Subramaniam Ashok Kumar, CMD, Annai Infra Developers Limited

We are majorly concentrated in water management and irrigation related projects and activities.

May 17, 2019 06:05 IST India Infoline News Service

Subramaniam Ashok Kumar
Subramaniam Ashok Kumar, Chairman and Managing Director of Annai Infra Developers Limited has over 15 years of experience in handling Infrastructural Development solutions. During this period, he has been instrumental in planning and formulating the overall business strategy and developing business relations for Annai Infra Developers Limited. He looks after the strategy and policy formulation for Company and liaises with various departments of the Government and also overlooks bidding, tendering and planning processes. 
 
In an interaction with Mamta Maity, indiainfoline, Subramaniam Ashok Kumar said, “By leveraging our demonstrated operational expertise in Water Management and Irrigation EPC projects, we have started bidding for higher value projects with a view to also expand our geographical footprint while continuing to focus on the niche segment we cater to.”

Brief us about the IPO and future plan?
We are planning to raise funds by the issue fresh Equity shares upto 1,00,00,000 of Face value of Rs10/- each. We intend to seize opportunities to undertake larger projects that can match our corporate profile, project experience, execution capabilities and anticipated profit margins and forge stronger relationships with our clients by leveraging our experience of more than a decade in the Water Management and Irrigation EPC segment and to expand our geography of operations to other regions of India. To continue the growth trajectory, we will be utilising the proceeds to strengthen our equipment bank for better and cost effective execution as well as meeting the financial requirement for higher value projects. We intend to continue to focus on bidding on more number of projects particularly from government authorities.

How does your business model work?
Annai Infra Developers Limited is mainly engaged in Engineering, Procurement and Construction (EPC) activities of water management and irrigation projects such as building of dams, laying of pipeline, integrated storm water drains, waste water treatment plants, developing drainage systems, lift irrigation, drip irrigation, reservoirs, canals, installation of irrigation pipeline, etc. among others.
 
We are majorly concentrated in water management and irrigation related projects and activities. Out of 62 completed projects between financial years 2013-14 to 2017-18 by us, 26% of projects were from water management segment while 34% of the projects were from irrigation segment.
While Anna Infra executes majority of projects independently, it also forms project specific joint ventures with other companies.
 
We attribute our business model as follows:
  • Focussed area – Accordingly, owing to our team and regional expertise, currently we have been focussing in South India. Our order book consists of 19 projects, out of which 14 projects are from Tamil Nadu, 5 from Kerala.
  • Focussed segment –We are majorly concentrated in water management and irrigation related projects and activities. Water Management and Irrigation forms more than 90% of total value of our Order Book.
  • Project selection –We select projects as per our defined strategy of selecting projects which are mid-sized in value. Further, we also give importance to funded projects which helps us to reduce financial burden. As on September 30, 2018, 11 of our ongoing projects were funded by multilateral agencies or various government funds.
  • Asset light equipment model –We have relied on asset-light business model while purchasing equipments which are critical to construction activities. As on September 30, 2018 we had 133 owned equipments which include major equipments like Hydraulic excavators, Bull Dozer, Cement lorry, Silo, Tippers, etc.
What growth rates are you seeing in micro-irrigation?
India depends enormously on micro-irrigation activity being an agricultural economy. Irrigation is a process whereby water is supplied to crops though artificial modes, i.e., canals, pipes, sprinklers, etc., reducing dependency on rainwater. In terms of investment, irrigation is one of the largest infrastructure sectors, after roads, power, and urban infrastructure. There is increasing penetration of micro-irrigation. The potential for micro-irrigation in India is very high, given that only 10.0 million ha of a potential ~69.5 million ha have been covered under such systems (as of March 2018), even as water scarcity issues loom large.
 
Expenditure on irrigation grew at a CAGR of 7.7% during the preceding five-year period from fiscal 2014 to 2019. CRISIL Research projects investments in irrigation to increase 1.7 times during the 5-year period from fiscal 2019 and 2023. Annual expenditure is expected to grow faster at a CAGR of ~10-11% during the corresponding period. With irrigation being a state subject, most of the investment will flow from state governments which will account for 85-90% of total investment.

What growth do you see in the Water Management business?
We continue to evaluate projects which require operational expertise and are of higher value projects. While Annai has always been focussed more in Tamil Nadu and Kerala, but with our decade plus experience we now intend to expand our operations to other geographies of India. At Annai, delivering a project at an optimum cost has always been a focus which is reflected in our financial positions and will continue to drive more operational efficiency. We believe, increased government focus and budgetary support will lead to launch of more projects for the Water Management sector which is quite underserved in India as on date. Further, we foresee huge opportunity from Smart City mission, where out of 98 cities selected for smart city project by Government of India, 24 cities are located in South India. This will require effective ways to manage water and related activities leading to new infrastructure projects including requirement for water management and irrigation projects. Our regional presence and knowledge will aid us to qualify for new projects under this segment and we intend to bid aggressively for projects under “Smart City” initiatives.

What is your market share and what edge do you have against your competitors?
With decade of regional experience Annai Infra has been able to continuously increase our revenue and profits with better operational performance. Infrastructure industry as such is highly fragmented with presence of many large players and specialised regional players. Our track record of timely completion of projects acts as a competitive advantage leading to better client relationship and confidence. While there are many infrastructure companies which are present majorly in various construction and infra such as roads, highways, buildings, etc but Annai Infra is are focussed mostly on Water Management & Irrigation projects leading us to possess regional and focussed expertise.

What is the revenue contribution for Water Management Segment Business?
We majorly focus on and have an established track record in water management systems business segment. The water management business includes construction and rehabilitation of water management infrastructure projects which include water supply projects and distribution projects such as integrated storm water drains, dams constructions, drainage systems, water storage facilities, pipe network, reservoirs, waste water treatment and underground rain water management system.
 
Our standalone and consolidated revenues from operation from Water Management segment formed 83.54 % and 76.48 % for Fiscal 2018 and September 2018.

Segmental break-up of our Revenue from Operation as per Restated Standalone Financial Information is as under:
 
(Amount in Rs. Million)
Particulars For the period of September 30, 2018 F.Y 2017-18 F.Y 2016-17 F.Y. 2015-16
Water Management 1,890.69 3,908.97 2,430.72 1,028.21
Irrigation 144.11 142.70 358.69 452.51
Roads 22.25 116.41 276.53 913.26
Miscellaneous 262.36 186.25 52.30 110.37
Revenue from Operations (Before
Trading)
2,319.42 4,354.34 3,118.24 2,504.36
Traded Goods 152.56 324.86 - -
Revenue from Operations 2,471.98 4,679.20 3,118.24 2,504.36
 
Our total order book as on September 30, 2018 stood at Rs6,520.86 million consisting of 19 projects, of which 13 are water management projects, 3 irrigation projects and 3 miscellaneous projects.
 
Detail of our order book as at September 30, 2018 is as under:
Project Segment No. of Projects Contract Value (Amount in Rs Million) Outstanding Order Value (Amount in Rs Million)
Water Supply 13 12,327.82 6,088.39
Irrigation 3 628.30 85.34
Miscellaneous 3 731.13 347.13
Total 19 13,687.25 6,520.86
 
What are your immediate fund requirements under various heads?
Although we are generating sufficient profits and internal accruals are strong, however to bid for large size projects and to maintain an efficient mix of equipment, we will be requiring funds primarily for: 1) To finance the purchasing of capital Equipments which includes paver, transit mixture, ready mix concrete batch plant and hydraulic excavator; 2) Funding the working capital requirement of the Company which includes Inventories, Trade receivables and Unbilled Receivable; and 3) General corporate purposes.

What is the Company’s financial performance?
Our business growth during the last five Financial Years contributed significantly to our financial strength. Our order book of Rs6,520.86mn as of September 30, 2018 provides us with revenue visibility. Further in the period from October 1, 2018 to January 31, 2019, we have received new orders amounting to Rs4,640.60mn.
 
Our standalone revenues from operations have increased from Rs2,506mn in Fiscal 2016 to Rs4,679mn in Fiscal 2018, achieving a CAGR of 36.64% in the five-year period ended March 31, 2018. In the same period, we have our Profit after Tax has increased from Rs98.75mn to Rs300.58mn at a CAGR of 74.47%. According to “CRISIL Rating” dated September 20, 2018, our credit rating is A3+ in Financial Year 2018-19.
 
Financial Snapshot of our Company as per our Restated Standalone Financial Information is as under:

(Amount in Rs. Million) 
Particulars For the  period of September 30, 2018 F.Y 2017-18 F.Y 2016-17 F.Y. 2015-16
Revenue from
Operations
2,471.98 4,679.20 3,118.24 2,504.36
Total Revenue 2,513.72 4,710.28 3,134.45 2,521.97
EBITDA 308.07 621.26 349.09 211.44
EBITDA Margin (in %) 12.26% 13.19% 11.14% 8.38%
Net profit for the year (PAT) 162.44 300.65 164.85 98.89
PAT Margin (in %) 6.46% 6.38% 5.26% 3.92%
 
Financial Snapshot of our Company as per our Restated Consolidated Financial Information is as under:

(Amount in Rs. Million) 
Particulars For the Period of September 30, 2018 F.Y. 2017-18
Revenue from operations 2471.98 4679.2
EBITDA 301.37 618.27
EBITDA Margin (in %) 12.02% 13.13%
Net Profit for the year (PAT) 162.44 300.58
PAT Margin (in %) 6.48% 6.39%
 
What is the growth strategy you are looking in future?
 
Our major business growth strategies are as follows:
 
With more projects being evaluated and more bids being tendered, we intend to seize opportunities to undertake larger projects that can match our corporate profile, project experience, execution capabilities and anticipated profit margins and forge stronger relationships with our clients. With experience of more than a decade in the industry and knowledge, we believe our Company is in a position to penetrate into other regions of India and also to strengthen our position in Southern region.
 
We intend to enhance our execution efficiency by efficient procurement and skilled manpower. We intend to strive to ensure technology advancement and continuous availability of equipments for our projects. We have avoided aggressive bidding in order to win projects instead focussed on bidding on selective projects with a view of strengthening both financial and operational performance.
 
With increased government focus and budgetary support will lead to launch of more projects for the Water Management sector. Further, out of 98 cities selected for smart city project by Government of India, 24 cities are located in South India. We intend to capitalise on these opportunities by various improvements in operational activities. Our regional presence and knowledge will aid us to qualify for new projects under this segment and we intend to bid aggressively for projects under “Smart City” initiatives.
 
Our Company specialises in water management infrastructure and irrigation projects majorly. However, with growing operational capabilities we now intend to penetrate into roads construction segment and offices & building segment as well.

Brief us about your geographical presence in India as well as internationally? What are the contributions of exports to the company's total revenue?
Till date, we have been focussed in Southern India. With experience of more than a decade in the industry and geographical knowledge, suppliers, contractors, we believe our Company is in a position to penetrate deeper into other regions of India. We have started bidding for higher value projects with a view to also expand our geographic footprint while continuing to focus on the niche segment we cater to.
 
Our standalone revenues from operations from the Southern India were Rs2,319.42mn, Rs4,354.34mn, Rs3,118.24 million and Rs2,504.36mn for the period ended September 30, 2018 and Fiscal 2018, 2017, 2016 respectively. As on date, our company does not have projects from outside India, so there is on such contribution of exports in company’s revenue.

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