifunctional skills in-house. TPL gradually started by bidding and executing projects under current SBUs, before allowing each SBU to undertake projects independently.
“The new process approach, stress on safety, quality and integrity enabled us to gain trust of our customers enabling our growth and timely execution of projects,” explains Deshpande.
1. 4506 Cu.M blast furnace for NMDC’s 3 MTPA steel plant at Nagarnar, Chattisgarh: equipped with the latest bell-less top charging equipment and pulverized coal injection technology to reduce operating costs and improved performance
2. 4060 Cu.M blast furnace for SAIL’s 4.2 MTPA steel plant at Rourkela: integrates the modern plate-cooling technology for high injection of coal and oxygen
3. 2×800 MW coal-based thermal power plant for APPDCL at Krishnapatnam, Nellore, Andhra Pradesh: complete BoP System including complete plant civil and structural work
4. 2×500 MW coal-based thermal power plant for MAHAGENCO, Bhusawal: complete BoP System
TPL has undertaken projects for several group companies such as Tata Steel and Tata Power, and has strengthened its position in these markets. In 2008, a TPL-led consortium bagged a project from Steel Authority of India Ltd (SAIL) — the public sector steel giant — to design, supply and construct a 4,060 cubic metres blast furnace at its Rourkela steel plant.
TPL has also successfully expanded its railways portfolio. The company recently bagged the first major contract awarded under the eastern dedicated freight corridor project worth Rs3,300 crore in partnership with Aldesa of Spain. The contract involves construction of 337 km of twin-track railway lines and 14km of single-track between Bhaupur and Khurja in Uttar Pradesh.
It is no small achievement that, despite more than 80 project sites and an order book of nearly Rs8,000 crore, TPL has managed to stay debt free and profitable. "Margins are a function of execution timelines. When you finish a project before time you save on cost and have timely revenues. To help us complete our projects on time, we are constantly evolving our supply chain, technology, delivery methods and execution designs. Cost-effective global sourcing, value engineering, and proprietary project management tools, have given us an edge. We have innovated construction processes too," reveals Deshpande.
“Today our customers are more like our partners and have a positive feedback about TPL, while we are constantly innovating and implementing new technologies, to keep us ahead of competition,” he asserts.
Even though Deshpande has reiterated that attracting and identifying good talent are key to TPL’s success, he adds that it’s not the end of the road. The challenge, once you have talent on board, is to retain it. Indeed, the Tata brand has always been an attraction for new talent. "Skilled manpower has not been our problem," claims Deshpande. "We, as a Tata group company, take good care of our employees, and have internally groomed most of our technical manpower which is dedicated, loyal, and has been with us for years. Even our contractual manpower is taken good care of. We take care of their PF, medical and children’s educational needs at various sites, thus developing a long-term relationship."
LEVERAGING THE TATA BRAND
Being a part of the $100 billion Tata Group has its own benefits. Tata group, with its 140-year-old history, is one of the most trusted brands in the country and TPL is using it to its competitive advantage.
Whether it is hiring the best talent, forming strategic partnerships with other companies or bidding for new projects, the Tata brand name is a major advantage for TPL. The presence of group companies in sectors such as steel and power acts as an added plus for TPL. The association with Tata Consulting Engineers, a leading player in engineering consultation has also worked well for TPL by allowing it to take up complex engineering projects.
TPL has an ambitious plan of achieving a topline of Rs100 billion in the next three to four years. While it seems to have all the ingredients needed to make this happen, with the current market dynamics, isn’t this target too far-fetched? Brushing aside the current slowdown, Deshpande seems quite upbeat about the sector’s potential.
“The sector is poised for good growth. The basic fundamentals are strong. Growing urbanisation in the country needs infrastructure worth about US$1 trillion in the 12th Five-year plan. Banks alone cannot fund this growth. The government is promoting Infrastructure Development Funds (IDFs), which shall provide the much needed resources,” he asserts. “Thus you have a demand on one end and improved resources availability on the other. This is likely to be a game changer.”
The infrastructure sector is primarily driven by government spending and an economic slowdown impacts it adversely. In the last few years, higher interest rates have added to the cost of construction, thus construction and EPC companies were adversely impacted. “Long-term funds had virtually dried up. The industry went in for its own funds to meet its commitments; EPC companies that did not have adequate funds or were relying on borrowed funds incurred losses. Project execution by them too suffered in the process. We were able to withstand these stresses, and continued on a directed growth path,” says Deshpande.
While TPL has managed to turnaround the situation by taking some right strategic decisions at the right time, it would have to stay on its toes to keep the momentum going. How Deshpande manages to sustain this growth in the face of ever-changing market conditions and increasing competition in the EPC space from foreign companies, will depend a lot on how he continues to reinvent the company.