The Hindu Business Line : Manpower driving M&As in construction sector

New Delhi April 24 Technically skilled human resource constraint faced by companies in the construction sector has reached such a high level that acquiring workforce is becoming a key factor for firms eyeing mergers and acquisitions.

This is a shift compared to the earlier days when the mergers and joint ventures in the construction space were driven more by the need to meet pre-bid qualification criteria, point out industry experts.

According to Ernst & Young's Vice-President, Mr Rajesh Samson, "Project managers with over 10 years of experience are in short supply in the construction sector. We are now approached by companies that are interested in acquiring other firms with an asset base consisting of good workforce. Companies from West Asia are examining Indian firms with this perspective and the vice-versa is also happening."

About 3-4 years ago, companies approached us wanting to acquire other firms - which had project experience in specific areas - so that the acquiring firm could meet the pre-qualification bid norms of a project they were bidding for, said Mr Samson.

When contacted, Soma Enterprise Ltd's Director Mr Ankineedu Maganti said, "We have considered the idea — of acquiring firms that have specific execution capability in terms of people. But we have not been able to get the perfect match to move in that direction."

Soma Enterprise, for example, has tied up with a Malaysian firm for foundation laying work for a bridge project.

"The Malaysian firm's key people are working on our project and are training our people as well," Mr Maganti said, adding that salaries in the sector have moved up by about 30-40 per cent annually every year during the last three years.

Manpower crunch is also hitting the engineering design consultants in the space. Feedback Venture's Managing Director, Mr Parvesh Minocha, said, "Growth of consulting firms is constrained by manpower crunch. Companies in the space have lost not less than 25 per cent of their turnover owing to lack of manpower."

"Lots of foreign companies are making India a poaching ground. Consulting firms from Dubai, Egypt, Ireland, Israel have also started hiring people from India," Mr Minocha said, adding that earlier it was primarily the UK and US-based firms who eyed the Indian workforce.