Our goals are clearly defined-to get smarter and bigger as we take on the huge opportunity challenge resulting from the transformation that is visible on the Indian landscape
I write you at a very important juncture in our journey. Having successfully bounced back into the profitability zone after two tough years of battling a depressed economic environment, we are now at the threshold of a new wave of growth. Our goals are clearly defined – to get smarter and bigger as we take on the huge opportunity challenge resulting from the transformation that is visible on the Indian landscape.
A nation in the grip of urbanization
The inflection point in our journey coincides with the urbanization wave that is sweeping the nation. Just a few weeks back, the new Government unveiled a plethora of initiatives in the Union Budget to boost infrastructure development in the urban areas of the country. On the anvil are a series of measures to boost investment, ease policy norms, relax FDI regulations, build new-age affordable housing and high-profile educational institutions, and generally create an environment favorable for the enhancement of urban life. The mood in the construction industry, which is directly linked to growth in urban infrastructure, is positive. After a period of de-growth resulting from a policy paralysis and slow rate of project approval, things are finally beginning to look up on the construction front. And, as a leading, integrated construction player, we stand at the helm of this change, ready to take on the multitude of opportunities thrown up by the transforming industry and business environment.
An endorsement of our intrinsic strengths
After 40 years of consistent growth, your Company suddenly found itself plunged into gloom two years back. The last two years proved to be detrimental to our operational and financial performance as we battled a spate of challenges, including volatility in the global environment, slowdown in domestic reforms and hurdles to sectoral growth arising from regulatory decisions and poor sentiment. The consequential inflation, low GDP growth and high interest rate regime that prevailed in the market threw us into despair, causing profitability to dip and decline in sales.
What helped us come out of this challenging situation was a series of strategic interventions that ensured that we were back on the track for growth. The Board approved infusion of around Rs. 50 Crores through Preferential Allotment and we also went in for completion of loss contracts/ withdrawal from contracts with estimated loss. Sale of non-core assets to increase the Company’s cash flow, streamlining of the contracting policy, installation of a high-level committee to regularly review and monitor projects, coupled with manpower planning and cost control measures, enabled us to pull back out of the red. Unlike many of our peers, we chose not to go in for CDR – a decision that stood us in good stead as it led to a churning which saw reduced competition and improvement in our margins. In a strategic shift, we have also reduced exposure to the more risk-prone private sector contracts, which shall help us deliver on our promise to grow faster and better through a smarter approach and business model.
The numbers get bigger
A Rs. 3,20,829 lacs order book (as of 15th July 2014) stands testimony to the success of our growth strategy. With 48% of this coming from the public sector, in line with our restructured approach, and greater focus on high margin projects, we expect higher EBIDTA and PAT margins to flow in over the next two years. The margins stood at 6.18% and 2.26% respectively for FY 2013-14, with a total growth of 31% over the previous fiscal.
Moving ahead, smartly
The tough times are definitely behind us, and what lies ahead is a period of getting smarter and bigger, as we move towards garnering a bigger chunk of the growth potential unleashed by the ongoing urbanization drive. The opportunities are humungous and, backed by the vision of our promoters, the support of our stakeholders and partners and the commitment of our people, we are confident of making the most of the same. The US$ 1 trillion investment in infrastructure targeted in 12th FYP, 50% of it from the private sector, opens up wide vistas for our growth, going forward. With strong growth drivers in place in the economy, and the push that the infrastructure sector has got in the budget proposals, the construction industry is on the way to expand and grow in a big way in the coming years. For ACIL, this offers opportunities of the kind not envisaged before. The two tough years that we faced inspired us to learn the smart way of approaching growth and addressing opportunities. It has taught us the ideal approach to reinforce our presence across diverse sectors while foraying into new areas of growth. With our eyes firmly fixed on becoming the industry leader, and focus clearly on high margin Government projects, we are set to create new benchmarks in excellence and quality by building new-age infrastructure that will transform the face of India. Affordable housing shall be high on our growth agenda and we plan to introduce high-tech precast construction Russian Technologies for affordable and mass housing, for which we have already established a strong technical collaboration. The government plans to set up more IITs and IIMs is another opportunity area that we shall explore aggressively, as we chart our future growth.
On a concluding note
While this may be the conclusion of my message, let me assure you that what we are looking at is actually the beginning of an exciting new chapter in our growth odyssey. With the continuing support of all our stakeholders, to whom we owe much of the success of our strategy, and guided by our visionary promoters, we have embarked on the next phase of progress and expansion , which shall lay the foundation for your Company to get bigger, and of course smarter.
Chairman & Managing Director