Generic offers general contracting, design-build; engineering, procurement and construction (EPC); and project management consultancy (PMC) services for Industrial & Residential buildings.
In an interaction with Shweta Papriwal, Editor, indiainfoline.com, Mr. Manish Ravilal Patel, Managing Director, Generic Engineering Construction and Projects Ltd said, "The key factors that led to upgradation of the company’s rating are due to significant improvement in scale of operations and profit margins".
Could you please elaborate upon the company and offerings?
As of today, we have the highest market share of contracting business in the fastest growing market of Navi Mumbai, where the company has delivered more than 300 industrial buildings. Our forte lies in executing projects having a ticket size between Rs. 25 crore to Rs. 100 crore.
The company has expertise in building all types of structures including industrial, commercial, residential, hospitals, educational institutions, data centres, etc. We are a pioneer in building cold storage facilities ranging up to -40° C. In FY19, we executed and handed over 4 hospitals, for one of the largest industrial groups in the country. In addition, we have the highest market share of contracting business in the fastest growing market of Navi Mumbai, where the company has delivered more than 300 industrial buildings.
Please share with us the company’s segment wise revenue contribution?
Currently, for the company its residential segment (legacy business) contributes about 59.47%, Residential (Govt and Semi Govt) includes 17.76% of the revenue, commercial & industrial segment constitutes 9.19% of revenue, special & Educational projects contribute the 9.01%, while health & leisure contributes the remaining i.e. 4.57%.
Which are the recent project undertaken by the company?
In the recent times Company has undertaken construction of Residential Project for reputed builder Named Kolte Patil, Construction of Godown, Civil, Structural, Works of Architectural & External Development works for GIS &DC4 Building at Ctrls in Mumbai, Construction of staff quarters and police quarters from Maharashtra State Police Housing & Welfare Corporation Limited at Bhiwandi and Marol (Mumbai) and many other projects in segment of Industrial and Residential.
The total current outstanding order book as on December 2020 stands at Rs. 1166.41 Crore.
What’s your turnover target for the financial year 2021-2022?
With situation getting back on track which got impacted during the Covid lockdown and its aftermath moving, the Company is confident on doubling its turnover from April, 2021 (FY 21-22) to Rs 400 crore plus and a PAT of approx. Rs. 30 Crs. with a lower debt equity ratio.
What are the approaches undertaken by the company’s to execute its order book?
We have 3 key methods using that are as follows:
Generic Contracting: Under this, we take charge of the entire project from inception to completion. Our responsibility includes core and shell construction along with finishes, internal infrastructure, MEP and specialized services like Elevators, Landscaping etc.
EPC: In this approach, we have a holistic service delivery model where we provide all architectural/engineering design services, scheduling activities, procurement, construction, installation and commissioning resources etc. under one roof.
PMC: In this model, our involvement begins much prior to the laying of foundation of the project. Overall the company’s activities are broadly classified in clearly defined phases of the project’s lifecycle. We meticulously monitor each stage for all constraints including cost, quality and time.
Recently, the company’s credit rating was upgraded from BBB- Stable to BBB Stable by Care Ratings. What are key takeaways for traders from this?
The key factors that led to upgradation of the company’s rating are due to significant improvement in scale of operations and profit margins. In addition, there has been an improvement in capital structure and debt coverage indicators marked by fresh equity infusion. There has been an overall improvement in operating cycle and liquidity position along with a healthy order book position.
We believe the above factors indicates key positives traits of the company and are indeed signs of greater things to come in future and a great confidence booster for investors.
What were the key strategies in place that helps the company achieve its objectives and goals?
Our key strategy in place is to focus on the small ticket size projects of Rs. 25 to Rs. 100 crore which provide higher margins, lower competition, better working capital cycle and lower risk. Industrial buildings is our core sector where we are involved from bidding stage to final execution. An important approach that led us gain over our competition is our planning wherein the execution in-house technical and contract team structure the tender in a way that results into minimal utilization of mobilization advance, and bank guarantee. In addition, we utilise asset light model, as most of the equipment are hired from 3rd party. This results in high asset turnover and low D:E ratio.
Furthermore, the company’s working capital requirement is reduced due to an unique model (for now being implemented on pilot basis) wherein the company and its client have a joint escrow account with joint signature authority. The fund in the escrow account is utilized for the said project only. This model, based on trust, brings in transparency and helps reduce non-fund based requirement.
Above all, we have strong tie-ups with many labour contractors with whom the company enjoys long standing history of strong relationships. This helps us to take up multiple projects across multiple locations in Maharashtra.
Do you foresee a revival in the construction sector?
In order to analyse and understand the trend one has to track the upward and downward cycles. If I have explain, housing has a 10-12 year cycle peak-to-peak wherein down cycles last about 6 years, while up cycles last about 5-6 years. The Real Estate market is 6 years into the current downturn, which is similar to the duration of previous two downturns. Currently, we are at a cusp awaiting an upturn.
The current stats indicate that residential cycle in the top 6 affordability cities has bottomed out with volume trajectory now moving upwards. In addition, new launches concentrated in ‘Affordable homes’ (40-60% of new launches in CY18). Supply is now targeted towards very high demand.
Finally, prices have remained stagnant - time correction has led to improved affordability. For instance,
Mumbai’s affordability is down to 7.8x (of average annual salary) from 11x seven years ago. Overall, we foresee a strong revival in demand.
What is the way forward for the company?
We will continue to focus on small ticket-size projects of Rs. 25 to 100 crore. The project pipeline in MIDC has increased manifold. We are dominant player in this micro market. Going forward, we aspire to achieve geographical diversification, while undertaking projects for present clients migrating to other regions. We believe that many high-value projects await the company especially in verticals, namely, IT, Pharma and Data Centers.
Mass Affordable Housing is an emerging vertical which we intend to target as it is the fastest growing segment in real estate. Along with this, we will target government projects in industrial segment from the likes of DRDO, Defence etc. wherein the execution involves complexity and requires specialized skills.
We plan to enter into pre-cast engineering to scale up and bring higher efficiency in project execution which will be supported by procuring latest technology for construction activities.
We are also developing a franchise type model wherein other contractors can work under the company’s banner. This will open up newer opportunities and avenues for the company and add to our revenues.
Over the next 3-5 years, we plan to undertake larger sized projects with significant complex engineering requirements. We are very confident of doubling our turnover from April, 2021 onwards to Rs. 400 Cr plus.
Kindly provide with the details for initiatives taken by the company for contribution to PM CARES FUND or some other means and other measures and steps taken
Company has during the financial year 2020-21 spent a significant amount towards the supply of ventilators to haffkine hospitals as a CSR initiative to fight against COVID-19 pandemic.
Company has further in association with the Mumbai Police participated in a campaign of distributing masks to the public and spreading awareness about traffic rules and COVID-19 and spreading motto “STAY SAFE, STAY HEALTHY, WEAR MASK, & KEEP SOCIAL DISTANCING” & “WEAR A SEAT BELT, DON’T DRINK AND DRIVE, BE ALERT etc.