Essar Projects, the EPC arm of the Ruias-owned Essar Group that was focussed on in-house projects until 2010, is increasing its third-party contracts base. It is targeting a five-fold growth in this line to $6.8 billion in the next three years. Times are difficult, and like some of its industry peers, it also had to remove some slow moving/ shelved projects from its order book. Essar Project?s president & CEO Alwyn Bowden tells Shubhra Tandon of FE, says the company now has a clean order book of $4 billion and is looking for collaborative projects. Excerpts from the interview.
How different is Essar Projects of 2013 from some years ago when most of your business came from group companies?
In 2010, 18% of our revenues came from external customers and the balance from the work we were executing on behalf of our sister companies. In 2012-13, shares of external and internal revenues are at equal levels. However, by 2015-16, we want to reduce our dependence on the sister companies to 20%. Most of the work will be coming from international markets. From forming 4% of our revenues in 2010, the overseas business at the end of FY13 stands at 22%, we want our Indian and overseas business to be a 50:50 split by 2016. At present, 40% of our order book of around $4 billion is in the international arena.
Which international markets are you targetting?
The core bases at present are in South East Asia and the Middle East. We are looking to add Africa. We have already started picking up projects on a case-to-case basis outside these territories as well. In Australasia we have now got our second project in Papua New Guinea.
Industrial EPC projects have seen delays, cancellations or postponement. What has been your experience?
We have had to reverse some part of the order book as some of the projects had been slow or shelved last year, but we now have a completely clear $4 billion order book which is going to happen. That apart, what we have seen is that in sectors like oil and gas, the customers are more focussed on profitability and completion of the project, leading to consistent margins.
Are you also seeing delays in your receivables cycle?
Cash flow is an issue for every contractor. I was at a CII meeting recently and it is clear that the lag in receivables has increased by more than a month. We have similar time lines, but our overseas projects are paying on the due date. The issue really lies here, in India, where we have relatively much less exposure.
How do you see Essar Projects faring, going forward?
We are an EPC contractor, and everything we do will be to support that business. Where necessary, we can give security on supply chain, run a plant or partner the project. We are working with Jurong Aromatics in Singapore, where we also have a 4.9% stake in the project that binds us to the project?s outcome for a long period. So we are looking at a more collaborative approach to contracting, which will differentiate us from other players in the market.
