Walking on water

What's the greatest problem that India will face in the 21st century? Here's a clue: it's a problem that will be faced both in the country's fast-growing megalopolises and in its distant rural hamlets.

The answer, according to the experts, is that India's billion-plus population will face water shortages of gigantic proportions. The shortages will hit both city dwellers who are digging deep and draining off the ground water at high speeds and villagers for whom a new handpump is a measure of progress.

That's why E Sudhir Reddy knows he has hit a gusher. Reddy's 14-year-old Hyderabad-based company IVRCL Infrastructure & Projects is emerging as a key player in a field that's best described as 'water infrastructure.'

IVRCL has a turnover of Rs 775 crore (Rs 7.75 billion) and about Rs 500 crore (Rs 5 billion) comes from water-related projects. What's more, it has a bulging order book - and about Rs 1,200 crore (Rs 12 billion) are water-related projects. That's good going for a company started in 1990 with about Rs 20 lakh in the kitty.

What type of project does IVRCL specialise in? The answer is almost anything. It has just beaten the competition to bag a water supply contract in Ahmedabad.

Then it's building storm water drains in Bangalore for the city's municipal corporation. And it's in the running for irrigation projects worth thousands of crores. Says Reddy: "Face it, we are a water-stressed and water-starved country."

It's not bad going for an engineering college dropout who then majored in psychology. Dropout or not, IVRCL is one of the country's fastest growing engineering and infastructure companies. It has made its presence felt in everything from power to transportation - that includes roads, ports, bridges and railways - and industrial structures.

If that isn't enough, IVRCL is also spreading its wings. It is about to tie-up with Russian oil and gas engineering consultancy company GEO Engineering. The 50:50 joint venture will be called GEO-IVRCL and it will offer oil and gas engineering consultancy services in India.

But it's the water-related industries where IVRCL has made its real mark. At one level it is constructing water supply systems for the Ahmedabad city authorities (the project is worth Rs 58 crore (Rs 580 million).

At another, it has provided end-to-end water solutions for organisations like the Indian Navy and blue chip companies like National Thermal Power Corp, Kochi Refineries, the National Mineral Development Corporation and the Indian Oil Corporation.

Now he's looking at ways to add quickly to that list. He is hoping to buy a company {for between Rs 50 crore (Rs 500 million) to Rs 75 crore (Rs 750 million)} that specialises in water treatment.

Says Reddy: "We see a lot of potential and we are also looking at the international market for companies that specialise in offering consultancy for water treatment plants." Currently, IVRCL has shortlisted a handful of companies and Reddy hopes to close a deal during this financial year.

Adds Reddy: "The states are not able to meet the demand for water from industries and more and more companies are looking at investing in their own solutions.

This move apart, the company sees a huge opportunity in the operations and maintenance of water projects. To ensure that it gets the latest technology in this particular field IVRCL has also entered into agreements with SMEC of Australia and the Brisbane City Enterprises Pty.

How big is the potential in water-related industries? Reddy believes there's almost infinite potential for growth. In the last five months the Andhra Pradesh government, for example, has floated tenders worth Rs 5,000 crore (Rs 50 billion) for irrigation projects. This is part of the Rs 46,000 crore (Rs 460 billion) that the state government plans to invest over the next five years in rural irrigation schemes.

Similar action is taking place in other parts of the country. Tenders worth about Rs 7,000 crore (Rs 70 billion) have been floated by the state governments of Kerala, Madhya Pradesh and Karnataka purely for drinking water projects, which are funded by the Asian Development Bank.

IVRCL according to Reddy has been pre-qualified in water projects worth Rs 10,000 crore (Rs 100 billion). Pre-qualifying is the first step towards bidding and bagging contracts after tenders are floated by the government.

According to recent government estimates the total investment requirement for water and sanitation in urban India will be around Rs 26,000 crore (Rs 260 billion).

But even that is dwarfed by the needs of the rural areas. "Look at the thrust of the projects being announced in the infrastructure area. Most of them are in the rural areas, and can water be ignored when one is talking about rural infrastructure?" he says.

"The central government has also pointed that it is keen on investing in ramping up rural infrastructure. When one talks about rural infrastructure, water becomes central to everything."

To substantiate, he points out that water-related projects in rural areas could mean work in the segments of lift irrigation, linking of canals and reservoirs, restoration of water bodies, energising the pump sets (which means actually providing physical electrical connectivity from the grid to the pumps), etc.

The seriousness with which the company is approaching the water segment can be gauged by the fact that it has put up a plant to make mild-steel pipes in Raipur, Andhra Pradesh and another that makes pre-stressed concrete pipes at Vedaranyam in Tamil Nadu. For Reddy this is backward integration as these pipes are used for water supply.

Reddy is absolutely certain that water will be the main focus in coming years. "We started our water division only a couple of years back. Until then there was no separate focus though we did find that our order book position was heavily skewed towards water-related projects. But once water-related infrastructure engagements started to contribute Rs 500 crore plus (Rs 5 billion) in turnover, we started to realise that our focus should be there," says Reddy.

All this has resulted in healthy profits in recent years. This year the company is hoping to post around Rs 1,200 crore (Rs 12 billion). That's up from Rs 775 crore (Rs 7.75 billion) last year.

On the way IVRCL has also notched up a couple of firsts that it can be justifiably proud of. It was, for instance, the first engineering and infrastructure company to offer employee stock options to all employees across the board. Today, it is probably one of the only companies in India where all the 1,200 employees have been given stock options.

"We started this in 2000 and the fact that we have not lost a single employee is proof that the scheme is highly effective," says Reddy.

"We do not have `crorepathis' like Infosys but we do have some `lakhpathis'." Yes, and before you ask. Reddy's driver - just like N R Narayanamurthy's at Infosys - does get stock options.