:: Competitive Strengths
RIL believes that its principal competitive strengths are:
Experience and expertise in the construction and management of Water and Waste Water Infrastructure projects:
RIL believes that its experience and expertise in planning, designing and constructing Water and Waste Water Infrastructure projects is a competitive strength that differentiates the Company from many of its competitors when bidding for such projects. Constructing and operating these infrastructure projects has been a significant area of focus for the Company’s business.
RIL has an in-house design and engineering team headquartered in Mumbai that specialises in designing Water and Waste Water projects. The team is equipped with the latest design tools, including design software, computers and technology. For example, the Company uses a sequential batch reactor technology (commonly known as C-Tech) for sewage treatment plants. It is an aerobic biological process whereby aeration, settling and decanting happen in a single tank that eliminates the inefficiencies of a continuous system like activated sludge process and extended aeration. The focus of the team enables the Company to build on its past experience in the Water and Waste Water sector and to maintain its differentiated expertise in this area.
Between 1 April 2002 and 31st Dec 2011, the Company completed 113 Water and Waste Water projects valued at Rs 6450.90 million and are currently executing 91 Water and Waste Water projects of an estimated value of Rs 49422.80 million. The Company’s achievements in this area have been recognized through six awards: The Environmental Leadership Award by the United States – Asia Environmental Partnership in 2004, the Safety, Health and Environment Performance Award by the Confederation of Indian Industry in 2005, the Water Digest’s Water Awards 2009-2010 in the category of Best Water Conserver – Waste Water Management, the Global Greentech Environment Excellence Award 2010 in the silver category of Greentech Environment Excellence Award, and the Water Awards 2010-11 as the ‘Distinguished Water Company’ by the Water Digest .The company also bagged the Gold Category of the prestigious ‘Greentech Safety Award 2011’. The Company believes success in this sector has enhanced its reputation as a significant player in the Water and Waste Water sector.
RIL’s construction business operates in diverse sectors and has a pan-India presence.
RIL provides engineering, design, procurement and construction services across its six industry sectors - Water and Waste Water; Buildings, Irrigation, Industrial construction, Transportation and Power Transmission and Distribution. This approach enables the Company to keep its construction business diversified and reduces its dependence on any one sector or type of project. In addition, the Company’s broad range of clients within the government and private sectors ensures that it is not dependent on a limited number of clients.
RIL is also geographically diversified in its business operations. The Company’s five zonal offices and three regional offices enable it to service clients throughout the country and facilitate participation in projects in all regions of India.
The total number of new orders for the Company’s construction business and the average order size for the construction business has been consistently growing.
RIL has been consistently receiving orders for its construction business as shown in the table below. While the average order size in the construction business increased from Rs 31 million in Fiscal 2003 to Rs. 1150 million in Fiscal 2011(upto March’11), the number of orders per employee has more than doubled during the same period.
Period |
Number of Orders |
Orders
(Rs. in million) |
Average Size of New Orders
(Rs. in million) |
Number of Employees(1) |
New Orders per Employee
(Rs. in million) |
Fiscal 2003 |
49 |
1,519.73 |
31 |
214 |
7.10 |
Fiscal 2004 |
52 |
2363.11 |
45 |
250 |
9.45 |
Fiscal 2005 |
46 |
5,771.35 |
125 |
508 |
11.36 |
Fiscal 2006 |
77 |
10210.85 |
133 |
904 |
11.30 |
Fiscal 2007 |
70 |
15,279.90 |
218 |
1,032 |
14.80 |
Fiscal 2008 |
113 |
35,412.26 |
313 |
1,384 |
25.59 |
Fiscal 2009 |
56 |
39,927.14 |
713 |
1,444 |
27.65 |
Fiscal 2010 |
37 |
34,220.20 |
925 |
1,742 |
19.64 |
Fiscal 2011 |
53 |
60,965.99 |
1150 |
2,429 |
25.10 |
| Fiscal 2012(upto 31st Dec’11) |
47 |
49,669.41 |
1056.80 |
2,839 |
17.50 |
|
- Number of employees at the end of each Fiscal year or fiscal period.
Strong and diverse Order Book
The value of RIL’s Order Book as on 30th Sep 2011 is Rs 118688.30 million. In addition, the Order Book is diversified across all the sectors. The Company’s execution capabilities have also seen steady growth and by way of leveraging on its planning and execution expertise, the Company has ensured that its orders are completed within the estimated budget and on schedule. Furthermore, the Company believes that a large order book will increase its operational efficiency by allowing it the economies of scale.
Strategically positioned to realize opportunities in the infrastructure sector
Infrastructure growth in India has been propelled in the past decade through reforms and benefits extended by the government, accompanied by a host of private investments. Increased allocation of resources to the infrastructure sector, facilitation of incremental lending to the infrastructure sector and increased social sector projects benefiting infrastructure development are contemplated as part of the Eleventh Five Year Plan. RIL believes that the increasing level of investment in infrastructure by the Central and State Governments and private industry will be a major growth driver for its business in the future and its demonstrated expertise and experience in the infrastructure segment will provide the Company with a significant advantage in pursuing such opportunities. The Company believes that it is in an advantageous position because of its operating history, industry knowledge, experience and familiarity with civil and infrastructure construction projects.
Qualified and experienced employees and proven management team
RIL has a qualified and trained workforce consisting of vice presidents, general managers, managers, engineers, technical staff and non-technical staff. As on 31 Dec 2011, the Company had 2839 full time employees, of which 1358 are engineers, including 20 members of its management team. The skill sets of the employees give the Company the flexibility to adapt to the needs of its clients and the technical requirements of the various projects that it undertakes. The Company is committed to developing the expertise and know-how of its employees through regular technical seminars and training sessions organized or sponsored by the Company.
The Company’s management team is qualified and experienced in construction and infrastructure development, and has substantially contributed to the growth of its operations. In particular, Mr. YR Nagaraja, the Managing Director, is a civil engineer who has over 24 years of project management experience. The Company believes that the strength and quality of its management has been instrumental in the implementation of its business strategy.
Sustained investment in equipment and fixed assets
RIL has invested in modern construction equipment that would facilitate in meeting the requirements of a broad spectrum of construction activities. Such an equipment base also gives the Company the capability to design and execute projects of any scale. The Company has a skilled employee resource that has the requisite expertise and experience in the use and handling of modern construction equipment and machinery. RIL believes that owning and managing a large portion of the equipment it typically uses on projects gives the Company a competitive advantage and helps it achieve higher operating margins.
:: Business Strategy
RIL’s objective is to be a world class construction and infrastructure development company. To achieve the objective, the Company will continue to improve on and consolidate its position by implementing the following strategies:
Focus on high value projects in the construction business to benefit from economies of scale
In the construction business, the Company intends to focus on undertaking projects having a high order value of Rs 1 billion and above in value. As on March 31 2011, the Company had 53 projects in its Order Book with a value higher than Rs 10 billion. Projects with a high order value typically have a smaller percentage of overhead cost as a percentage of total cost and therefore provide a greater potential for profit.
Projects with a high order value are also, in the current market, subject to less competition. The pre-qualification and financial entry barriers for pursuing such projects result in a limited number of competitors being able to bid for such projects. The Company believes that these high entry barriers make this an attractive sector to participate. As its financial condition and pre-qualification capabilities have improved in recent years, the average bidding value of the Company has steadily increased. This demonstrates the increasing ability to bid for and undertake high value projects. RIL aims to firmly establish itself as a player in the large order size sector by successfully executing high order value projects so that the Company can take advantage of these higher barriers to entry, lower levels of competition and higher profit margins.
Diversify the Company’s construction business into more complex and multi-disciplinary projects, which tend to have a higher contract value and the potential for better margins.
Leveraging on its existing engineering and execution capabilities in diverse areas such as civil, structural, piping, water treatment and electrical engineering, RIL intends to undertake more complex and multi-disciplinary projects such as power transmission and distribution projects, industrial construction projects and airport terminals. Complex and multi-disciplinary projects tend to have higher contract values compared with complex and sector specific projects on a less scale, and also offer the potential to realize better margins. RIL is currently constructing its first power transmission and distribution project in Madhya Pradesh, its first major industrial construction project in Orissa and also its first airport terminal at Chandigarh through 70:30 joint venture collaboration with Srishti Constructions.
Enhance its design capabilities
RIL currently has design capabilities for the Water and Waste Water and Irrigation sectors, which enable the Company to provide turnkey construction services in these sectors. The Company intends to enhance its design capabilities in other sectors such as the Institutional Building Construction and Transportation sectors in order to extend turnkey services.
Reduce costs of materials through backward integration and importation
The construction industry is subject to periodic shortfalls in the supply of bulk construction materials such as cement, steel, concrete and pipes. To address this shortfall, the Company is pursuing two strategies. First, the Company seeks to reduce supply costs by importing supplies from overseas suppliers at a less price. Second, the Company has in-house capabilities to produce certain construction materials, such as mixed concrete, aggregates and asphalt, which would enable it to control the quality of the materials used and ensure timely delivery of materials required for the projects undertaken.
Achieve higher operating margins by acquiring further capital equipment and other strategic assets
The Company’s strategy is to continue to acquire core equipment that is required for the projects. The continued acquisition of such equipment will enable the Company to achieve higher operating margins. .
Expand RIL’s developer business by undertaking more projects in the sectors in which the Company is already engaged
In recent years the Government has laid more emphasis on infrastructure development through enhanced Five-Year Plan allocation and encouraging PPPs. PPPs offer significant advantages in terms of attracting private capital in the creation of public infrastructure as well as in improving efficiencies in the provision of services to users. BOT/BOOT/BOO projects offer attractive opportunities to developers because such projects provide long-term sources of revenue. Concession periods for BOT/BOOT/BOO projects generally range from 15-99 years. To take advantage of such opportunities, RIL has leveraged its experience in construction business to establish a developer business. In Fiscal 2009, the developer business generated Rs. 817.60 million in revenue and as on 31st March 2011, the Company’s developer business generated Rs. 6376.70 million in revenue. Thus far, the developer business has been engaged in designing, financing and building of industrial parks, residential and commercial properties, transportation terminals and roads. In addition, the Company has been actively pursuing PPP projects, particularly through its various subsidiaries. RIL believes the Company is well positioned to benefit from the continued use of the PPP model.
Diversify RIL developer business into other sectors
A fundamental aspect of the Company’s business strategy is to engage in projects from a range of sectors to avoid dependency on one or a few sectors. In view of BOT/BOOT/BOO projects offering long-term sources of revenue, the Company intends to apply this philosophy to its developer business. Therefore, the Company is considering diversifying its developer business into other sectors such as power, WWW, marine works, mechanized parking, and cargo& bulk handling terminals.
