A leading player in the transport consultancy and engineering sector, RITES boasts a debt-free balance sheet and although the COVID-19 pandemic has resulted in a massive fall in its consolidated profit, the company’s project pipeline is expected to help it in turning the tide.
In an interview with Moneycontrol, Rajeev Mehrotra, Chairman and Managing Director, RITES, talks about the impact of COVID-19 on operations, private trains project and employee retention.
Q. With COVID-19 having a debilitating impact on India’s infrastructure sector, how does RITES plan to play a role in reviving sentiments?
A: I think this is a very macro-level problem. From July onwards, things started normalising in certain areas. We have not really returned to full normalcy at the construction sites. We are trying to persuade the contractors to bring the required manpower and also get all the approvals on priority. Secondly, whatever initiatives the government has taken, be it the burden of the contractors, reliving as part of the performance guarantee or now reducing the performance guarantee to 3 percent, etc, we have very quickly implemented the measures.
Q: The government has asked all PSU to ramp up capital spending. What was your capex plan for FY21 before the pandemic, and what are you actually going to end up spending this year?
A: For a company of our size, it is very limited. We are not into that league of other capex oriented companies. For this year, we should see somewhere around Rs 160 to 180 crore of capex.
Q: What plans do you have related to the bullet train project?
A: In terms of credentials, RITES has been in the sector for almost 46 years. We were involved in the pre-feasibility study then and at that time it was taken to Pune also. We have been familiar with the issues in this project and we hope to play a significant role going forward in the consulting part of it. Since this is a JICA funded project, lead consulting role has to be with a Japanese consultant or a group of consultants. We have concluded our discussions and whenever the opportunity for tendering for consulting comes up, we will be ready to put a meaningful offer.
Q: How does RITES view the private trains project and will it be an active part of it?
A: We are the transaction adviser to the Ministry of Railways. There is an exclusivity clause which states that the consultant cannot participate. Our role here is confined to the formulation of the scheme document, tendering, answering pre-bid queries and doing evaluation. After that, when there's no restriction and we can explore opportunities later.
Q: What do you have to say about reports of government looking to further pare its stake in RITES?
A: To the best of my knowledge, with RITES, there could possibly be some pause.
Q: What portion of revenues does RITES get from consultancy services in projects of other countries and are there any plans to scale it up?
A: The total consulting income would have about 7-8 percent from the overseas projects and yes, we intend to scale up our presence overseas also.
Q: Being a PSU, have you seen any visible changes in the work environment after you have taken over and what legacy do you want to leave behind?
A: We diversified operations and targeted high growth rates and added businesses. We predominantly remain a consulting company but we have scaled up our presence in exports. We have also started an interesting energy management business where we do power procurement for Railways under open access. We have also successfully executed turnkey projects. So, this has given a different profile than what it was before I took over and there is a proven track record of high double-digit growth done by the company in the last five-six years. Another important thing is that we have focused on employee retention. They now have a sense of belonging and have helped me achieve my targets.
Q: Do you think the infrastructure sector is getting adequate support from PSBs and financial institutions?
A: I'll confine this to the clients we are interacting with. I think they have been getting good support and the government took an important initiative regarding performance guarantee. We do not allow anybody who has defaulted to a bank to bid for our projects.Q: When do you expect to see a rebound fully visible on the ground?
Nothing is wrong with companies like us or the construction companies or the project owners. Macro challenges came suddenly. It is very important to bring the feel of normalcy. I believe that maybe by end of this financial year, we will have a visible way forward on vaccination.