Spot the Opportunity

The difficult times were seen as an opportunity to foray into newer areas of business and expand overseas, says Ram Singh, Director Finance, Engineers India.

 Ram Singh, Director Finance, Engineers India Ram Singh, Director Finance, Engineers India
Engineers India Limited (EIL) operates in a highly competitive and complex industry focused on the oil and gas and petrochemicals sector. EIL provides design, engineering, procurement, construction and integrated project management services. It is a zero-debt company with a consistent record of healthy earnings and dividend payout.

Given the economic slowdown in the past few years and stagnancy in the hydrocarbon sector in India, the journey for EIL has been very challenging due to ever-increasing competition. Even in such times, EIL has successfully managed to execute the nine million metric tonnes per annum Guru Gobind Singh Refinery project of HPCL Mittal Energy Ltd in a record time and costs. EIL also secured a contract from Bharat Petroleum for its Kochi refinery expansion project with a capacity of six million tonnes a year at an optimal price.

The difficult times were seen as an opportunity to foray into newer areas of business and expand overseas. Newer areas of the consultancy business were identified, such as nuclear and solar power, fertilisers and waste-water management.

For me, the main challenge was to manage the unlimited opportunities in a competitive environment, and at the same time optimally manage profitability of the company. This was ensured through a flexible bidding policy for securing business, driving cost efficiencies across activities, eliminating idling of funds and reducing working capital.

In numbers
#Revenue: Rs 3,723 crore, up 31%
#EBITDA: Rs 718 crore, up 9%
#Profit after tax: Rs 644 crore, up 21%
#ROE: 38%
(Figures for 2011/12; Source: Annual Reports)

#Dividend payout ratio of 33.5%
#Compound annual profit growth 36% for five years through 2011/12
#Ventured into new businesses of green buildings, effluent management and highways

Debtors' collection period was reduced from 59 days in 2009/10 to 30 days in 2011/12. Aggressive treasury management resulted in post-tax returns of more than 10 per cent on mutual fund investments. The objective was to strive for sustainable and profitable growth. 
EIL's follow-on public offering in July 2010, through which the government divested 10 per cent of its holding in the company, was successfully implemented. The offering received overwhelming response and was oversubscribed 13.4 times.

We have also set an exemplary benchmark of mitigating project risks through a robust Enterprise Risk Management framework. Key risks were identified, a risk register developed, root causes analysed, key risk indicators put in place, an escalation matrix prepared and action plans were developed to mitigate them. We also implemented 'Project Risk Management' for all important and large projects. A project risk register is prepared by listing all possible risk events or activities associated with the project along with a mitigation action plan.

Today's world of finance is diverse, complex and multi-faceted. Against this backdrop, the role of the chief financial officer takes on critical importance. A proactive approach, analytical skills and foresight helped manage the potential threats to the organisation's growth. Top priority was given to optimisation of returns for sustainable business growth and diversification initiatives. The difficult business condition was converted to the advantage of the company by navigating newer territories and looking at asset acquisitions.

Ram Singh is Director (Finance) of Engineers India. He has been adjudged the Best CFO of a PSU (Medium).