The Hindu Business Line : Simplex Concrete sees opportunity in rising oil prices

THE surging global oil prices may be causing a widespread trepidation across different sectors, but there is at least one sector that views this trend as an emerging business opportunity.

The Indian construction industry feels that this could mean significant business opportunities in the oil producing nations, as they focus on oil recovery, improved refinery efficiencies and infrastructure development.

One company that is especially sharpening its focus on overseas order in the light of the trend in the global oil industry is the 80-year-old Rs 640-crore Simplex Concrete Piles (India) Ltd.

"We are noticing tremendous activity in the infrastructure development sector in the Gulf, apart from North Africa and Central Asia.

The oil producing nations are ploughing back the returns on oil export into infrastructure development on a large scale," says Mr Amitabh Mundhra, Director of the company.

The rising oil prices, apart from other factors, have prompted the company to re-fashion its business strategy so as to give a sharper focus on exports.

"We intend to increase our export turnover from the present 10 per cent of our total earnings to 50 per cent over the next five years. We have been getting increased queries from countries in West Asia and North Africa," Mr Mundhra told Business Line.

The company will be bidding for the new engineering-based infrastructure projects in these markets, encompassing sectors such as power, road and airport development projects.

Recently the company bagged a major EPC contract worth Rs 100 crore from Qatar Petrochemical.

"We will be looking at projects of relatively smaller scale, involving a value of between Rs 50 crore to Rs 350 crore each. Another reason that has prompted us to increase our focus on export is that this could reduce our risks," according to him.

With increasing steel prices shrinking the profit margins of Indian construction companies, export is being increasingly viewed as a convenient route to offset this trend.

"Steel prices have increased almost 100 per cent during the last two and half years. And steel constitutes anything between 20 to 30 per cent of the cost of construction projects," Mr Mundhra pointed out.

In the domestic market, the company, which has an order book valued at Rs 2,500 crore, will be focusing on urban infrastructure, nuclear and thermal power and port projects.

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