KEC International, an Engineering, Procurement, and Construction (EPC) headquartered in Mumbai, India, is the flagship company of the RPG Group. Which executes projects in Metro & Railway, Electricity transmission & distribution (T&D), civil, solar, smart infra and cables, did not face problems linked to payments or renegotiation of contracts during the lockdown, the company has seen delays in orders from its clients. In an exclusive interview of Vimal Kejriwal, Managing Director of KEC International, He talks about labour shortages might lead to alternative strategies by companies to increase productivity through mechanisation, automation and digitalisation of projects. Here are the edited excerpts:
How do you see the removal of restrictions on projects in the construction sector to help companies such as KEC?
Things are gradually getting back into action after the restrictions removed on April 20, 2020. We think that it will take at least another four-five days to get back to normal since we require the related suppliers for the construction work to continue in full swing.
Our projects require cement, steel and other materials for which we need to line up the logistics as well. We usually have stocks which are good enough for a week, but if the supply chain does not get cleared, then one starts to feel the stock-outs. The same things can happen in factories as well if they do not allow the vendors to open their shops. However, projects are slowly getting into shape.
As you are already in various segments like T&D, railway electrification, cabling and civil work for industries, which projects according to you are getting into shape?
The T&D projects have started at various places. Railway electrification work has also begun in Maharashtra. Civil projects like construction of cement factories and other industrials have got approvals. We are doing four metro projects; the one in Kochi has got approval for starting the construction activity, but the three projects in Delhi are stuck due to complete lockdown. In Maharashtra, we have got approval for railway electrification now. But unfortunately, we could not work during the lockdown on electrification, which we had requested.
What has been the impact on the completion of projects in FY20 due to lockdown?
There was not a serious impact on project completion due to lockdown in FY20 since only six days’ work was lost. Though, going ahead, we will require an extra effort to make up for the lost time of over 45 days. We will take at least two weeks to ramp up. So some of the lost time can be recovered, but if the lockdown continues beyond May, then the recovery could be complicated. The restoration for us will depend on two things — how much of logistics and the raw material is ready for ramp-up, and how many migratory workers we can retain.
How many workers do you have at present and will it help to ramp up your projects?
We had around 30,000 workers reached across 150 project sites before the lockdown. Currently, we are left with 20,000 workers, while 30% have left for their hometowns. These workers are staying at temporary quarters at the project sites, where their food, shelter and medical requirements are taken care of. So we have the advantage of starting the projects and ramping up immediately if the workers continue to remain with us.
How do you see the rise in transportation cost to impact your overall operations?
Overall the cost curve has gone down if we look at the cost of materials, such as aluminium, copper, steel or oil. This drop-in cost will help us to offset whatever little raise in the price we have seen in transport or otherwise unless there is an extended shutdown.
Do you see an essential part of your revenue coming from international operations in Q1FY21 since most of your factories and projects began abroad?
We suppose the international revenues to go up in Q1FY21 to at least 50% from 45% earlier as most of our projects are operational in more than 35 countries that we operate in. But the way domestic operations are coming up, the impact will only be for one month, that is April.
What is your outlook on overall improvement in coming quarters? Have you encountered payment related issues or order delays from your clients?
We have an order book of Rs 20,000 crore as of March 31, while Rs 3,000 crore is as L1. So for us, it is a question of revenue delay rather than revenue loss. For us, the revenue will come if not in this quarter then next quarter. By God’s grace, we have not had any issues related to payments or renegotiation of contracts. But we have seen a delay in orders from our clients. Going ahead, we foresee a dramatic change in our project executions as a lot of shift is seen in terms of mechanisations, automation and digitalisation of projects due to social distancing and labour shortages.
Can you explain in detail about the change in project execution?
With government mandating only 25% to 50% employee attendance due to social distancing, companies will have to find alternative ways of raising productivity. One way of doing it will be to mechanise, automate and digitalise the projects. It may take at least five-six months to automate the factories since it will require redesigning the factories or relocating them. Still, mechanisation, such as getting an excavator or a loader, can be done immediately.
Digitalisation will have to be done at different levels to overcome the issues of social distancing. However, it should be understood that the intent is to maintain social distancing and not reduce labour count.
What according to you, has been the most significant shift in the way companies have been operating since the lockdown?
In my opinion, a bigger paradigm shift due to lockdown has been the ability of employees to work from home, which until now was unimaginable. We believe 15-20% of our office workforce can be shifted back to home, although it may not be possible for people deployed at project sites where physical presence is a must. But if mechanisation is introduced at project sites, then these people can be re-deployed to other projects.
(The Article First Appeared in Financial Times)