Patel Engineering Says Tenders In Three Key Segments May Cross Rs 2 Lakh Crore In Two Years

India is expected to issue irrigation, hydro and tunnelling tenders worth over Rs 2 lakh crore in the next two years as the government focuses on infrastructure, according to one of the top contractors vying for such projects.

The hydropower sector is expected to bring in approximately Rs 50,000 crore, while irrigation and tunnelling could contribute around Rs 90,000 crore each over the next two to three years, Kavita Shirvaikar, chief financial officer at Patel Engineering Ltd., told BQ Prime.

These projects will help the company grow its order books, Shirvaikar said. "Our order book of Rs 20,000 crore has an L1 component of Rs 2,000 crore, and the trend will continue in the coming years," she said.

Indian continues to aggressively spend on building roads to power projects, making up for lack of momentum in private investments. Asia's third-largest economy has earmarked bigger-than-anticipated Rs 10 lakh crore on capital investment for the ongoing fiscal compared with Rs 7.5 lakh crore in the year ended March.

Patel Engineering—an engineering, procurement, and construction firm—secured orders worth Rs 7,700 crore in FY23. And it expects growth trajectory to continue into FY24. Targeted projects include irrigation contracts in Madhya Pradesh and Karnataka as well as hydro projects with major public sector units like National Hydro Power Corp. and SJVN Ltd.

Shirvaikar said that hydropower and dams contribute 60% of the company’s total order book, while irrigation accounts for 21%. The rest comes from tunnelling and other projects.

The company’s turnover crossed Rs 4,200 crore in FY23, and it projects 15% year-on-year growth in FY24. Shirvaikar also expects the operating margin to widen from its consistent range of 13–15% seen over recent years.

According to Shirvaikar, reducing debt is the company's primary objective. Patel Engineering has decreased its debt from Rs 5,000 crore four years ago to Rs 1,750 crore.

The company intends to further shrink its debt by "monetising non-core assets and realising claims from the government."

The company owns land parcels worth Rs 1,000 crore in Chennai, Bengaluru, and Hyderabad. It also has pending claims of Rs 3,000–4,000 crore from the government. Some of these claims have been resolved, while others will be resolved in the future, she said.

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(Corrects an earlier version that misstated that Patel Engineering expects to receive contracts worth Rs 2 lakh crore. That outlook is for the industry)