IVRCL eyes Rs 2,000cr turnover by 2007

Targets cumulative annual growth rate of over 44% in 3 years

Buoyed by the Union Budget and on the strength of a strong order book position, IVRCL Infrastructures & Projects Limited is targeting a cumulative annual growth rate (CAGR) of over 44 per cent over the next three years. It hopes to achieve a turnover of Rs 2,000 crore by 2007.

For the current financial year alone, the city-based infrastructure major has set a turnover target of Rs 1,200 crore. In the last financial year, it achieved a total income of Rs 775.56 crore.

R Balarami Reddy, director (finance) of IVRCL Infrastructures, told Business Standard that environment and water projects would continue to account for a lion's share of its business. The current order book stands at Rs 1,695 crore.

Of this, water supply projects account for Rs 988 crore, building construction Rs 326 crore, road projects Rs 336 crore and power projects Rs 45 crore.

The company is exploring strategic alliances in the power sector, which will contribute higher percentage of turnover in the coming years, he said.

Explaining the rationale behind the target of Rs 2,000 crore by 2007, Reddy said that the total investment envisaged by the government in various infrastructure projects for the next five years is Rs 6,20,000 crore.

The construction sector accounts for nearly 50 per cent of this investment, he pointed out. The Rs 3,10,000-crore potential for construction would translate into orders over the next three to four years, thereby facilitating extra order book for the construction industry.

Listing out the opportunities for the company, he cited the Planning Commission's estimates that an annual investment of around Rs 15,000 crore was required in the next 10 years for water supply and sewerage projects.

In the pipeline sector, the company expects a build-up of 18,671 km of domestic oil and gas pipeline network over financial years 2004-2008.

The Golden Quadrilateral and the North-South East-West highway programmes are estimated to cost Rs 58,000 crore. The port sector is likely to attract investment of up to Rs 12,000 crore from domestic and foreign majors over the next three years.

The 'Sagar Malaa' project is estimated to cost Rs 1,00,000 crore over the next 10 years. Reddy said the company is actively looking at participation in BOT projects in the road, port, railways and power sectors.

On the Union Budget, Reddy said that the proposals were favourable to the infrastructure industry and more particularly to IVRCL being a 'water company'.

The proposal to revive the Rural Infrastructure Development Fund with a corpus of Rs 8,000 crore and provision of Rs 2,800 crore to Accelerated Irrigation Benefit Programme (AIBP) would help increase the business for the company.

The proposed scheme to repair, renovate and restore water bodies that are linked directly to agriculture under the National Water Resources Development Project over the next seven to 10 years also assures a healthy order book position for the company.

The company is qualified for desalination projects and the proposals for setting up the Rs 1,000 crore desalination project in Tamil Nadu affords the company a good opportunity.

On the excise duty hike on steel by four per cent on flat products, Reddy said that the impact would be negligible as the contracts of the company had an escalation clause. The proposed equity and loan funding to the extent of Rs 17,000 crore to PSUs would help the construction sector in the infrastructure segments of roads, power, ports and oil and gas.

The service tax will not have much impact as 95 per cent of the operations are covered by the exempted items and even in cases where there is impact of service tax it can be passed on to the clients/employers in all the future projects.

The impact of two per cent education cess on all taxes would have an impact of about Rs 10 lakh which is negligible, Reddy said.