The Hindu Business Line : Gammon to focus on overseas projects

FACED with shrinking margins that have hit Indian construction companies in the wake of increasing competition, construction major Gammon India Ltd is now sharpening its focus on overseas orders, as part of its strategy to increase volumes.

"We are looking at medium-sized projects in West Asia and North Africa. We are in the race for the Rs 500-crore Oman airport project and the Rs 300-crore Sharjah airport project. We see a good market for such projects especially in Dubai, which is going in for massive infrastructure projects and residential complexes," Mr S.A. Reddi, the company's Deputy Managing Director, told Business Line.

According to him, the focus on overseas projects would benefit the company in terms of exposure to new technology and equipment in the construction sector.

"Construction projects in these markets involve use of sophisticated computer-controlled machines. We will have to hire them for executing the projects, which would increase our capabilities in operating such equipment," he pointed out.

The company is planning to increase its share of overseas work from the present five per cent of its turnover to 25 per cent in the coming years. The company had clocked a turnover of Rs 1,250 crore in the last fiscal and is targeting to touch the Rs 2,000-crore mark this fiscal. "We are confident of crossing the Rs 1,500-crore mark and reach close to our target," Mr Reddi said.

In keeping with the current trend in the construction sector, Gammon has changed its strategy to go for more volumes and take up multi-disciplinary projects to offset the shrinking margins. "Right now, the operating margin for construction projects is at a low of an average 5 per cent, although the industry has registered a growth rate of about 14 per cent," according to him.

The company, which at present has an order book of Rs 5,000 crore, is also planning to take up diverse projects, like BOT and annuity projects. "Under the Government's annuity scheme for road projects, the construction company will have to lay the road, for which the Government pays a mutually agreed annuity sum every six months. It is something like deferred payment. Right now we are executing two projects, both in Andhra Pradesh, involving a total of 60 km of road under this scheme," Mr Reddi said.

Gammon India, which forayed into the port sector by taking up construction and operation of two berths at Visakhapatnam port, is also bullish on this sector. "We are in the race for a port project at Kandla. Apart from the port sector, we see bright prospects in the hydel and nuclear power sectors. Although civil construction will continue to remain our core competency, we will be looking at new and diverse opportunities," according to Mr Reddi.

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