How Vikran pioneers growth in India's EPC sector
“Hum Ishwar ke Banday hain (we are servants of God), and we strive to maintain an anger-free environment across our offices and projects as well,” says Rakesh Markhedkar, CMD of EPC firm Vikran Engineering Limited.
Hailing from a small village, Champa Khedi, in the Vidisha district of Madhya Pradesh, with a population of fewer than 600 people Markhedkar grew to become the first Indian CEO of a British EPC giant in India, L&T, and set up his own venture at the age of 50. Focusing on three verticals – power, railways, and water – Vikran Engineering has grown from zero to a Rs790-crore company in 7 years, with projects executed in 22 states across India. But for the Covid-period glitch, the company has shown consistent growth.
“We provide end-to-end services from conceptualisation, design, supply, installation, testing, and commissioning on a turnkey basis and have a presence across multiple sectors,” says Markhedkar, an alumnus of BITS Pilani and IIM Bangalore. Having started its operations in Madhya Pradesh, the company gradually expanded over time to complete projects in 22 states across India. As of now, it is executing 34 projects across 17 states, aggregating orders worth Rs3,957 crore. It has already built 10 Extra High Voltage (EHV) substations of up to 765kV, which power sector analysts say is a unique achievement, as it typically takes 30-35 years to develop this capability.
Markhedkar explains that his 13-year tenure at L&T was a significant learning experience, as he worked across the world, including in extreme weather conditions such as -30 degrees Celsius. The year 1995-96 proved to be a turning point in his career, as he was selected for the elite Management Leadership Programme (MLP) and, at the age of 37, had the honour of being appointed CEO.
He returned to India in 2005 to fulfil his family responsibilities as a son and a parent and worked with four different loss-making companies – EMCO, KEI, Bajaj Electricals, and Era Infra – successfully turning them around. This earned him the distinction of being a turnaround expert.
“I then decided to be on my own and started my entrepreneurial journey at the age of 50 by taking over a small company, which made us eligible for pre-qualification,” he explains. Vikran started with joint ventures, and its first project was a substation contract in Madhya Pradesh. Over the years, the company has successfully executed multiple system-strengthening projects, including orders under the Rajiv Gandhi Grameen Vidyutikaran Yojana, Integrated Power Development Scheme (IPDS), Deendayal Upadhyay Gram Jyoti Yojana (DDUGJY), and Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya).
The Union government has committed to ensuring that all rural households in the country have access to safe and potable tap water in sufficient quantity and of a specified quality on a regular and long-term basis. To achieve this goal, the Jal Jeevan Mission (JJM) was launched in August 2019 in collaboration with the states.
Since the inception of Jal Jeevan Mission, significant progress has been made in improving access to tap water for rural households. Vikran Engineering is executing projects under JJM in Uttar Pradesh, Madhya Pradesh, and Chhattisgarh. In Fiscal 2024, it undertook projects worth Rs387.34 crore in the water infrastructure vertical. Its clients in the government sector include NTPC Limited, Power Grid Corporation of India Limited, South Bihar Power Distribution Co Ltd, North Bihar Power Distribution Co Ltd, Transmission Corporation of Telangana Limited, Madhya Pradesh Power Transmission Company Limited, Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited, District Water and Sanitation Mission (PHED), and State Water and Sanitation Mission (SWSM). Additionally, the company is working on projects for Assam Power Distribution Company Limited and the Danapur division of the East Central Railway.
Market opportunity
According to a CRISIL Report, to service a large installed generation base, investment in the transmission sector is estimated to cumulatively reach Rs2.5-3.5 lakh crore over fiscal 2025-29. Investments in the sector are expected to be driven by the need for a robust and reliable transmission system to support continued generation additions, the strong push for the renewable energy sector, and rural electrification. Further, the need for a robust transmission system to support generation additions, the renewable energy transition, and rural electrification will fuel investments.
The transmission sector, a crucial part of the power industry, requires greater attention to meet the growing demand for electricity and the expanding generation capacity. Robust generation capacity addition over the years and the government’s focus on 100 per cent rural electrification through last-mile connectivity have led to extensive expansion of the T&D system across the country.
The total length of domestic transmission lines rose from 413,407 circuit kilometres (ckm) in Fiscal 2019 to 485,544 ckm in Fiscal 2023. Substation capacities in the country grew from 899,663 MVA in Fiscal 2019 to 1,251,080 MVA in Fiscal 2024, at a CAGR of 6.8 per cent. The growth in substation capacities has been primarily in the 220 kV, 400 kV, and 765 kV segments, contributing to 32, 41, and 24 per cent of incremental additions between Fiscal 2019 and Fiscal 2024.
In the water supply and sanitation sector, during Fiscal 2019-24, total infrastructure investment amounted to Rs4.4 lakh crore, which is expected to grow by approximately 2.3 times during Fiscal 2025-29, reaching Rs9.9 lakh crore. This growth is largely driven by government support through various schemes such as Swachh Bharat Mission (SBM), Jal Jeevan Mission, and the National Mission for Clean Ganga (NMCG). Additionally, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is focused on the development of water supply and sanitation facilities, among other infrastructure improvements in urban regions.
“Our government and public sector contracts are sourced from a wide range of entities across geographies,” says Avinash Markhedkar, younger brother of Rakesh. “Our involvement in a variety of projects, ranging from extra high-voltage transmission lines to water treatment plants to railway electrification, helps maintain a steady flow of business opportunities and mitigates sector-specific risks, apart from reducing excessive reliance on any single revenue stream,” continues Avinash, who has over 34 years of experience. With a pan-India presence supported by 195 sites and store locations as of 31 August 2024, the company offers a range of EPC services.
Vikran Engineering provides turnkey solutions for water infrastructure projects, such as surface and underground drinking water projects. “We are also involved in the railway infrastructure sector, particularly in railway electrification,” says Avinash, a BE (Mechanical) graduate from Samrat Ashok Technological Institute, Vidisha. The company has successfully completed overhead electrification and signalling systems.
During Fiscal 2019-24, rising investment expenditure across major agricultural states, coupled with the central government’s focus on schemes such as Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), the Accelerated Irrigation Benefits Programme (AIBP), and the Command Area Development and Water Management (CAD&WM) Programme, attracted a total investment of approximately Rs5.2 lakh crore. Looking ahead, an estimated Rs7.7-7.9 lakh crore investment is projected over the next 5 years (Fiscal 2024-28), representing 1.5 times increase over the past 5 years, driven by state governments’ push to expand irrigation penetration, according to a CRISIL report.
Vikran Engineering is executing 12 ongoing water infrastructure projects in states such as Madhya Pradesh, Uttar Pradesh, and Chhattisgarh under the government’s Jal Jeevan Mission initiative.
“With the increasing focus on water sector projects from the government, we believe we are positioned to capitalise on these opportunities and expand our portfolio in the water infrastructure sector,” says CMD Markhedkar.
“Our strong balance sheet enables us to fund our strategic initiatives, pursue opportunities for growth, and better manage unexpected cash flow variations,” says Ashish Bahety, CFO of Vikran Engineering. The company’s revenue from operations grew by 49.56 per cent to Rs791.43 crore for Fiscal 2024 from Rs529.18 crore for Fiscal 2023. Profit after tax increased by 74.67 per cent to Rs74.83 crore for Fiscal 2024 from Rs42.84 crore for Fiscal 2023, he says.
Its order book grew from Rs517.34 crore as of 31 March 2022 to Rs2,114.80 crore as of 31 March 2024. According to the CRISIL report, Vikran Engineering has achieved the fastest growth in profitability, with a 236.94 per cent CAGR increase in PAT and a 130.02 per cent CAGR increase in EBITDA between Fiscal 2022 and 2024.
Vikran Engineering has executed multiple projects for key customers such as NTPC, Transmission Corporation of Telangana Limited, Madhya Pradesh Power Transmission Company Limited, and South Bihar Power Distribution Co Ltd. Further, to gain insights into market trends for raw materials and equipment, Vikran Engineering maintains long-standing relationships with its suppliers and service providers, says Bahety, an ex-Kalpataru professional.
Asset-light model
Vikran Engineering follows an asset-light model that allows for efficient utilisation of capital, says Dibyendu Ray, COO of Vikran Engineering. “We take equipment on rent from third-party lessors, which helps us reduce our fixed costs and makes the execution of our projects cost- and logistics-efficient. It also allows our management team to focus on the core functional areas of business rather than managing and maintaining such in-house assets,” says Ray, who was previously associated with BARC, Siemens Limited, Sterling and Wilson, and KEC International Limited.
Vikran Engineering handles its business in an integrated manner. For instance, says Ray: “We have developed in-house resources to deliver a project from conceptualisation to completion, ensuring an overall overview of the project and its execution.”
“We have a team of 10 designers and engineers with industry knowledge across our business verticals, possessing a total cumulative experience of over 93 years, who help us offer customised solutions for our turnkey projects. Apart from this, we also have a team of designers and engineers providing on-ground support at our ongoing project sites,” says Ray.
“During the last three fiscals, we have worked with over 3,500 suppliers and service providers across many states,” says Nakul Markhedkar, Whole-time Director and the founder’s elder son – a BTech in Electronics and Telecommunication. “By diversifying our supply chain network, we endeavour to maintain regular availability of materials and equipment. This approach helps to reduce dependency on a limited number of suppliers and, consequently, enables us to adhere to project timelines, delivering on schedule while maintaining quality and operational efficiency,” says Markhedkar, who has spent 9 years in procurement, marketing, and business development at the company.
Vikran Engineering is in IPO mode, having received the final observations for its Draft Red Herring Prospectus (DRHP) from market regulator SEBI. The company aims to raise Rs1,000 crore through a mix of a fresh issue of shares valued at Rs900 crore and an offer for sale (OFS) of Rs100 crore by promoter Rakesh Markhedkar.
The proceeds from the fresh issue, amounting to Rs625.5 crore, will be used to fund the company’s working capital requirements and general corporate purposes. The company is backed by pre-IPO investors such as India Inflection Opportunity Fund, Ashish Kacholia, Mukul Agarwal, Negen AIF, and other family offices and HNI investors.
Vikran Engineering has completed a pre-IPO up-round equity placement. Avid investors, including Mukul Agarwal, Negen Undiscovered Fund, leading Indian family offices, and HNIs, collectively invested over R100 crore. Notably, India Inflection Opportunity Fund and Ashish Kacholia together invested R85 crore, acquiring an approximate 11 per cent stake in the company in January 2024.
“As part of our growth strategy,” says CMD Markhedkar, “Vikran Engineering plans to expand into infrastructure EPC projects in the private sector and explore international markets, particularly in Africa and the Middle East. For instance, we are set to expand into the solar EPC industry by undertaking turnkey projects for solar PV systems of up to 100MWp and balance of system projects for solar power plants of up to 300MWp. In the water sector, we are qualified and actively bidding for water irrigation projects. We have secured five projects in the railway infrastructure sector,” he says.
The company’s offer document states that it intends to participate in government programmes such as the Revamped Distribution Sector Scheme (RDSS), the National Solar Mission, and the Swachh Bharat Mission. The Government of India has envisaged the development of high-speed rail (HSR) corridors and has identified eight corridors for HSR projects, of which the Mumbai-Ahmedabad corridor is under construction, while the DPR for the remaining projects is being prepared.
“We are currently executing a project for a GIS substation at Dahanu, Maharashtra, which will provide power supply to bullet trains,” says Markhedkar.
Over the next 4 fiscal years, investment in power generation will be led by renewable energy capacity additions, followed by investments in conventional generation and flue gas desulphurisation (FGD) installations, indicating a shift in investment flow towards enhancing clean energy supply. These opportunities will drive the sustained growth of EPC companies such as Vikran Engineering Limited.