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Published on: June 4, 2023, 4:47 p.m.
Engineers India and its growth catalysts
  • EIL has footprints in 11 out of the 12 mega petrochemical complexes in the country

By Ritwik Sinha. Consulting Editor, Business India

The declaration of annual results by the top brass of Engineers India Ltd (EIL), over the 50-year-old PSU, known for its front-row positioning in the consultancy and engineering (C&E) space, was subtly laden with a host of messages this time. In her elaborative presentation, chairperson Vartika Shukla and the top leadership underlined the latest performance highlights with the marked emphasis on future direction, which entails adding or rather further harnessing the elements, which have a small presence in its portfolio, driven or dominated by oil & gas businesses.

In terms of futuristic agenda, the company also dwelled on another important element – the efforts to expand the international footprint, which promises to get sizeable in the near to medium run. Having created a base in a strategically important global hub, EIL is now aspiring to further stoke its global expansion plans.

But then there was a clear message that it would not make any hurried attempt to build strength in verticals or line of services it finds promising. Bonding with the best in the world as reliable C&E partner, both within the country and outside, the company would like gradual evolution of promising domains. According to the top brass, preliminary signs of momentum picking in new growth areas are well discernible today. 

Basic strength 

But before looking at how EIL’s near or medium run story pans out, here’s a look at its current base as underlined by the recent numbers. “In the last fiscal, our revenue stood at Rs3,284 crore which marked a healthy growth of 14.5 per cent over the last year figure of Rs2,870 crore,” Shukla declared. The revenue from operations in Q4 rose to Rs866.15 crore – an increase of 7.5 per cent. Its stand-alone net profit in the concluding quarter was quite impressive, touching Rs158.72 crore, which marked an increase of over 25 per cent.

The last fiscal also saw a significant increase in new businesses. “EIL had secured business worth around Rs4,700 crore as against the order value of about Rs1,650 crore in 2021-22,” she said. A detailed company statement further pointed at robust order book positioning. It stood at Rs9,079 crore, including a go-ahead of about Rs1,600 crore, out of which 9 per cent of the order value is contributed by the private sector projects.

According to the company’s top brass, EIL’s mega project implementation drive in the core area of oil & gas sector (accounting for around 75 per cent of its revenue) has been in full swing in the recent past. The company is involved with some of the most prestigious projects in the country which includes Vizag Refinery modernisation project (VRMP) of HPCL; HPCL Rajasthan Refinery project (HRRL); capacity expansion project of IOCL, Panipat; Cauvery Basin Refinery (CBR) project for CPCL; etc, with the combined capital outlay of about $20 billion.

“Some of our mega projects in the oil & gas sector is nearing completion. On domestic front, Vizag Refinery project is at the advanced stage of commissioning having the state-of-the-art crude distillation column, designed and implemented by EIL, with highest energy efficiency in terms of energy number across the world,” a company statement said.

  • Shukla and the top leadership: emphasis on future direction

EIL has further informed achieving mechanical completion of Kochi Refinery, as also the Palakkad section of the Kochi-Salem LPG Pipeline project. The company is providing EPCM services for Kochi-Salem LPG Pipeline (a JV initiative of IOCL & BPCL). This pipeline system will evacuate LPG from Kochi Refinery and transport imported LPG from IOCL Jetty at Puthuvypeen to a number of LPG bottling plants of public sector oil marketing giants. Chhara LNG Terminal (HPLNG) has also achieved Mechanical Completion. EIL was entrusted with the PMC services for the LNG Terminal Project (HPLNG).

On a cumulative basis, EIL has nearly a dozen lines of business. These are: petroleum refining, petrochemicals, pipelines, oil & gas (Offshore & Onshore), storages & terminals, coal gasification, fertilisers, infrastructure, mining & metallurgy, water & waste water management, bio fuels and clean & green technologies (green hydrogen). Its strength in oil & gas and allied line of services is well reflected by the fact that it has been involved in 20 out of 23 refineries in India including 10 greenfield refineries, with a combined refining capacity of more than 150 million tpa (3 million BPD). You will notice its footprints in 11 out of the 12 mega petrochemical complexes in the country. If you closely examine its financial sheet, it will become clear that execution of turnkey projects is its main earning channel. But that does not mean that consultancy services is a distant laggard and is helping the company with better yields. 

But as a senior official of EIL emphasised during the result announcement, the company is now subtly trying to transform its core identity into a total energy solutions firm and as part of this exercise, it is now making headway in new areas like bio-fuel, green hydrogen, etc. One of the largest capacities bio-refinery project in India for Assam Bio-refinery Private Limited (ABRPL) – a JV of NRL, Fortum and Chempolis OY is already at the advanced stage of completion, a company note points out.

In addition, EIL is preparing DFR for setting up bamboo-based bio-refinery project at NTPC-Bongaigaon. EIL is also playing a crucial role in providing technological solutions for decarbonizing the aviation sector in collaboration with CSIR-IIP, Dehra Dun. In this regard, EIL is providing technology support and consultancy services for production of Bio-ATF for MRPL.

New growth pillars 

In terms of setting afoot new projects, the current fiscal has begun on promising note for the company, with the Prime Minister Narendra Modi inaugurating the methanol plant (500 TPD) at Namrup in Dibrugarh of Assam Petrochemicals (APL) on 14 April 2023. EIL provided services as LEPCM consultant for this project. 

Meanwhile, the growth journey in the current fiscal or the medium term, as EIL’s top brass emphasises will have the clear intent of harnessing its infrastructure vertical as well as expanding its international presence. “The infrastructure vertical has started doing well for us and more contracts are now adding up. It is currently contributing 5 per cent of our revenue. This could be our next big vertical,” Shukla told Business India on the sidelines of the press conference.

There is a host of prestigious infrastructure projects in EIL’s current kitty which includes consultancy services for Jewar Airport, Noida, AP Airport Development Corporation, etc. It is also implementing a host of infrastructure projects related to Data Centres, and involved in much awaited Leh Airport. Its infrastructure kitty also has projects like RF & Wi-Fi set up across the state of Rajasthan including 10,000 gram panchayats.

  • MRPL Mangalore is one of the most prestigious projects for EIL

As a project development and management consultant, EIL is participating in Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for nine cities of Odisha. Interestingly, under its infrastructure vertical, the company has also brought in water and waste management line of services. “Water and waste management domains have huge potential,” Shukla emphasised. The company is committing to provide engineering consultancy services for projects dealin with water deslination and treatment, urban water distribution, waste water collection and treatment and waste water and residue disposal. 

In a directional sense, a more critical factor for EIL’s future growth would be harnessing its international operations. “The contribution from our international operations has broadly been in the range of about 10 per cent in the last few years, we see a lot of scope to further improve it,” says Sanjay Jindal, director (finance), IEL. The company’s international operations are mainly the Middle East and Africa-centric. It has created a base in Abu Dhabi and has partnered with ADNOC for some large scale turnkey projects in refineries and pipelines. According to a company note, EIL has already showcased its unparalleled track record of mega project implementation in new geographies. 

Overseas forays

The commissioning activities of Dangote Oil Refinery Project (DORC) in Nigeria having total capital outlay of almost $20 billion, with the highest single train refining capacity in the world, has commenced on 22 May 2023. EIL has recently bagged another project worth about Rs160 crore for a green-field urea and ammonia complex in Africa. The company is also providing PMC services for construction of crude oil refinery in Mangolia and has bagged a similar project for setting up NGL plant and 300 MW CCGT power plant in Guyana.

With the visible uptick in its international business particularly in the Middle East and Africa, EIL has placed a larger team at its Abu Dhabi office to further push the momentum to the next level. “Strengthening our Abu Dhabi office has resulted in fetching results as EIL bagged several projects from our esteemed clients in this part of the world,” Jindal added. 

The company is also keen to tap new business opportunities in the neighbouring countries. The recent inauguration of the India-Bangladesh Friendship Pipeline (on 18 March) by Narendra Modi and Sheikh Hasina is a clear pointer in that direction. EIL has provided consultancy services for this prestigious project.

And EIL’s efforts to strengthen its international operations have probably begun to show results. It probably reflects in the work order since the beginning of the current fiscal. In the preliminary months, there has been a marked improvement in the contribution of overseas orders to the total business. “So far, we have received a work order worth Rs209 crore in this financial year only from the overseas that constitute more than 30 per cent of our order value in 2023-24,” Shukla informed.

  • EIL engineers at work

EIL’s top brass is looking at its growth momentum to stay steady in the near to medium run backed by its core strength and incremental contribution for new focus areas. A company-specific credit report released by CARE early this year clearly pointed at growth tailwinds supporting companies like EIL.

According to the report, the Ministry of Petroleum and Natural Gas has announced increase in the exploration area for oil and natural gas to about 310,000 sq miles by 2025 and to 620,000 sq miles by 2030, which is expected to provide significant growth opportunities for engineering players like EIL. Also, there is an increasing interest in establishing the green hydrogen projects with National Green Hydrogen Energy Mission announcement, wherein EIL already has a presence. There also exists demand-supply mismatch in refinery pipelines thereby resulting in need for expansion of India’s pipeline network. 

Another leading credit rating firm ICRA has recently released its sectoral outlook report for 2023-24 wherein it has classified the near run prospects for leading sectors. And most of the sectors which are critical for an engineering consultancy firm like EIL is in positive or stable categories. The government’s high capex commitment for infrastructure made in this year’s budget and focus on recent initiatives like Hydrogen Mission, National Logistics Policy and PLI schemes are slated to support the growth momentum especially for companies in the consultancy and project execution domains.

“We expect more action during the current calendar year especially in awarding of new projects and in completion of the existing ones. There could be a short break in the momentum in the last quarter of this fiscal (early quarter of the next year) as we reach close to the parliamentary elections. But the long-term story looks intact,” says Abhishek Gupta, VP & sector head (corporate ratings), ICRA. A well-entrenched firm like EIL would probably prefer to take the first part of the statement seriously.

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