Upbeat on infra growth opportunities in India: Tata

The Tata group’s engineering, procurement and construction company, Tata Projects, hopes to grow in “double digits” on the back of government’s reform measures for the infrastructure sector. The company, which has an order backlog of Rs 54,000 crore, which includes the new Parliament building hopes to complete it ahead of schedule, Managing Director Vinayak K Deshpande, told ET’s Rachita Prasad in an exclusive interview. While he is upbeat on the infrastructure opportunity in the country, he adds a word of caution of slow dispute resolution in the sector which may have led to “few lakh crore” stuck in these disputes. Edited excerpts of the interview follows: How are things looking in the infrastructure space after the Covid experience? There is a greater realization that infrastructure is very critical. If we have to be a $5 trillion economy, and we have to get there as quickly as possible by 2024-25, there is a greater realization that infrastructure development is really critical. Secondly, once a country has world class infrastructure, productivity dramatically improves. If India wants to be competitive on different platforms and be globally relevant then it is important to have world class infrastructure to raise the national productivity.. So, I think very rightfully, there is the realization that we need to grow infrastructure very rapidly. We have the national infrastructure pipeline which outlines Rs 111 lakh crores of projects. That outlay is big; it is 5-7 times the outlay in previous years. The government has also announced setting up of the development finance bank with the capitalisation of Rs 20,000 crore. This bank would have sovereign guarantees and can leverage this equity capital and can raise a lot of capital. This becomes another vehicle by which they can actually fund the growth. The government has done whatever is required to ensure that there is adequate funding that can be organized for projects. This does not mean that the ‘Public-Private Partnership’ (PPP) model will go away. The government of course wants the private sector to participate in this but the private sector has its own problems. These problems need to be taken care of. There are two types of investors in infrastructure-- financial investors and strategic investors. Financial investors are not doing construction work but they are interested in running the asset for 20 years; they mostly enter when the asset is operational and so their investment doesn't go directly into creating new assets. The other category is construction and engineering companies; many of these efficient construction companies today have balance sheets in such a shape that they cannot borrow money. They are stressed. Something needs to be done to improve the balance sheets of local construction players. One of the things that can help is efficient dispute resolution there. Bank guarantees are choking them so we quickly need to move to something like surety bonds. The other thing to do is to make sure that there are InvITs and other platforms that can raise money and pump in money to new projects. On one side there is the government engine with the bank, and on the other side there is the private sector backed with banks and insurance companies. These dual engines, we will do well.Strategic players are not in the best of health. Dispute resolution has been a challenge for the sector; how is it moving?Right from the time a dispute starts till the time you see the legitimate party getting its dues, the improvement in the process has been only 40% - 50%. What has improved is the handling of disputes under arbitration; we have a timetable within which it must be resolved. Many disputes are being resolved in 12-18 months but then despite having gone through the arbitration process it is challenged in the court. The court process can last 3-5 years. There should be limited situations in which it should be challenged, and if challenged, it should be disposed of soon. The amount that is stuck in disputes is huge for the industry; the number would be in few lakh crore. If this amount is released it will give immediate boost to liquidity and resolve the non-performing assets of many banks and help many private companies come out of stress. It can only change with some regulation or with guidelines from the government because it causes long term damages.What is Tata Projects’ order book looking like and what is the long term growth strategy?We have an order backlog of Rs 54,000 crore. Our average annual revenue is Rs 15,000 crore- Rs 16,000 crore. We believe that the current budget, the infrastructure deficit in India and the opportunity means there is a possibility for the company to grow in double digits. We want to grow sensibly; we don’t want to be known only for size alone, but for our performance as well. We are focusing on technology and innovation.What sectors would be the key drivers?We are in industrial systems, core infrastructure and urban infrastructure; all of them are growing. Most engineering and construction in India are moving at high speed. And we have a diversified business, so we're doing well and will continue to grow in a very balanced manner.Tata Projects bagged the order to build the new parliament building for India. How is the execution planned?We feel blessed to have bagged the Parliament building project. We are very proud to be doing this and we have a very good and young team working on it. It has a very tight time schedule but we want to do it a little bit ahead of time. It's a fully integrated project so we want to make sure that the best of the technologies are used to create the best experience in the building. It’s not just work, but it is a passion. The official date for completion is in November 2022 but we think we should finish before that. The challenge is that it is in the center of the city, right next to the parliament, so we want to make sure that we don’t disturb the city or the surroundings. We want to do it in a very clean, green and sustainable manner. We are taking all precautions for dust emission control and material movement. We are working to the plan and making sure we pre-arrange everything so that not a day is lost. We are partnering with the best Indian contractors and system suppliers. What is the order pipeline looking like?We are looking at the scale of the projects, because sometimes you are not cost effective in small projects. But I think for us, what is important is, if we are adding value and create something which is differentiated, even if it is a small project. Will Tata Projects look at PPP projects?We have so far been a focused engineering, procurement and construction company. The Tata group has other companies which are developing infrastructure-- housing, commercial and urban. We will focus only on EPC projects. Any plans for fundraising?We are holding ourselves well, so no immediate plans.At some time, can we expect Tata Projects to be listed?That would be a decision the group will take. 2020 saw a lot of migrants going back home. While many have come back but the general understanding is that we are moving towards the gig economy. How has the last year impacted you in this context and how are you ensuring you have the right talent?We had workers exiting, but slowly they came back and by September we were at our usual capacity. At the same time we looked at our manpower-- across sites and corporate offices-- to see how we can reduce costs. We have reached a good balance on how we can reduce overheads without being less productive.

from Economic Times https://ift.tt/3sT7QO9