I P Tantia - CMD, Tantia Constructions Ltd

What factors helped you to register consistent top-line and bottom-line growth over the years?

Tantia Constructions Ltd, with its 47 years of experience in the field of Core Infrastructure, has completed over 600 projects till date. It has a reputation of delivering challenging projects on schedule. Hence, it has a legacy which inspires confidence among prospective clients and makes the old clients provide repeat business to us.
Secondly, Tantia has expertise in all infrastructure verticals like Road Infra, Railway Infra, Urban Infra, Aviation Infra, and Marine Infra and has recently ventured into RMC manufacturing as part of its backward integration initiative. Hence Tantia has a thoroughly diversified portfolio.

Thirdly, one of our great strengths is our tendering team. It comprises of seasoned professionals who have consistently displayed the ability to bag key projects for the company allowing us to always maintain a healthy Order Book. Our current Gross Order Book is about Rs 3,000 crore, providing revenue visibility for the next 3-4 years.
All these factors have attributed to the consistent growth in all spheres.

What is your view on the current outlook of Core Infrastructure sector and its future?

The strong economic growth achieved in recent years has led to an expansion in industry, commerce and per capita income, which in turn has strengthened the infrastructure sector. Consequently, India has emerged as one of the world’s largest and most potential infrastructure and project finance markets, with the total number of project-based special purpose vehicles at around 800. The infrastructure sector accounts for about 26.7 per cent of India’s of industrial output.
India’s Infrastructure spending increased about 23 per cent to reach Rs 2,14,000 crore for 2011-12. The Govt. intends to double the infrastructure allocation to USD 1 trillion in the Twelfth Five Year Plan. In fact, the Government has allocated around 48.5 per cent of the Gross Budgetary support, to support infrastructure expenditure in the 2011 Union Budget.
These factors will definitely make the core infrastructure industry flourish with many golden opportunities.

What has been the impact of rising interest rates on the Core Infrastructure sector?

The rising interest rates have had adverse impact on the PAT margins of many   companies. We are proud of the fact that we have a robust EBIDTA margin of over 12 per cent and in spite of the rising interest rates, we have managed to improve the PAT margin from 3.3 per cent in 2009-10 to 4 per cent in 2010-11.

Tell us about the projects in hand and in the pipeline?

Tantia is matching the country’s aggressive growth agenda, leading to attractive year-on year growth. We have healthy Order Book of Rs 3,000 crore, providing revenue visibility for the next 3-4 years. The break-up of the Order Book is as follows: -
Roads & Highways     -   36 per cent
Railway Infrastructure            -   29 per cent
Urban Infrastructure   -  30 per cent
Industrial Fabrication and  Marine Infrastructure        -   5 per cent

In 2010-11, we have entered the Build-operate-transfer( BOT) space with two BOT projects:-(1)Rs 40 crore parking –cum-commercial project in Shimla for HPIDB and (2) Rs 429 crore 70 km road project, for NHAI.
The steel girder fabrication and erection for the prestigious Jubilee Bridge in West Bengal deserves special mention too. The company is also engaged in contract wagon fabrication for the Railways in Kolkata.

What kind of growth rate are you looking for the company in this financial year?

We are estimating a growth in Turnover of over 20 per cent, a growth in Gross Order Book by over Rs 1,000 crore and maintaining the EBIDTA margin at over 12 per cent and PAT margin at over 4 per cent.

Where do you see Tantia Constructions in next five years?
We intend to become the foremost Contractor in eastern India, excel in all verticals in the infrastructure space and expand to a Rs 1000 crore company.

What kind of risks and challenges lying ahead for the company?
Let’s look at each element of risk, one by one:
Slow economic growth: Although the economy is expected to report slower growth in 2010-11, infrastructure companies possess large order books with a minimum 30-month revenue visibility. Also the Govt. has given great importance to the infra sector by providing around 48.5 per cent gross budgetary support to infrastructure in the 2011-12 Union Budget.
Rising interest rates: It is a factor affecting the economy as a whole and infra sector is not immune to it. However we are looking to improve our margins and get into high margin projects to absorb the excess interest cost. Already we have shown improvement in the PAT margin during FY’11 despite the high interest rate scenario.
Competition Risk: The company has a diversified portfolio across sectors like roads, highways, bridges, railways and urban infrastructure to counter excessive competition in any one or few sectors. The company has forged alliances with various construction companies possessing specific competencies, enabling us to bid for challenging projects.
The company’s strong net worth, requisite experience and acknowledged reputation help address stiff pre-qualification norms, providing us an edge over competitors.

What is your message for your investors?
Our Board of Directors have recommended a 25 per cent dividend pay-out on the equity shares of Rs10 each. During last FY, Company also opted to buy-back US$ 5 million worth of Foreign Currency Convertible Bonds (FCCBs) from the bondholders as per RBI guidelines. The buy-back was completed at a mutually agreed available discount rate of 25 per cent on the accredited value of the bonds and this was funded out of internal accruals.