Vinayak Deshpande took charge as the managing director of Tata Projects in 2011, at a time when opportunities in the engineering and infrastructure space were growing. The company has achieved all-round growth under the leadership of the chemical engineering graduate from IIT Kharagpur with over 35 years of work experience in different roles across diverse industries. In this interview, Mr Deshpande speaks to Gayatri Kamath about the restructuring of Tata Projects’ business verticals, its challenging projects and how it stays ahead of the technology curve.
About five years ago, we had three business verticals, all in the area of industrial infrastructure — power generation, minerals and metals, and oil and gas. At that point of time, there were two very visible trends. There was a shift from industrial projects business to urban projects business, with fewer refineries and power stations being commissioned, and more metros and commercial buildings being taken up. The other trend was the commodity meltdown, with prices of oil and steel going down because of developments in the Middle East, US, China and so on. Suddenly the world had excess manufacturing capacity in these commodities. This meant our market was shrinking and we were very vulnerable.
We realised we needed to rework our business strategy and we moved to our current six verticals strategy. The earlier three business verticals have been clubbed as one called EPC business. We have a new vertical focused on transmission and distribution, ie, power transmission lines. There was an upswing in railway modernisation, so we focused on railways with a business vertical called transportation. General construction and the water business was clubbed as construction and environment. Urban infrastructure was the fifth and quality services the sixth. This was the strategic plan, our bridge to the future. This has done two things: it has expanded the market that we address and it gives us a portfolio which de-risks us.
Five years ago, we were struggling for 10 billion to 20 billion worth of orders; now we get about 150 billion to 200 billion worth of orders. Our order backlog today is about 320 billion. Our turnover has grown from about 30 billion in FY14 to 61 billion last year. This year we should close at about 90 billion. That’s a three-fold jump in turnover in five years.
Roughly, about 65% is public sector and the rest is private sector. Most investment is happening through government spending. But in certain sectors, private sector participation is increasing. One example of this is power transmission, which was earlier the stronghold of Power Grid Corporation of India, a public sector undertaking. Now we have a lot of private money coming in to set up transmission lines, such as from Sterlite and the Adani group. Same trend can be seen in commercial buildings, where entities like Tata Realty and Mahindra Lifespaces are coming in.
There is no difference from the engineering point of view. All projects come with the same requirements in terms of design, engineering, logistics, construction skill, etc. The only difference perhaps would be in terms of safety of the general public when we are undertaking an urban infra project. For instance, we are building the Mumbai Metro 3 underground line, for which we have dug a hole near Prabhadevi and we have to bore the tunnel to Mahim.
We have to pick and choose because one bad project or customer can ruin the good work done in 10 projects. We have some criteria that we look at when it comes to project selection. One is the class and quality of the customer, especially as it relates to payment terms. For instance, some state government entities are virtually bankrupt. Some projects come with unsuitable payment terms where a large part of the payment is retained till the end. That is as good as not paying us. The size of the project is another aspect. We prefer to not get into too many huge projects. One or two 50 billion projects are fine, but having more average-sized 6-7 billion projects is better for us as this reduces our risk exposure. Project margins are important, and also the cash flow — some projects can suck a lot of your cash. The last aspect is the guarantees or liabilities that you are signing for. For instance, there could be guarantees with respect to performance of the facility or timelines, or associated commercial liability. We scrutinise the commercial liability aspect of projects that we sign up for. We have a very elaborate project risk assessment process that extends upto the board level, to ensure we are bidding for the right projects.
The one that immediately comes to my mind is the Lucknow Metro. The underground metro line passes through the heart of the city, with heritage buildings above it. We had to make sure that none of the foundations were affected in the tunneling. We used an automated tunnel boring technology with sensors and central monitoring system. We also used precast diaphragm walls for the tunnel. The whole thing was done with factory-like precision and we finished about 20-30% ahead of scheduled time. This is a national record and the customer is very happy.
The other big example is a Sterlite Power project where we were building the Jammu & Kashmir transmission line. It was very close to Kargil in a hilly terrain full of snow, where conditions were such that we could work for only 4-5 months in a year. There was a bonus clause for finishing the line ahead of time. In this project, we used a helicrane for the first time in India. The helicrane transported the tower equipment and also helped erect those towers. That is how we managed to finish the project ahead of schedule.
Value engineering is about optimising engineering so that you do not waste material. We use 3D visualisation techniques where we view the whole facility or plant in 3D. We also use structural analysis, design analysis, clash detection, safe construction methodologies and so on. It helps minimise the quantities that are required and eliminates rework completely.
Lean construction is about construction productivity. Whatever you need to construct, be it fabrication of your pipe or laying of a road or doing plastering of a building, you have to see how you can do that in the fastest manner. We use lean construction techniques to manage and improve per person productivity. We look at how to eliminate time delays and process wastage so that construction on site happens with factory-like precision. Precasting, prefabricating, applying 5S techniques and proper storage gives you huge advantages in construction productivity, which helps you to do projects faster and reduce costs.
Apart from 3D visualisation, we use other cutting-edge applications, such as PDMS for industrial sites and building information management system for building sites. These are fully integrated so that we can take full advantage of digitalisation. The second big thing is the adoption of mobility applications which help our teams in onsite collaboration. Our teams use tabs which connect them with the ground work force and help provide instructions, understand problems and remotely handle safety and quality issues. So site connectivity and collaboration is being handled through mobile applications.
Our partner, Tata Consultancy Services, is helping us with the digitalisation of some of the work processes. We are looking at digitising our bidding, costing and estimation process. We are using drone technology for collecting field data. We are also planning to use big data and analytics for safety management and quality management.
Right now 10-12% of our business is international. Most of the international projects come from the Middle East, Africa and South East Asia, and are in the areas of transmission and distribution, power generation and railways. We’re trying to see how we can push this to about 20-25% in the next two to three years. For that, we work very closely with Exim Bank of India, Asian Development Bank and World Bank, especially for the Africa projects.
The Smart cities initiatives hold a lot of business potential for the Tata group. It covers 40 big cities of India and gives us the opportunity to provide the smart backbone that these cities require. We are very hopeful that our collaboration with Tata Consultancy Services and Tata Communications will help us take this business opportunity forward.