Jaihind Projects is into Pipeline EPC business and has vast experience in pipeline construction segment having laid down more than 10000 km of pipeline. It caters to pipeline EPC business for hydrocarbons, water, thermal power plants and infrastructure sectors. Broadly, the business segments include cross country pipeline construction, city gas pipelines, horizontal directional drilling and water supply and storage networks.
Of the 10000 km of pipeline, nearly 4000 km is in oil & gas space particularly for large PSU's like Gail, GSPL, BPCL, HPCL, ONGC etc. The company has strong experience in laying pipelines of upto 56 diameter over diverse terrains including onshore, near shore, rocky mountainous and marshy areas. The company has 2nd largest equipment base for execution of pipeline EPC contracts.
Industry update
There is a total proposed investments of more than Rs 200 billion in developing and expanding the existing pipeline network in India over next 3 to 4 years, adding up to more than 10000 km of additional cross-country natural gas pipeline across the country. Further more than 60 cities are earmarked to get CGD (city gas distribution) networks by FY'12, along with proposed implementation of National Gas Grid by GAIL and capacity expansion of the LNG terminals, the demand for natural gas pipelines is slated to grow. Pipeline projects are also expected to come up for crude oil and refined products linked to the development of new refineries GGRSL, Bhatinda, Bina refinery, Paradip refinery and new oil discoveries such as Cairn's in Rajasthan, all provide sizable scope for the EPC pipeline business in India.
Nearly 80% of total gas in India is transmitted through Gail's pipeline network. The company, which currently owns 6500 km of natural gas transmission pipelines, which is highly concentrated in eastern and northern part of the country, plans to add another 6000 km of pipeline in next 5 years. GSPL and Reliance has similar plans for about 2700 km and 2200 km respectively.
Presently, there are 19 city gas networks (CGD) operating in India. The current demand for CGD for natural gas is expected to grow from 12 mmscmd to 23 mmscmd by 2012, source being largely gas from KG basin. New pipeline networks in proposed in 60 new cities.
The company is also well positioned to bid for refurbishment/renewal projects expected to come in oil & gas infrastructure space which involves replacement and refurbishment of components like piping, valves, pumps etc in refineries, gas gather stations, power stations, compressor stations etc.
Normally an EPC business in pipeline comprises of three activities Engineering, Procurement and construction. Often the orders are segregated in terms of the above three criteria and are allocated. Very few customers give all the three orders of EPC in pipeline to one company. If procurement (i.e. the procurement of pipes) is involved, then the working capital requirement increases tremendously. The engineering and construction work largely involves the execution and project handling skills.
Company specific
Total order book position of the company as on Dec'09 stands at Rs 943 crore. The break up of the order book is as under: -
Project Name Client Backlog Expected completion
Name Rs in crore Target
EPC - Darod Jafarabad Pipeline GSPL 119 FY 2010
EPC - Morbi Mundra Pipeline GSPL 28 FY 2010
Construction - Slurry pipe laying BRPL 60 FY 2011
Construction - Sewerage System BWSSB 52 FY 2012
Construction - Sewerage System BWSSB 55 FY 2012
Construction - Sewerage System BWSSB 51 FY 2012
Various Projects KUWS & DB 10 FY 2011
Construction -Steel Pipeline MNGL 27 FY 2011
Construction - ATF Pipeline BPCL 15 FY 2011
Construction - Refinery Pipeline HPCL 11 FY 2011
Engineering & Construction
ONGC 15 FY 2010
Construction - oil & gas pipeline SWCC 270 FY 2010
Construction - gas pipeline GAI 1,00 FY2011
Other Projects
130 FY 2011
Total backlog of orders in crore 943
In addition to the above, the company has bid nearly Rs 1000 crore of domestic orders on its own and more than Rs 1000 crore of international orders along with the alliances.
The company had bagged an order of Rs 153 crore from GAIL in May'2007 in JV with Tehran group. Gail wanted this JV to be separately monitored and hence a separate book of accounts was kept. Tehran group was paid its predefined royalty amount. Hence the consolidated results were published and not the standalone results.
Further this JV is completed successfully and hence as on date, there is no significant difference in standalone and consolidated results. After completion of this JV, the company now domestically can qualify for any EPC pipeline contract. So domestically there is no tie up or alliances as on today for the company.
In domestic orders, the clients give advance to the tune of 5% of the total project value and charge interest as well. Further there is retention of nearly 15% of total project value in form of bank guarantees. The working capital gets stretch as the payment terms becomes aggressive only at the fag end of the projects. The company has term loan of around Rs 100 crore with average interest cost of 11.2-12% while the working capital and bank guarantees together stands at around Rs 133 crore with interest cost of around 12-13% as on Dec'09.
So far all its exposure of EPC pipeline business is in India. Now after establishing its strong presence in India, it is venturing into other emerging markets like Middle East and Africa. The company has entered into active alliances with Tehran Jonoob, one of the largest and most experienced pipeline EPC contractors in Middle East and Arabian Pipeline Projects company (APPCO), which is the largest manufacturer of HFW pipe for Oil & gas and is Riyadh. The company will pay 1% of the total project cost to Tehran as royalty payment towards the contract.
International orders unlike domestic orders are with an interest free advance of nearly 10-15% of order value. Plus the payment terms are very liberal unlike the domestic EPC pipeline orders. Normal domestic EPC orders or EC orders or C orders have margin element of around 10-12% at the operating level. The international orders are with better operating margins and better payment terms.
The company intends to invest in windmills and generate about 12-15 MW using wind power. Nearly 80% of the project cost is bank financed at subsidized rate. Further the capex results in higher depreciation and lower tax outflow.
The company has strategic plans to continue in the existing EPC business of pipelines. But apart from India, it intends to go international in same line of business.
The company has target of net sales of more than Rs 475 crore for FY'10 with better margins. At right time, it has plans to raise money and reduce the interest burden, which is a key concern for the company.