Mr. Chandrakant P. Sanghvi, Chairman and Managing Director, Sanghvi Movers Ltd., has been one of the pioneers in the cranes hiring and engineering industry in India. Having started the Company back in 1989, he brings with him mammoth experience of more than 20 years in the crane business. With strong entrepreneurial spirit, Mr. Sanghvi has been instrumental in building the Company from scratch, thereby scaling newer height at each stage of the organizations journey. Under his leadership, the Company has maintained its monopolistic position in the industry since inception. Mr. Sanghvi is a Graduate in Engineering and has completed his Masters in Engineering from the United State.
Sanghvi Movers Ltd., the largest crane hiring and engineering company in India and 9th largest in the world, provides medium sized heavy duty world class cranes on rental basis for various infrastructure and core projects. The Company has a fleet of more than 347 hydraulic and crawler cranes with lifting capacity ranging from 20 MT to 800 MT and a strong regional network with depots across Nagpur, Chennai, Pune, Bangalore, Bharuch, Jamnagar, Gadag, Cuttack and Delhi. The Company’s client list includes Reliance Industries, Reliance Energy, Enercon, BHEL, NTPC, Lanco, Aditya Birla Group, Vedanta Group, Tata Steel, L&T and Suzlon.
In an exclusive conversation with Hemant P. Maradia of IIFL, Mr. Sanghvi says, "We hope to attain utilization levels of 80-85% by the end of FY11. EBIDTA margins will be at around 75%."
What led to the tepid performance in Q1 FY11?
We were banking heavily on the Power sector, but that business has not lived up to expectations. It is taking more time to gain traction than we had anticipated.
We did a capex of Rs800mn in this quarter. This helped us in increasing the EBIDTA margins a little bit.
Also, our utilization improved in the first quarter. It increased by 7-8% in Q1 FY11 when compared to Q1 FY10.
Things are looking up and enquiries have started trickling in. Growth in infrastructure tends to lag behind the overall economic growth.
The revenue contribution from Oil & Gas and Metal sectors increased. Windmill increased from 22% to 25%. Cement was more or less flat at 17-18%. Refinery was at 13% and Steel & Metals stood at almost 9%.
What will be the sectoral mix going forward?
Power sector’s contribution will rise, from 29% to 35%, while that of Windmill will remain unchanged, and Cement’s contribution will go down. The contribution of Oil & Gas and Steel & Metals will remain flat.
Are you facing any cost pressures?
We were protected till FY09, but now we are witnessing more competition. With new players entering the business, some clients are demanding a cut in rates. Clients are paying slightly less premium.
We are also realigning our market policy. We aim to maintain our volume but the yield will be slightly less. Overall, our growth will remain in tact, notwithstanding the growing competition. Our strong brand name and quality services will help us in tackling competition.
What is your USP vis-à-vis competition?
We have the early mover advantage. We have domain knowledge, a good track record and branding.
We have a depot network that nobody else has in India. We have 12 depots spread across India. We also have a fleet of 80 trailors to move the cranes.
These are some of the competitive advantages that we have.
We have undertaken and completed a number of large volume projects such as the Reliance Jamnagar refinery project.
We have 80% market share in BHEL.
What is the share of largest client and top five clients?
Top five clients contribute nearly 60% of the company’s total revenue.
Suzlon has been our largest client for quite some time. But, the percentage of contribution from Windmills, from the peak level of 60% has come down to 25%.
Give us a sense of crane rentals and utilization?
Going forward, we hope to attain utilization levels of 80-85% by the end of the current fiscal year. Yield may not reach previous high levels seen in FY09, at least in the immediate future. But, once the demand from the Power sector picks up, we will see yields also improving to some extent.
Yields were more than 3.5% in FY09. Average yield for the first quarter of FY11 was around 3%.
Have you undertaken any recast of your fleet?
Since the past one year or so we have decided to revamp our fleet. We are going for realignment by selling some old cranes, particularly those that has lifting capacity of less than 100 metric tons.
In the April-June quarter we sold 5-6 cranes. We generated a profit of around Rs35mn.
Last year also, we had a profit from the sale of cranes of around Rs75mn.
Going forward we will continue to pursue this strategy of selling old cranes and adding more and more new cranes.
Nearly 57% of our cranes today are brand new cranes. In FY05, all our cranes were old ones. In the next two years, 70% of the fleet will be brand new cranes.