Manohar Lal Punglia, Managing Director, Vishnu Prakash R Punglia Limited

22 Aug 2023 , 09:53 AM

How has been this journey of starting a company and now coming out with the IPO?

Founded in 1986 as a partnership firm by the Punglia family, we have over 36 years of experience in successfully executing Water Supply Projects (WSPs), encompassing pipelines, reservoirs, tunnels, water treatment plants, and more, with over 75 WSPs completed. Our journey has seen us evolve, acquiring not only experience but also financial strength and managerial capabilities.

This evolution has propelled us to explore new horizons, venturing into segments like railways and roads. We intend to build upon our foundation by leveraging our experience, assets, market presence, and project management capabilities to expand our portfolio of water supply turnkey projects and diversify into various geographies. Our growth strategy centers on enhancing performance, competitiveness, and embracing larger projects, supported by investments in cutting-edge equipment and technology

Our legacy is one of innovation-driven problem-solving, project efficiency, and community impact. As we approach the milestone of our IPO, we are enthusiastic about taking our vision to new heights. Going public not only reflects the trust of our investors but also underscores our commitment to wider outreach, innovation, and the values that define us. The IPO stands as a testament to our journey, propelling us towards advancing sustainable infrastructure and making a positive difference in communities’ lives.

What are the key segments the company is working in and what is the breakup of revenue from each segment? How do you see this percentage changing over a period of next 3-4 years?

While VPRP’s primary focus has historically centered on water supply projects, the company’s capabilities and expertise have enabled it to diversify into other segments of the infrastructure sector. This strategic expansion has gained momentum in recent years. As of FY23, water supply project executions have contributed significantly to the company’s total revenue, accounting for approximately 85%. Notably, the railways and roads segments have also emerged as contributors, each constituting around 6-7% of the total revenue.

While specific projections for the future are challenging to provide, the management has conveyed a clear strategic intent. VPRP is poised to maintain its emphasis on water supply projects, leveraging its established proficiency in the domain. Simultaneously, the company is actively exploring opportunities to grow within other verticals of the infrastructure sphere. This forward-looking approach underscores VPRP’s commitment to its core strengths while pursuing calculated expansion strategies in alignment with evolving market demands and opportunities.

What is the current order book, any projects in the pipeline and the medium term and long term goals for the order book?

In the period spanning FY20 to FY23, our order book surged at 37% CAGR, reaching a substantial Rs. 3,800 crore by FY23. This ascent underscores the enduring trust in our capabilities and the quality of our work.

While the order book is a pivotal predictor of future performance in our industry, our strategy focuses on the pursuit of quality over quantity. We strategically expand our order book and skill set across diverse segments and regions, allowing us to engage in a broader range of project tenders and optimize business volume and profit margins. As of July 15, 2023, ongoing projects amount to Rs. 61,835.81 million, with executed work at Rs. 23,840.53 million, leaving Rs. 37,995.28 million in our forward-looking order book. This robust foundation positions us for sustainable growth and enhanced shareholder value.

It’s important to note that our order book captures firm projects, though changes like withdrawals or scope adjustments may arise. The computation is based on projected future revenues from signed contracts or those with received letters of intent. We remain adaptable to project dynamics, using our commitment to excellence and project-winning proficiency to navigate potential changes.

Revenue from operations increased at a compounded annual growth rate of 55.10% to Rs. 1168.40 crore in FY23. What are the key contributors to this revenue growth and what is projection growing forward?

During the specified period, a significant driver behind our revenue growth was the successful execution of water supply projects. This core focus area played a pivotal role in contributing to our financial performance. Additionally, while comparatively smaller, the railways segment also made a notable contribution to our revenue during this timeframe.

In terms of our forward projection, we remain poised for continued growth. Our strategic emphasis on water supply projects, coupled with the momentum gained in the railways segment, positions us well for sustained expansion. We’re confident that these key contributors will continue to play a vital role in driving our revenue growth forward, in line with our commitment to delivering value to our stakeholders and making a positive impact in the sectors we operate in.

Can you elaborate a little bit on the key milestone projects which the company has executed in the recent past?

In recent years, our journey has been defined by transformative milestones that underscore our commitment to growth and excellence. One of our earliest triumphs came in 2014-15 when we secured a significant Rs. 188.86 million work order, marking our entry into the railway sector with the Nawa City station project. Subsequently, in 2015-16, we expanded our capabilities by establishing our first Ready Mix Concrete Plant, positioning ourselves for enhanced project execution.

The turning point arrived in 2016-17 as we achieved a watershed moment in collaboration with our joint venture, M/s VPRPL-WABAG JV. We secured a substantial Rs. 5,953.37 million work order for a ‘water supply project’ in Barmer, Rajasthan. This milestone not only showcased our ability to undertake larger-scale projects but also reinforced our commitment to providing essential services in critical sectors.

Continuing our trajectory, 2017-18 brought the acknowledgment of our expertise with a Rs. 3,238.53 million water supply project from Gwalior’s Municipal Corporation. As we expanded our reach, the fiscal year 2019-20 marked a significant geographical milestone with our foray into Assam. Our journey surged in 2020-21 with a major Rs. 2,378.94 million Uttar Pradesh project and the achievement of a remarkable revenue milestone of Rs. 4,500 million. The subsequent fiscal year witnessed our expansion into Manipur with a Rs. 4,332.90 million water supply project and our debut in the ‘Road Division’ segment. Finally, in 2022-23, we secured a remarkable Rs. 3,040.84 million railway project and achieved an impressive revenue milestone of Rs. 11,000 million, reflecting our unwavering dedication to pushing boundaries, embracing innovation, and establishing ourselves as industry leaders.

What are the geographies the company is currently operating and what are the new geographies you are looking to expand in the near future?

While historically focused on Rajasthan, VPRP’s recent expansion into states like Assam, Manipur, and Uttar Pradesh reflects our commitment to broader growth. We intend to further capitalize on our experience, assets, and market position to extend our portfolio of water supply and other projects across various geographies.

Our growth strategy includes enhancing project performance and competitiveness, with a focus on higher-value contracts. We’re also investing in cutting-edge technology and equipment to support our expanding operations. Geographical diversification reduces risk by lessening reliance on specific regions and enables us to tap into diverse growth trends.

This strategy not only widens our revenue base but also safeguards against market volatility. By targeting growth in existing and new markets, we’re well-positioned to navigate changing conditions and achieve sustained success in the dynamic infrastructure sector.

As the industry is exponentially growing led by the thrust of the central as well as state government, what are your views on the total business opportunity in the near future?

Given the momentum spurred by initiatives like the National Infrastructure Pipeline (NIP), Amrut 2.0, and the Jal Jeevan Mission (JJM), it’s evident that both central and state governments are placing substantial emphasis on infrastructure development. This strategic focus has been evident over the last decade and is poised to persist in the foreseeable future.

In light of these initiatives, the overall business opportunity landscape appears remarkably promising. The sustained commitment to infrastructure creation signifies a dynamic industry that holds immense potential for growth. As a company like VPRP, well-versed in executing essential projects, we are optimistic about the abundant prospects that lie ahead. We anticipate a landscape rich with opportunities, enabling us to contribute effectively to these transformative initiatives while achieving sustainable business growth.

PAT margins are constantly growing over a period of the last 3 years. What are the key contributing factors leading to this growth and how this is expected to further rise in upcoming years?

Undoubtedly, the expansion in profitability margins over the past three years has been underpinned by key factors such as prudent operating leverage and enhanced cost management. This strategic approach has led to tangible improvements in our financial performance, enabling us to achieve sustained growth.

Looking ahead, the influence of operating leverage is expected to remain a driving force behind the expansion of our profitability margins. By optimizing our operational efficiencies and capitalizing on the economies of scale, we’re poised to further enhance our margins. This approach aligns seamlessly with our commitment to responsible growth and maximizing shareholder value, while maintaining a strong focus on delivering exceptional results in a competitive landscape.

The augmentation of our profitability margins over the past three years can be attributed to the synergy of multiple factors. Notably, our strategic emphasis on operating leverage and effective cost management has played a pivotal role in enhancing our financial performance. This approach has not only bolstered our bottom line but also fortified our overall resilience in a dynamic market environment. As we progress, the role of operating leverage is anticipated to continue shaping our trajectory of margin expansion. By leveraging our operational strengths and optimizing resource allocation, we are positioned to drive further growth in our profitability margins. This strategic outlook reflects our commitment to achieving sustainable success while continuously seeking innovative ways to enhance operational efficiency and value creation for our stakeholders.