Rising like a Phoenix

Written by Noor Mohammad | Noor Mohammad | Updated: Jan 31 2011, 05:34am hrs
Hindustan Prefab Ltd (HPL), a pioneer in unconventional prefabricated civil construction work in India, has made a dramatic turnaround after years of sickness. The company reported profit in 2008-09, a first in 17 years, and has maintained its performance since then. The company now plans to foray into manufacturing of building structures like steel beams and pillars in collaboration with Steel Authority of India (SAIL), as also start its stalled prefab concrete unit.

A memorandum of understanding has been signed with SAIL for the steel prefab unit and a consultant would be appointed soon.

HPL has 28 acres of land in Jangpura, Delhi, now valued at about Rs 5,000 crore. But the company does not have much in cash reserves. That is why it has roped in SAIL as a partner for the new project.

SAIL will bring cash while we will leverage our technical expertise and land for equity sharing, HPL chairman Jaiveer Srivastavaa said.HPL also plans to modernise its concrete prefab manufacturing unit with an estimated investment of Rs 300 crore.

HPL, a brainchild of Indias first Prime Minister Jawaharlal Nehru, slipped into the red in the 1990s. Used to operating in a protected environment, the company was caught short when exposed to private competition brought in by the government as part of broader economic liberalisation programme during the decade.

The company started losing business to private players and soon the situation worsened to an extent that its cash generation was not enough to pay salaries. It had to seek financial assistance from the government to pay its overhead liabilities.

When Jaiveer Srivastavaa took over as HPL chairman on August 1, 2006, the company was still making losses. HPLs performance improved significantly by 2008-09 and it made an operating profit of Rs 9.38 crore. Its turnover jumped 428% to Rs 150 crore from the previous year. The companys annual sales revenue further grew to Rs 162 crore during 2009-10.

The company is expected to earn a gross revenue of Rs 180 crore in the current financial year. Our turnover should reach Rs 180 crore in 2010-11, Srivastavaa told FE.

After its manufacturing operations stopped, the company turned to civil construction work contracts. It now has projects worth Rs 2,000 crore in hand, spread across 17 states. It has opened five regional offices to monitor the contracted work.

Meanwhile, the company has started spreading its operations beyond the domestic market. It has bagged a major housing project in Sri Lanka.

The ministry of external affairs plans to build 50,000 houses in the Tamil-dominated areas of Sril Lanka, such as Jaffna and Kilinochchi, Mannar and Vavuniya. HPL has already been assigned the job of building 1,000 houses under a pilot project.

The company is, however, critically understaffed. A big chunk of our staff left the company during the bad days. Now we are trying to rebuild our staff strength, the HPL chairman said.

Cost savings of up to 30% can be made by using prefab structures in construction alone. Besides, this unconventional mode of civil work also allows savings of up to 8% in freight and 15% in energy consumption.

The prefab structures are suited for the construction of low-rise industrial, commercial and institutional complexes. Because of the pick-up in new construction in these sectors, demand for prefab structures remains strong. HPL is scripting a revival of its manufacturing business to get a piece of the rising market.