Mumbai: Niche engineering, procurement and construction firm Patel Engineering Ltd is looking to enter the water treatment business, and is in discussions through a global consultant for its fourth acquisition overall, managing director Rupen Patel said.
The Mumbai-based firm, with an order book worth Rs10,000 crore over the next three years, is in talks with three overseas companies, Patel said.
In the past, too, Patel Engineering—which has Rs120 crore in cash on its balance sheet—has acquired companies for technology in the space of dam building and micro-tunnelling. The company, with revenue of Rs2,460 crore in 2008-09, acquired US-based ASI RCC Inc. in 1997 to gain expertise in roller-compacted concrete technology used in the construction of dams. It bought Michigan Engineers Pvt. Ltd of Mumbai in 2006 for sewage treatment expertise and in 2002 acquired US-based Westcon Microtunneling Inc. for access to micro-tunnelling know how. The three acquisitions cost the company a total Rs25 crore.
Patel Engineering also plans to set up thermal power projects on its own and is actively looking to raise Rs6,000 crore in the form of debt and equity through options that include inducting a strategic partner or a private equity firm.
The company has already built 70 dams in India and executed 200km of micro-tunnelling, and is eyeing a quadrupling of revenue to Rs10,000 crore in the next five years.
It reported a 25.82% rise in consolidated net profit to Rs77.03 crore in the half year ended 30 September from the year earlier.
“This proposed acquisition will open a new line of business for us as several water projects are expected across the country,” Patel said. “We are looking at companies in the water space with specialized technologies, especially in water purification,” he said, declining to name the consulting firm, where he is looking for companies to buy or the estimated price he will pay.
He added that the firm would focus on water desalination and waste-water treatment projects.
“In India, water is considered a birth right. So there will be initial hesitation to privatize,” he said. “But all states would be having water desalination projects.”
On 1 December, Agatha Sangma, minister of state for rural development, told the Rajya Sabha that the Union government assists states financially and technically in their efforts to provide potable water to rural habitations under the National Rural Drinking Water Programme.
According to the ministry, as of 1 April, there were around 180,000 rural habitations nationwide that were affected by excess chemical contaminants such as arsenic, fluoride and iron, as well as salinity and nitrates in groundwater-based drinking water sources.
Patel, a keen angler and gardener, acquired Patel Engineering 18 years ago from a group of four families from Gujarat at a time when the firm was making an annual loss of Rs5 million on revenue of Rs5.5 crore.
The firm is also developing corporate parks in Hyderabad, Chennai, Bangalore and Maharashtra.
“Currently, at Rs2,200 crore, these real estate prices are more than company’s market capitalization,” Patel said. “The earnings from real estate will help to fund new lines of business.”