Bricks, Mortar and Moolah
If there is one sector that has benefitted most visibly from the India growth story, it is the construction industry. Titanic-sized tower cranes busily moving blocks of concrete and steel are a common sight across metros. Less noticed, however, is the performance of many of the construction companies that have built solid fortunes amidst the boom.
One such company is the $7-billion, UK-based construction group Laing O’Rourke (LOR), which set up operations in India just around four years ago. Till date it has been low profile and sometimes in news as one of the joint venture partners of Indian real estate major DLF. The two have an equal joint venture for construction—DLF-Laing O’ Rourke—that clocked a bookturnover of Rs 800 crore (typically managed turnover for construction firms is 30-40 per cent over book-turnover) this year and has more than 1,100 people on its rolls. “We are adding over 100 people every month,” says Laing O’Rourke India country head, Dhiraj Singh.
Independently the company has participated in projects such as Mukesh Ambani’s new home Antilla, the Asian Games stadium in Ranchi and two build-operate-and-transfer road projects.
Construction, however, is just a part of LOR’s business in India. Singh points out that the company intends to straddle the gamut of construction-related activities in India—ranging from services to manufacturing and even equipment leasing—and also to use India to feed its global business with low-cost products and services. That is, use India as a global resource base.
The LOR journey in India began with Eigen, which provides support and technical services to construction-related firms globally. The construction giant is planning to leverage the low-cost strength of the Indian economy to provide outsourced services such as remote monitoring of facilities through its other joint venture with another Indian realty group, Vipul—Vipul Laing O’Rourke.
On the manufacturing side, the company is setting up a timber door manufacturing plant in the Kandla SEZ in Gujarat. It is also planning to rope in its present suppliers in the UK into this joint venture and others that may look at manufacturing curtain walling and concrete sleepers.
This growth in multiple businesses is expected to be funded from retained earnings initially and in some cases—such as Vipul LOR and the manufacturing ventures— by other strategic partners as well. “However, each of these individual businesses may grow to such a size that they may well approach the public equity markets after another three years,” says Singh.
By 2011, he expects the manufacturing arm to fetch Rs 400 crore in revenues, and the services businesses, Rs 250 crore. The construction business hopes to employ 3,000 people and have book revenues of Rs 2,500 crore by then. The construction giant’s India investment: Rs 350-odd crore by the end of 2007-08.
Whoever said construction is a dirty business wasn’t thinking of Laing O’Rourke. Despite the dust and grime, there are nifty revenue and profit possibilities. Interested? Well, there seems to be an opportunity. Laing O’Rourke is currently scouting for strategic partners in a few businesses, notably DLOR and VLOR.
