In August 2020, one of India’s most ambitious projects to build the Zojila Tunnel, connecting Srinagar and Leh, was finally awarded after bids were invited several times over six years. The name of the winner took many by surprise as it was a little known company from Hyderabad called Megha Engineering and Infrastructure Ltd (MEIL).
The company had beaten heavyweights like Larsen & Toubro, among others. What surprised people more was finding out that this relatively unknown company was in fact already executing some other big projects.
On March 14, the Election Commission of India (ECI) published details of the buyers and beneficiaries of electoral bonds since 2019 in line with the Supreme Court’s orders, ahead of the 18th Lok Sabha elections, and MEIL has emerged among the top donors on the list.
While the company is better known than it was in 2020, its status as the second largest infrastructure company in the country remains largely under the radar, at least in terms of public perception.
Such was the curiosity that on March 15, certain parts of the company’s website stopped responding due to high traffic.
“They came on the scene with no history of executing infrastructure projects and bagged big orders. In fact, not many industry players even know much about the promoters,” an infrastructure sector veteran told Moneycontrol.
MEIL is a closely held public company.
How big are the donations via electoral bonds?
MEIL contributed Rs 980 crore through bonds purchased between April 2019 and November 2023.
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The data from State Bank of India also reveals that MEIL’s subsidiaries and associate companies also donated. These included – a Rs 220 crore donation by Western UP Power Transmission Company Limited, Rs 40 crore by SEPC Power and Rs 6 crore by Evey Trans Private Limited.
The donations aggregate to Rs Rs 1,200 crore.
Mega Projects
The company is executing projects across 20 states and two Union Territories in sectors such as irrigation, drinking water, highways and tunnels, ports, railways and power.
Some landmark projects include– Zojila Road Tunnel, Polavaram multipurpose irrigation project, Narmada-Kshipra River linking project in Madhya Pradesh, Mahasamruddhi Mahamarg in Maharashtra, Chardham Rail Tunnel in Uttarakhand, Vadodara Canal Top Solar Power in Gujarat, Gangajal Aapurti Yojana in Bihar, Polavaram Lift Irrigation in Andhra Pradesh, Saurashtra Branch Canal and Sauni Yojna in Gujarat and the Ramthal drip irrigation in Karnataka.
As per data from rating agency CRISIL, MEIL order book was a robust Rs 1.87 lakh crore as on September 2023. While this is second to sector leader L&T’s order book of Rs 4.5 lakh crore around the same time, it is significantly higher than its peers.
In a report in October 2023, India Ratings affirmed MEIL’s debt rating at ‘IND AA’/Positive and added that it expects MEIL's revenue to increase to Rs 30,000 crore-33,000 crore in FY24 owing to a likely strong execution of orders in the second half of the fiscal.
The company’s revenue in FY23 was Rs 25,837.7 crore, and earnings before interest, taxes, depreciation, and amortization (EBITDA) was Rs 3338.1 crore, according to India Ratings.
How it started?
Hyderabad-based businessman P Pitchi Reddy (PP Reddy), who comes from a farming background, started Megha Engineering Enterprises in 1989. The company initially built pipelines for municipal projects and then progressively moved to bigger water and irrigation projects. PP Reddy’s nephew PV Krishna Reddy (PV Reddy) joined the business in the early 90s.
As the company added more verticals and expanded, it was renamed and a new company was incorporated in 2006, namely Megha Engineering and Infrastructure. PP Reddy is now the chairman and PV Reddy is the managing director of the company.
Beyond irrigations and drinking water, the company diversified into transport, manufacturing, power, and hydrocarbons. At a group level, the company has also forayed into the mobility sector with companies Olectra Greentech, Evey Trans and Megha Gas.
MEIL’s special purpose vehicle, My Home Group along with other investors also owns Associated Broadcasting Company Private Limited (ABCL), the umbrella company for a portfolio of regional news channels under the brand name of TV9.
Big Order Wins
MEIL’s order wins for some of the big infrastructure projects, have been a topic of discussion in the infrastructure sector.
Here are some instances that piqued interest of the industry:
1. Polavaram Multipurpose Irrigation Project- In 2019, soon after Y.S. Jagan Mohan Reddy took charge as Chief Minister of Andhra Pradesh and he canceled the contract for the project given to Navayuva Engineering, alleging a scam. New bids were invited through a reverse auction route. MEIL was the sole bidder and bagged the order.
2. Zojila Project: After six years and five failed rounds of bidding, and despite changing the model for the project to an engineering, procurement and construction (EPC) job, this critical project connecting Leh and Srinagar remained a nonstarter. The project was awarded to Mumbai-headquartered IRB Infrastructure in January 2016 but was canceled soon after on allegations that the road ministry may have tweaked norms to favour the company. Then in January 2018, Mumbai-based IL&FS bagged the order to build the tunnel project, beating Larsen & Toubro, Reliance Infrastructure and Jaiprakash Ventures. But after IL&FS ran into financial trouble, it exited the project. While Prime Minister Narendra Modi laid the foundation stone for the Zojila tunnel project in May 2018, it was finally awarded to MEIL after it beat L&T and IRCON in 2020, much to the surprise of the industry given the difficulty of the projects and MEIL’s lack of experience in complex projects.
3. Thane-Borivali twin tunnel project: MEIL beat L&T to bag two separate packages to build the ambitious project worth Rs 14,400 crore. This raised eyebrows as while MEIL was the lowest bidder for ‘Package 1’, L&T’s bid was the lowest for ‘Package 2’ but it was rejected later as the company had “inadvertently” mentioned the amount as the final bid but had not added the tax component to it, as required by the tender.
Covid-related norms helped
MEIL, like some other infrastructure companies, may also have benefited from the Centre’s decision in 2020 to dilute key financial criteria for bidding for infrastructure projects to help EPC players execute projects despite the financial crunch, due to Covid. The easing of these norms allowed more companies to bid for projects. Some industry leaders, including former L&T’s chairman AM Naik had previously argued that it compromised the quality of bidders and intensified competition.
Union Minister of Road Transport and Highways Nitin Gadkari agreed with this line of thinking at a Moneycontrol Policy Next in March last year. “We diluted the eligibility norms which made many infrastructure companies bid for big projects, reduced the bid price but did not take care of quality. L&T stopped bidding for many projects citing the competition. Now we are trying to rectify this.”
How is it going?
Olectra Greentech, the listed entity of the group, saw share prices falling 3 percent intraday on March 15 to Rs 1,742 a share on BSE. Shares of the company soared to an all-time high of Rs 2,135 on February 19, riding high on EV bus orders, particularly from state agencies in Maharashtra.
MEIL is reportedly under the lens of the Comptroller and Auditor General of India (CAG) in the Kaleshwaram Lift Irrigation Scheme (KLIS) scam, according to reports. A news piece in Deccan Chronicle, which cited the draft performance audit report on KLIS by the CAG, said that the company was paid an excess of Rs 5,188.43 crore in just four packages, involving the supply and commissioning of pumps, motors and auxiliary equipment.
Reports in Hyderabad media also suggest that all may not be well between the uncle-nephew duo at the helm of the company. According to reports, an ongoing clash between the two has resulted in an arrangement where the founder PP Reddy will exit the company after PV Reddy pays him Rs 14,000 crore in three years. The company has not made any comments on this.
“Only the two of them know what happened. They may share details later but for now, there is nothing officially known,” a source said.
MEIL declined to comment and the Reddys were unavailable to comment on the electoral bonds matter.
(With Inputs from Yaruqhullah Khan)
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