27 February 2020

Infratrack

The urban thrust

 

Tata Projects is now on an urban infrastructure roll in view of the overall decline in industrial business

 

With the Narendra Modi government putting the Smart Cities agenda on fast track India’s burgeoning construction industry may well have found its Holy Grail of Development – Urban Infrastructure, to give it a name.

Likewise for Tata Projects, the engineering, procurement and construction arm of the Tata Group, and a leading player in the Indian construction firmament. Tata Projects operates through its strategic business units — Urban Infrastructure, Industrial Infrastructure and Quality services — and offers turnkey end-to-end solutions. The company has a current order book of over Rs.14,000 crore and has secured fresh orders in 2014-15 worth about Rs.8,000 crore. In what could be perceived as a slight decline in focus from industrial segments the company could now witness almost 60 per cent of its order book coming in from contracts bagged in urban infrastructure over the next three years.

What is hugely encouraging is that the company since its entry into the urban infrastructure market in 2014-15 has secured business worth about Rs.2,000 crore. It may be recalled that earlier, till three years ago, industrial segment contracts from power generation, transmission and distribution, formed up to 90 per cent of the company’s order book position, but has shown a decline leading the company to smartly shift focus to more prosperous areas of business of building construction as witness its most recent partnership with partnership with Australia’s global contractor Brookfield Multiplex – a subsidiary of Brookfield Asset Management – to target residential, commercial and healthcare projects across India.

 

PARTNERSHIP CONTOURS

The two partners are already working together on a healthcare project in Kolkata, five commercial office special economic zones in Noida-Gurgaon and Kolkata, and a five-tower residential project in Bengaluru. Brookfield Multiplex will bring to the partnership its experience of delivering high-rise buildings in Australia, the Middle East, Europe and Canada. It has to its credit over 900 projects worth $61 billion and commands unmatched leadership and expertise in carrying out state of the art projects across the residential, health, tourism, commercial, education, engineering and infrastructure sectors across the globe. On its home turf of Australia, Brookfield’s signature has been seen on several projects including Prima Pearl, an 80-storey tower in Melbourne and the Brookfield Palace in Perth, while the JW Mariott Marquis in Dubai is counted among the company’s landmark projects in the Middle East.

Vinayak Deshpande, Managing Director, Tata Projects said, “The partnership with Brookfield is to help Tata Projects’ tap into world class construction practices and to deliver premium quality buildings in the social infrastructure space. It will enable us to pioneer new initiatives which will accelerate India’s growth.”

Glenn Raphael, Managing Director, Brookfield Multiplex India is led to say: “We are here in India because we expect the social infrastructure market to grow rapidly. There is room to bring in world-class technology and best practices to the Indian building construction market.”

It is easy to see that the rapid urbanisation in India has triggered change in the approach of companies leading them to explore a broad swathe of opportunities to construct commercial complexes, houses, metros, hospitals and schools, transportation systems like metros, water treatment, waste water management etc. Understandably Tata Projects’ tie up with Brookfield for the social infra biz is because it wants a bigger footprint in the future. The pure-play infrastructure vertical of the Tata group, with an overall orderbook of Rs.14,000 crore, is now hungry for more growth, presence and revenues.

“Our shift in focus is because of increasing urbanisation which we see as a very big opportunity. We believe the market is growing and we will engage more into this market. That will allow Tata Projects to diversify into areas in which we were not present earlier but to which we can now contribute in a big way,” explains Deshpande.

 

TIE-UP IMPLICATIONS

In terms of the engagement with the Australian firm this will mean the strengthening of Tata Projects' presence in India's social infrastructure firmament currently restricted to four cities: New Delhi, Bengaluru, Kolkata and Mumbai. What one can also expect from the relationship is changes in the skylines of cities coupled with faster execution of high rise buildings with world class design. Both the firms, it is learnt will resort to a revenue sharing formula which will be worked out on a case-by-case basis.

The Indian company is also exploring how its new Australian partner can help to strengthen its position in its key vertical of industrial infrastructure. Brookfield Multiplex, whose speciality is high-rise and complex buildings, has devised designs and techniques that minimise labour requirement thereby making construction cost-efficient and safe. Those will be valuable inputs for Tata Projects as it makes it move into the Indian urban infrastructure market.

As far as the memorandum of understanding (MoU) is concerned it promises ‘on-time delivery’ of projects and will offer state-of-the-art construction technology and world-class design capability The two companies are currently working on three projects with a combined value of about Rs.1,600 crore. The partners will initially focus on social infrastructure projects in major Indian metros and will not go after all projects together but will bid together selectively.

 

SMART PROJECTS

Both partners will doubtless be eyeing business prospects on the 100 Smart Cities front. Deshpande is of the view that it makes eminent sense for prominent infrastructure players to contribute to the ambitious developments being planned. “In keeping with our new focus area which is of urban infrastructure we will be keenly monitoring all avenues where Tata Projects can play a role. Going forward Smart Cities will most certainly be one of them.” “We applaud the Indian government’s plan to come up with Smart Cities. For players like us who are in the business of introducing quality to the urban built environment Smart Cities are certainly a great space for us to be in,” adds Raphael. In all our projects across the world the one word you will always find embedded along with sustainability is smartness.”

 

OPTIMISTIC OUTLOOK

Despite the current decline in industrial projects the Indian infrastructure construction major is gung ho about the overall infrastructure growth of the country and is looking to clock a healthy 20 per cent growth in its total order value this year. In FY15, a fresh order inflow of Rs.3,000 crore has already been booked. Furthermore, Tata Projects Limited is currently at L1 position in orders worth Rs.3,000 crore. The company’s minders feel that this will ultimately translate to fresh orders in the course of time. In the urban infrastructure space, too the company has recently bagged an order to build a 9-km elevated viaduct for the Delhi metro rail project (phase-III). A Tata Projects-led consortium has also recently bagged the contract for two phases of western dedicated freight corridor (WDRFC) for a stretch of 300 km beating others in a competitive bidding Understandably the company is upbeat about bagging more projects, works related to metro and water treatment and 6-7 mega projects in the power sector. “The bidding processes have started and we intend to secure a majority of them,” says Deshpande with a determined look in his eyes.

With the Tata name behind it there is no doubting the success of TPL’s onward urban development march. It should have no problem finding its Holy Grail.




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