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Back to (the old) school

Ahluwalia Contracts managed to ride the storm on the back of financial discipline, an optimum mix of clients and projects and good old-fashioned conservatism.

Shalini S. Dagar | Print Edition: May 2, 2010

March-April 2009: The global economic outlook is still grim and a recovery isn't a gleam in the eye of even the more optimistic pundits. The scenario back home is unclear, too. Amidst this uncertainty, a Delhi-based construction company, Ahluwalia Contracts (India) Ltd (ACIL), the chief contractor for the Commonwealth Games Village in Delhi, sees that prestigious project teeter towards irreparable delay. The developer, Emaar MGF, is unable to make payments to ACIL. That's a big headache, and it isn't the only one. A number of retail and IT projects as well as special economic zones are hanging fire because of tight liquidity.

Successfully Managing the Global Crisis (Mid-size Company)

S.K. SACHDEVA, Executive Director/ Finance/Ahluwalia Contracts

  • Winning move during 2008-09: Handling the Commonwealth Games Village project.
  • Challenge ahead: High inflation which could hit growth.
  • Most likely to be heard saying: "Finish today's task today."
Yet, S.K. Sachdeva, Executive Director, (Finance and Accounts), ACIL, recalls that period with a grin of triumph. "The working capital cycle was hugely enlarged. Receivables that were normally paid up in 50-60 days were now stretched to 120 days. However, we were relatively insulated as we had envisaged the situation earlier," he says. According to him the red signs were flashing almost a year prior to the collapse of Lehman Brothers. "There were signs of incipient sickness. Even so there was euphoria. When something goes to the top with that speed, it also goes down with equal speed," he says.

Sachdeva believes that it was the conservative work culture of the company coupled with its diversified project and client mix that saved the day for ACIL. In any case, as a contractor, the risk for the company was limited. If payments did not come, the work could be stopped while ACIL retained general lien over the project.

But then a major risk was that of invocation of bank guarantees due to non-performance. Sachdeva believes that a solid risk management system and stringent preproject appraisals came to ACIL's rescue. Projects that needed to be shelved were duly kept aside. Where payments could be rescheduled or projects deferred, those options were taken. "Not a single paisa has sunk. Even in the past, we have had no bad debts," says the former banker with Allahabad Bank and Union Bank of India.

Chairman Bikramjit Ahluwalia points out that Sachdeva played a pivotal role in raising funds and bringing business to the company. "He created a system of multiple banks (to get loans) and we were able to get competitive rates in a tough market." That's one major reason for ACIL sitting pretty with an order book of Rs 5,400 crore and appearing poised to clock a 25 per cent growth in revenues for the second year in a row, after five years of roughly 50 per cent compounded annual growth rate.

Clearly, for Sachdeva, who in his 12 years at ACIL has seen several transformations, from the company getting rated to it getting listed (in 2005-06), more milestones await.

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