Bhopal-based Dilip Buildcon Limited (DBL) is one of the largest player in the road construction industry in India, having its presence in over 16 states. Its construction capabilities are in roads & bridges, mining, water sanitation, sewage, irrigation, industrial, commercial & residential buildings. DBL won an iconic project to construct a cable stayed bridge across the Zuari River in Goa. This is the second largest cable suspension bridge being built in India.
Founded by Mr. Dilip Suryavanshi, a civil engineering graduate, DBL, in its initial years of operation, focused on commercial and residential buildings, and later, in the early 90’s, forayed into water sanitation, sewage, etc. At the end of the 1990s, heightened activity in the road sector, led the company into road construction, where despite stiff competition from established players, it got a small road project.
Within six years of its entry in the road sector, DBL became the largest road construction firm in Madhya Pradesh. Backed by R&D, innovation, and quality standards, DBL set its sight on bigger projects. It improved its EPC capabilities and procured the best road building equipment from around the world. At present, EPC projects make up 80% of Dilip Buildcon’s order book. Apart from the road sector, the company is looking at low-cost housing, smart cities, mining, etc., where it sees a lot of opportunities.
Maria R, in an exclusive interaction with Dilip Suryavanshi, Devendra Jain, Rohan Suryavanshi & Karan Suryavanshi gathered inputs about the company’s future plans, strategies for growth, success mantra and their vision for 2020. Excerpts:
Currently, the pace of road construction is 25 km a day and we’re alone building 12% of this.
Mr. Dilip Suryavanshi
What is your assessment about the current business scenario in the road sector in India?
The current business scenario is very bright. If you look at the historical data, how the road construction has ramped up in the last five to six years. Both the Central and state governments have been doing a lot to build up road infrastructure every year. The Central government, for instance, in FY13 awarded 1900 kms of roads; in FY14 it awarded 3600 kms; in FY15, the awards went up to 8000 km; in FY16, it was 9000 km; and FY17 has already seen 15000 km of roads being awarded. So, one can say that road building activity has gone up eight times higher over the last five years.
In fact, for all the state governments infrastructure is a major push, be it housing, dams, metros, and across sectors, work is happening at multiple levels involving Central, state and the municipal. Minister for Road Transport and Highways Mr. Gadkari has stated that he wants to award more contracts in the next two years than they have given in the past three years, may be over 35000 kms of roads. He has also increased order activity in projects stuck in the past, and has restarted grants etc. Rules have been made simpler, and regulatory framework more environment-friendly. Basically, to sum it up, the government has taken a three-pronged approach: award more projects, restart projects that have been stuck, and improve on all the issues including regulatory framework.
The government introduced various initiatives/models to bring the road sector back on track, but still it is seen that a lot of projects awarded under HAM, EPC etc have not been started. What do you think are the major roadblocks and challenges for developers which hamper completion of projects?
While the government has done a lot, it is far from ideal as it needs to do a lot more. Sixty years of over regulation cannot be broken down in a year or two, though the government is breaking down the existing archaic rules and finding solutions. A lot of projects were awarded but have not started due to multiple reasons such as land acquisition/clearances, financial closures etc. New players with no history of running BoT projects are finding it difficult to step in as banks are not willing to finance them. Many developers who were already in bad shape took on new projects without completing the old ones. Sometimes, elections slow down work, or it could be the rains. Some projects get delayed depending on the current political scenario. Some problems can be addressed. We feel that deregularisation, and making rules for developers and contractors more open and transparent could be one way.
What does the government need to do to improve funding and bring back the confidence of the investors and contractors?
HAM addresses the interests of all the stakeholders such as the government and the bankers and the concerns of the developers. Under this, the government will pay 40% of the project cost during the initial five years through annual payments, and the balance 60% will be invested by the private player. This reduces risks and lessens funding needs. But this model had a slow start as bankers remained unconvinced about it given the very low equity participation by developers. Bankers are also reluctant to give loans to new players or players with high debt rates. But a reputed player like DBL which is well known for completing projects before deadlines and has a good track record and low debt, has never faced any problem in getting funds.
What about your current order book and the major projects in hand?
As of March 2017, it is about ₹17,568.3 crores. Currently, we are working in 16 states and are successfully completing projects everywhere well before time. Our focus is on timely execution and we are targeting a healthy growth of about 20% this year.
Currently, we’re working on many projects of which the most iconic project is the cable suspension bridge across the Zuari River in Goa and Uttar Pradesh’s largest HAM project. We bagged ₹545.40 crore cable suspension bridge contract from the Ministry of Road Transport and Highways last year. It is 50% larger than Mumbai's Worli Sea Link and is also the largest suspension bridge to be built by a private sector company.
For the technical expertise required in this project, we have partnered with Ukrainian firm Mostobudivelnyi Zahin (MBZ), which has a vast experience in construction of cable suspension bridges. Dilip Buildcon will have a majority stake of 70% in the joint venture firm while the remaining 30% will be held by MBZ. We’re expecting to complete the project before time, that is, in just two and half years’ time from now.
We’re also very happy to get the ₹2,016 crore road project contract in Uttar Pradesh from NHAI. It is the largest hybrid annuity project in the country as of now. The 4-Laning of the Lucknow-Sultanpur section of NH- 56 from 11.5 km to 134.7 km in Uttar Pradesh under NHDP Phase-IV will be completed in 30 months from the date of commencement. It will reduce travel time from Lucknow to the holy city of Varanasi and promote tourism in the region.
We have many big projects in hand which are expected to get completed before time. As a result of this, we’re anticipating growing 20-25% every year.
How do you rate the current business growth of Dilip Buildcon, and what are your strategies for further growth?
DBL is the fastest growing infrastructure development company of India. In the last decade, our revenues have grown by 103.29% CAGR. Our vision is to become the largest player in the Infrastructure sector by 2020.
Currently, we have many big projects in hand which are expected to get completed before time. We’re anticipating growth by 20-25% every year. DBL has registered 60% growth in revenue to ₹1,666 crores in the first quarter of the current fiscal. We’re looking to grow revenue and profit after tax (PAT) by 10-15% in FY18. As of March 2017, the gross debt of the company is about Rs. 3780 crore which we’re trying to reduce.
Our other big achievement is that in the road sector, out of the 25km per day of road construction targeted by the government, DBL alone is building 12% of this target. DBL is working on around 60 projects at a time while our competitors work maximum on 10-15 projects, so we are doing four times more in numbers.
We invest over ₹100-150 crores every year on buying new and advanced equipment from the major players of CE sectors.
How do you view the role of mechanization in construction industry? What is your equipment bank strength? Are you looking to add new equipment in your fleet?
DBL, since inception understands the importance of owning one's own equipment and got its first stone crusher in 1996, followed by excavators and dumpers. Today, DBL owns over 8,718 GPS-connected and geo-tracked construction equipment which have been operated by 17,000 trained drivers. The company invests over 100-150 crores every year on buying new and advanced equipment from the major players of CE sectors such as Wirtgen, Atlas Copco, Caterpillar, Volvo, Casagrande, CDE Asia, Metso and so on.
We are one of the largest manufacturers of sand and have many sand making machines on various sites as we prefer to adopt sustainable methods to create sand. Moreover, we also make bricks, signages, Geo green slopes and many other products in-house.
Technology plays a big role in faster & safer execution of the projects and also in enhancing their lifecycle; how do you find the potential of pre-cast and pre-stressed systems in the country and the role your company is playing in initiating usage of such innovative solutions?
We always believe in adapting advanced and sustainable technologies for quality and speedy construction. We have been embracing pre-cast and pre-fab technologies not only because it speeds up the construction work but also enhances the quality of the final output. We have backward integration and building up our in-house proficiencies. At our two precast factories, we’re producing precast products for our captive use. This technology is gaining prominence in India due to several reasons such as tight project schedule, rising labor & input costs, in-creased emphasis on quality and durability etc.
Our focus is on providing a good work environment to our workers both on on-site and at home. We’re taking care of their food, family and other necessities.
At DBL, our focus is also on going green in terms of using green products, solutions, technologies and equipment & machineries. Workers’ health & safety is our top most priority, when selecting products & equipment for construction. Our head office in Bhopal is a LEED green rated building as we aim to give a healthy work environment to our employees.
How do you keep your workforce up-to-date with best construction practices and mechanization?
We’re providing regular training to all our workers at our training center in Pithampur. We ensure that our operators get completely trained by the service engineers of OEMs which improves the productivity of the machines for better return of investment. In case of trouble shooting or when necessary, OEMs provide us full onsite support services.
Mr. Rohan Suryavanshi serves as Head of Strategy and Planning at Dilip Buildcon. He is responsible for business strategy and planning, financial planning and streamlining existing business processes and implementing enterprise resource planning (ERP). He believes that the initiative of the government to increase allocation in budget every year for the development and expansion of highways and roads across the length and breadth of India will fetch numerous benefits for not only the Engineering Procurement and Construction leaders like Dilip Buildcon, but also give a jump to infrastructure development.
What is the rationale behind selling 24 SPVs to the Chhatwal Group and what are your plans with the deal amount of ₹1600 crores?
We have taken the decision to monetize the entire road asset portfolio (the largest annuity portfolio in the country) as we want to focus on our EPC business rather than owning assets. Hence, we entered into a pact with Chhatwal Group Trust (Shrem Group) to sell our 24 subsidiaries of a total project value of ₹10,500 crore. Out of 24 projects, 14 are operational and 10 under construction, for which we will receive about ₹1,600 crore over the next two years.
It is not just the largest deal in the sector in terms of value of assets or in terms of equity, but most significant fact is that no other buyer has acquired such a large portfolio that also includes projects under construction.
We have many plans with this deal amount and the foremost is to take off a lot of debt from our books. Beside this, we will make investment in the infra projects, especially in the road sector, which would give additional strength to the company for expansion and growth.
With the government pumping more funds for building necessary infrastructure across the country, what are other business areas you’re contemplating to diversify?
Today, we have all the necessary expertise for construction and our focus is all about quality and timely completion. We’re building national level important infrastructure like dams, canals etc. and all in record time. We have entered the mining sector as well. We are witnessing opportunities from smart cities and low-cost housing sectors, and also keeping an eye on new ones. We’re open to diversify from wherever the opportunities come and keep exploring newer business verticals.
Our competitors are working on 10-15 projects at a time but we’re working on around 60 projects i.e four times more in number.
Please tell us about your tie-up with the IT major IBM.
We have tied up with IBM for Strategic & Transformational journey to address the business needs. IBM will do the process standardization, operational excellence & ERP SAP HANA for cloud, implementation to leverage role based access to critical data, applications, analytical tools, and effectively manage the largest fleet of our vehicles and machineries. It will streamline DBL's processes across procurement, projects, asset management, finance, and HR, and improve stakeholder collaborations. This will help to provide the core support service to drive business value, adoption, alignment of business and IT, strong and sustainable growth by having all the business data & dashboard available online.
Today, we’re a renowned player in the Infra industry because of our good practices and strategies. Our practice is to always conduct our own checks before and after the bids for our own satisfaction. We consider all aspects like land acquisition, environmental clearance, local litigations if any, etc. to avoid delay once the project gets started. We aim to complete our projects before time because this will not only help us collect rewards from the government but also enhance our reputation among the stakeholders. A good image has always helped us to win contracts and grow.
1988-89 – Founded Dilip Builders as a proprietorship company
2006 – Company incorporated as ‘Dilip Buildcon Private Limited’
2009 – Earned revenue in excess of ₹1,500 million
2010 – Converted from a private limited company to a public limited company and consequently name changed to Dilip Buildcon Limited. Also bagged first order of value over ₹5,000 million, and the first order outside Madhya Pradesh. Recognized as the largest Caterpillar fleet owner of machines and engines of Central India by Caterpillar India & Gmmco Limited.
2011 – Recognized as one of biggest customers of Metso Mining & Construction Technology in Central India.
2012 – The Investor Selling Shareholder invested ₹750,005,000 by subscription to 2,400 Compulsorily Convertible Preference Shares and 100 Equity Shares. The Company earned revenue in excess of ₹10,000 million, and outstanding order book crossed ₹10,000 million. In the same year, it received ISO 9001:2008 certification.
2013 – Awarded for achieving highest upliftment of Bitumen during January to December by Indian Oil Corporation Limited, Bhopal Division Office.
2014 – Earned revenue in excess of ₹20,000 million and received OHSAS 18001:2007 and ISO 14001:2004 certifications.
2015 – Outstanding order book crossed ₹50,000 million. Completed construction of over 5,000 lane kilometres of road projects since FY 2009. Received ‘Best Performance Award’ from the Bhopal Sub Regional Office of the Employees’ Provident Fund Organization in relation to compliance under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Certified by Wirtgen Group as being the biggest fleet owner of Vogele Pavers in India.
2016 – Received first EPC bonus from NHAI for early completion of the Jhalawar project in Rajasthan. Declared as a ‘selected bidder’ in relation to EPC projects in Andhra Pradesh amounting to Rs.7407 million from NHAI. Many awards, accreditations and accolades won, and bagged many new projects including India's second largest cable suspension bridge in Goa.
2017 – Dilip Buildcon sold 24 road assets of a total project value of ₹10,500 crore to the Chhatwal Group Trust, which runs the Mumbai-based Shrem Group.