Punj Lloyd

INTRODUCTION COMPANY PROFILE Punj Lloyd Limited is one of the largest engineering construction companies in India and is mainly in the business of providing integrated design, engineering, procurement, construction and project management services for energy industry and infrastructure sector projects. It has a strong presence in oil and gas sector. It is also engaged in the niche business of providing engineering construction services for power plants. With operations spread across the Middle East, Africa, the Caspian, Asia Pacific and South Asia, Punj Lloyd provides EPC services in Oil & Gas, Process, Civil Infrastructure, and Thermal Power. Further, Punj Lloyd is today a diversified conglomerate, owing to its successful foray into aviation, defence, upstream, real estate and marine, through its subsidiaries and joint ventures. The first Indian company to partner with an American nuclear company –Thorium Power, after the 123 agreement, Punj Lloyd was also prompt in exploring the opportunity in the defence sector with its tie-up with ST Kinetics, Singapore. Its stake in Pipavav Shipyard Limited continues to throw new opportunities every day, be it fabrication of platforms, or the requirements of Navy on the defence front or the nuclear industry. Punj Lloyd‟s operations are spread across the Middle East, the Caspian, the Asia Pacific, Africa, south Asia, Turkey and Georgia. The company has 13 subsidiaries including subsidiaries in Kazakhstan and Indonesia, and 12 project and marketing offices including the United Kingdom, Tunisia, Libya and Saudi Arabia. The company has worked on projects for international energy majors such as ADNOC, British Petroleum, Cairn Energy, Pertamina, Petrokazakhstan, Petroleum Development Oman, Shell, Total and Tengizchevroil as well as energy majors in India such as BPCL, CPCL, Dabhol Power Company, Essar Refineries, GAIL, Gujarat Gas, HPCL, IOC, Jindal Power, Kochi Refineries, Nuclear Power Corporation, OIL, ONGC, RIL, NHAI, DMRC. As a reflection of the international quality standards, construction and project management techniques, Punj Lloyd holds ISO 9001:2000, ISO 14001:1996 and OHSAS 18001:1999 certification.

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ORIGIN AND EVOLUTION Punj Lloyd limited (PLL) was incorporated as Punj Lloyd engineering pvt. Ltd. On 26th September 1988with the specific aim of taking over all the engineering, turnkey & general construction activities along with other specialized technical services business of the erstwhile Punj Sons Pvt. Ltd. This had been in business since 1954. Punj Sons Pvt. Ltd. Was a large diversified business group engaged in activities ranging from general construction to specialized activities such as pipe laying, insulation etc.

Punj Lloyd Engineering Pvt. Ltd. was renamed Punj Lloyd Pvt. Ltd. on July 11, 1989. On conversion into a public limited company on 22nd July 1992 the name was changed to Punj Lloyd Ltd.

VISION To be among the top five EPC companies in the segments and markets we serve by 2012.

MISSION We will deliver reliable, high-quality solutions for global infrastructure, always ensuring that integrity, safety and sustainability are at the heart of everything we do.

CORE VALUES To realize the vision and mission, PLL always turn to the corporate values that it hold dear • Performance We are here to make a valuable difference to our stakeholders and we will make it happen against all odds • Passion Differentiated by their „Can Do‟ attitude and the fire in their belly • Team work Can gain from the diversity within the Group by sharing knowledge and resources to achieve individual and collective success • Agility Understand stakeholder needs and respond with speed and precision • Reliability Trustworthy and reliable, in both thought and action. Their stakeholders can count on them to deliver, always 2

SERVICES PROVIDED BY PUNJ LLOYD LTD. Punj Lloyd Ltd. is a total engineering construction company with activities including cross country pipelines, tank ages, cryogenic system, oil & gas, petrochemicals, oil & gas piping projects, piping jobs, industrial construction, effluent treatment, fertilizers, bridges, highway engineering, civil engineering, & construction for the power and irrigation, water supply, water treatment, distribution networks, on-shore & off-shore pipelines, infrastructure services, broadband services.

CONSTRUCTION CAPABILITIES In over 18 years of experience in construction, Punj Lloyd Limited has constructed more than 8,000 km of pipelines and 6 million m³ of tanks and terminals capacity and has executed 11 refinery modernisation and quality improvement projects. It has also successfully executed projects in South Asia, the Asia Pacific region, the C.I.S., the Middle East, and in Turkey and Georgia, in difficult terrain and extreme climatic conditions. Some of the projects the company has undertaken are construction of Dahej-Vijapur Pipeline for GAIL, LPG Storage Tank for Reliance at its Jamnagar Refinery, LNG Storage Tanks for LNG Terminal at Hazira etc. Some of the projects the company is currently working on are construction 12 highways falling under Golden Quadrilateral Project, Motor Spirit Quality Upgradation at IOCL Haldia Refinery, Hydrocracker Units projects at IOCL Panipat Refinery and Mathura Refinery.

CLIENTELE BASE Punj Lloyd has catered to more than 120 clients and executed more than 180 projects in over 14 countries. Some of its prominent clients are Qatar Petroleum, British Petroleum, Cairn Energy, Shell, BHEL, BPCL, CPCL, Dabhol Power Company, Essar Refineries, GAIL, Gujarat Gas, HPCL, IOC, Jindal Power, Kochi Refineries, OIL, ONGC, RIL, Skoda, Engineers India Limited, NHAI and Delhi Metro.

CONSISTENT DIVIDEND Punj Lloyd is the consistent dividend paying company. It paid 10% dividend in the year 2004, 7% dividend in the year 2005 and 10% dividend in the year 2006.In the year 2008-09, the directors have recommended a dividend of 15% .

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CORPORATE SOCIAL RESPONSIBILITY The corporate philosophy of Punj Lloyd is to bring about an improvement of the lives of those less privileged than us.They care for the upliftment of communities not only in our own country but everywhere we work. Various initiatives taken by Punj Lloyd are: • The biggest manifestation of our social responsibility is the „Dayawanti Punj Model School‟, located between Varanasi and Allahbad, run by SNP Punj, Chairman (Emiratus) Punj Lloyd and established in 2003.The school has 600 students and 25 teachers of mainly backward class. Out of these hundred students, mainly girls get free education, books and school uniform under the “sponsorship scheme”. Punj Lloyd has contributed INR 32.30 lakhs to this venture in the current fiscal year. • We take measures to protect neighbouring communities from harmful effects of construction activities or pollution that may result from it at all our international and domestic sites. We generate employment for the locals, impart new skills to them through training to add value so that they become a part of our international multicultural, multi lingual workforce, improving local infrastructure, offering medical services to local communities, arranging for drinking water or water for irrigation areas. • Health and safety of employees is of prime importance to us. Punj Lloyd‟s aim is to eliminate any chances of accidents, harm to people or damage to the environment. We have achieved following safe man-hours without lost time injury at our sites. 16 million at Belgaum- Maharashtra, 4million each at Haldia, Turkey, 2.5 million in Georgia and 1 million in Oman. We have won IPLOCA Safety Award for the year 2004 on the basis of more than 1,500,000 safe man-hours worked, the prestigious Greentech gold award for safety for 200405, Five star rating from British Safety Council for our BTC project in Turkey, Safety Milestone Award for working more than 3,500,000 hours and safety award for initiation and exemplary performance of an Internal Safety Audit system in Kazakhstan, “good” rating for a 3.3 out of 4 score in Oman, this is the highest rating scored by a contractor for a PDO safety audit, and 6 consecutive awards in Panipat for the Best Safety Performance, the last of which was won in 2004.

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PRODUCT PROFILE PIPELINES The pipeline system is much more economical mode of transport for high volume products as compared to other means of transport. Pipelines can be used for oil distribution, petroleum refining, thermal power plant, nuclear power plant, and cement plant etc.

As far as India is concerned, there is a great scope in the pipeline sector. The country has less than 15000 kms of oil and gas pipelines as compared to 329600 kms in US. Government‟s decision to open up the oil retailing to the private sector has rustled up tremendous excitement in the industry which has nearly 17000 outlets run by state owned Indian oil corporation

(IOC),

IBP,

BPCL,

and

Hindustan

Petroleum

Corporation.

Punj Lloyd Ltd. is recognised as a major player in this field both in domestic as well as the international market the future outlook of the company is encouraging. The SBU expects to win substantial orders, both domestic and international in the current year. One of the major achievements of the Pipeline SBU has been the execution of the Baku-Tbilisi-Ceyhan pipeline in turkey and Georgia. The work on Gas Export Pipeline in Oman is going as per schedule.

Company‟s

major

projects

in

the

pipeline

sector

are:

• Baku-Tbilisi-Ceyhan Crude Oil Pipeline • Gas Export Pipeline for PDO Oman • Dahej-Vijaipur Pipeline • Panaran Pemping • Tunu Field Development Phase 9 • Jamnagar-Loni LPG Pipeline

CIVIL CONSTRUCTION There has been an upsurge in the in the road sector with the Government of India emphasizing on implementation of the national highways development project (NHDP) which is being implemented through budgetary grants and aid from the World Bank and other multilateral agencies.

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The Civil Construction SBU of Punj Lloyd has been working on various road construction projects in India. Major projects are: • Upgradation of Belgaum-Maharashtra Border Section of NH-4, Karnataka • Construction of Jaipur Bypass Zone D, Rajasthan • Construction of Vadodara-Halol Tollway • Thiruvananthapuram City Road Improvement Project • Delhi Metro Rail Corporation • Dukhan Support Services Area, Qatar • Duri Steam Flooding Area 10, Indonesia

PROCESS PLANTS This SBU of Punj Lloyd deals with construction of plants for the production of Gasoline/petrol, refineries, EPC projects in hydrocarbon sector. The achievements of SBU are: • Sulphur Recovery Units VisBreaker Unit (VBU) and Sulphur Block for CPCL Refinery III Project, Sulphur Block and Utilities/Offsite at IOCL Guwahati Refinery, Sulphur Block at Kochi, Mathura, Koyali Refinery • Hydrocracker Units Hydrocracker Unit at IOCL Panipat Refinery and at the Mathura Refinery Peciko Development Project Phase 4, Indonesia Gas Field Development, Dandewalan & Tanot Motor Spirit Quality Upgradation, Haldia

TANKAGE & TERMINALS In India, the demand for tankages for storing crude oil products is expected to increase substantially on account of : (i)

expected increase in the refining capacity from the present level,

(ii)

(ii) increase in import of crude oil to meet its shortfall in the country. The achievements of this SBU are:

• LNG Storage and Regasification Terminal at Dabhol • Low Temperature LPG / Propylene Storage at Reliance Jamnagar Refinery • Product Storage Tanks at Marine Tank Farm Area, Jamnagar 6

• LNG Storage Tanks for LNG Terminal at Hazira • Ravva Oil Field Development

POWER SBU Power has been working with many reputed domestic and international players over the years. Achievements of SBU Power are: • SBU Power made a breakthrough with the award of a contract worth Rs. 208 crore by the Jindal Group for setting up a 4X250 MW power plant at Raigarh in Chattisgarh. • The SBU has recently been awarded, jointly with BHEL‟s international division, 2X60 MW Merak Energy power project worth USD 50.43 million at Indonesia • SBU Power expects to participate in all future projects of BHEL, NTPC, and IPPs.

TELECOMMUNICATION Given the very low penetration levels as compared to the world average, large registered waiting list and existence of latent demand, the potential for the growth of telecommunication sector in India is quite high. Punj Lloyd Ltd. is in discussion with several ISPs and software technology parks for laying fibre Optic Cables. • During the year the company applied for the Internet Telephony License in its name with the Department of Telecommunication (DOT). • The SBU has two certifications of ISO 9001:2000 and BS 7799:2002, making it the second ISP in India to achieve this milestone.

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SWOT ANALYSIS OF PUNJ LLOYD LIMITED

STRENGTHS • Strong resource base Equipment base Financial capacity Manpower strengths • Ability to organize additional resources at short notice. • Excellent „track record‟ • Presence in Asian and European market (Indonesia, Oman, Turkey etc.) • Association with leading oil and gas majors • Strategic alliances with large construction and engineering companies • Highly competitive in terms of cost with its competitors. • Strong IT aided analysis • Strong communication network • ISO 9002 and ISO 14001 company • Impressive safety record

WEAKNES Weak presence in Power sector Pressure vessels fabrication – Qualification The company is over dependent on Oil & Gas sector.

OPPORTUNITIES • Upcoming Expansion in grass root projects in refinery sector • Market to take off in LNG & LPG sectors • Additional oil storage being planned by the Government • BOOT projects • Infrastructure sector, in India, opening with emphasis on : Water and Sewerage Roads Ports 8

• Telecom sector opening up with international players. • Major pipeline network planned in India and Bangladesh • New market areas available, like Africa & Central Asia.

THREATS • Entry of foreign companies in Indian market • Low bidding by non organized sectors in small and medium sized projects • PSU does not appreciate value added in terms of modern management techniques& scientific project execution. • Unstable political scenario in the region.

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ANSOFF’S MATRIX

Diversification Diversification

Punj Lloyd has signed Memorandum of Understanding (MOU) with an America based company Thorium Power, thus entering into a new market of nuclear as well as solar power. Henceforth, in the Ansoff‟s Matrix currently they are in the diversification stage wherein they are entering a new market of nuclear and solar energy with new products i.e. nuclear and solar energy. Due to FDI regulations, Thoruim Power is not allowed to enter the Indian market but possess a very good experience in the construction of nuclear power projects and is a dominant player in the international market. According to the MOU, this joint venture would facilitate Punj Lloyd with experience of Thorium Power in the constructions of the nuclear power projects. Thorium as well would gain the permission to enter the Indian market with this venture.

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PRICING Pricing has been very market oriented and competitor based for Punj Lloyd ltd. In its policy it is mentioned that 12 % growth per annum is sought for the company. So company always go for value based pricing to lure customers. As several major players are there in the market, the company keeps a vigil on the pricing front according to the changing scenario. A) Value based pricing: They believe in providing optimum value for the price customer is paying. They serve there clients at the most affordable industry oriented price and give proper attention to the client‟s need.

B) Customer based pricing: They price their service or project according to the need of the client. They strictly adhere to the budget of the client and specificity of the project details. They have different set of raw materials and construction materials for different project. If a client need higher quality product then they can provide A-CLASS product and if customer wants B-class product then they priced accordingly.

C) Cost based pricing: it is based on the sum total of the cost of the raw material and the finished product which is used to deliver the final product to the customer.

BUYER SUPPLIER RELATIONSHIP Be it purchase decision, manufacturing orders or construction assignments, Company always stresses on the relationship management. Liasoning is a important aspect in this context. Apart from it they have focussed on collaborative management. Ex. When Reliance industries ltd handed them a pipeline project, they worked with a team of RIL to finalise the roadmap. They offer attractive package and rewards to their clients to build long term relationship in terms of extra maintenance period. Some part of the Golden Quadrilateral are made by them and taken care of them till now.

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COMPETITORS

Larsen & Toubro

336648.70

1599.55

1.51

24.10

52-Week High/Lo w 945849.87 1800/557

Jaiprakash Assoc

57641.80

229.75

0.86

16.70

319387.30

270/53

Lanco Infratech

40825.86

525.80

2.28

28.51

123785.25

575/99

0.90

267.00

8.78

133.84

81578.77

264/65

Punj Lloyd

68817.74

215.80

1.70

27.14

70448.28

299/67

IVRCL Infra

49830.92

376.45

2.46

23.33

49049.71

425/82

41514.08

168.55

2.77

26.87

42079.74

184/34

31048.10

137.65

2.61

41.40

40680.93

147/29

Era Infra Engg

23768.99

194.45

2.21

13.59

33995.79

205/62

Patel Engineering

14787.22

464.20

0.22

17.19

27634.09

526/103

Gammon India

36820.00

229.50

-2.36

17.22

25288.25

255/47

Simplex Infra

46626.56

518.30

2.62

22.99

24986.00

546/102

709.94

955.30

0.86

62.76

14302.72 1287/231

373.41

19.20

0.52

121.20

13789.05

31/8

3570.91

363.65

2.80

18.12

13108.36

400/105

10624.81

943.05

-0.86

18.30

11890.00

999/220

10254.34

138.85

7.01

20.48

9574.89

139/21

Shriram EPC

9187.66

223.65

1.75

22.34

9559.47

265/77

Maytas Infra.

13348.70

172.55

9.97

17.07

9233.70

520/31

792.11

37.30

2.33

21.97

6786.81

48/16

Company

IRB Infra

Nagarjuna

Sales (Rs.Million)

Current Change Price (%)

P/E Market Ratio Cap.(Rs.Million)

Constuctn Hindustan Constructn

Reliance Indl Infra Gammon Infra Project Consolidated Constn. Sadbhav Engg. Madhucon Projects

Noida Toll Bridge

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Unity

11323.28

433.75

0.34

7.90

5778.99

476/67

850.98

737.95

1.89

18.07

5103.06

970/358

Subhash Projects

12572.21

134.25

-1.00

20.66

4969.78

171/36

C&C Constructn

5332.58

231.45

2.48

9.92

4124.02

284/87

Gayatri Projects

10045.95

353.10

4.39

8.39

3756.19

394/42

7528.09

206.80

2.20

7.16

3376.21

242/47

6496.08

112.65

2.60

6.96

3087.96

138/21

Supreme Infra

3822.50

150.70

3.93

7.38

2011.99

155/19

ITD Cementation

9406.34

179.90

3.60

34.76

1999.72

234/60

MSK Projects

3534.99

91.20

5.74

7.26

1968.32

107/31

Atlanta

1943.24

127.00

6.01

7.27

1952.74

142/31

Valecha Engg.

6063.74

97.45

0.93

11.78

1731.14

124/22

4375.46

228.40

4.41

25.98

1649.03

229/58

4494.51

103.45

1.22

6.04

1591.57

127/28

UB Engg.

4531.06

81.25

-0.98

6.20

1400.34

97/28

PBA Infra

3642.99

68.25

2.40

5.69

899.81

84/21

Roman Tarmat

1498.25

51.25

4.81

20.85

535.98

72/18

791.74

47.60

4.96

8.07

469.05

89/13

822.80

19.55

1.82

12.59

376.43

35/7

535.14

31.60

9.91

6.99

361.46

38/9

953.74

88.15

3.52

48.20

255.45

121/38

147.05

38.25

2.55

19.55

133.17

68/8

Acrow India

27.51

148.00

0.68

18.48

94.08

165/59

Bhagheeratha

123.39

11.32

0.00

0.00

88.50

13/12

Infraprojects NESCO

Pratibha Industries KNR Construction

Petron Engg Constn Tantia Constructions

Niraj Cement Struct. Kaushalya Infra. Mukand Engineers Stewards & Lloyds CCAP

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Engg 76.95

243.80

0.00

5.78

68.29

244/244

284.78

19.75

3.95

3.40

57.00

23/7

Jog Engineering

2.90

2.74

0.00

0.00

23.29

6/3

Numero Uno

0.00

1.02

0.00

0.00

5.10

0/0

RJ Shah Conart Engg

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CORE COMPETENCIES It has unique set of skills which is better known as : E- Engineering- It designs and engineers a product with little help from technologies from abroad P- Procurement- Here procurement of raw materials (sand, bricks, steel, cements, electrodes ) as well as finished products (vessels, heat exchangers, boilers) takes place C- Construction- Here the project manager manages the entire project by optimally utilising the resources and at the same time concentrating on quality and productivity. C- Commission- Here the step of post completion takes place like plan expansion, debottle necking and turnaround support.

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The process as follows: Open tenders for the projects which are to be undertaken by the clients. The tender can be published in either newspapers or online.

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Interested companies participate in the bidding, PUNL and competing companies participates too if interested in the project. PUNL bids for the lowest prices and wins the tender. The client describes the tit-bits of the project in the tender. The tender also includes an approved vendor list which is an Engineering India Limited vendor list. The vendor list consists of major suppliers of bricks, electrodes ( Dwikam, Hanover), cement (Ultratech, Jindal, JP), Steel (SAIL, Jindal, Tata) , sands. PUNL has to follow the tender requirements on a strict basis. It should fulfil the client requirement of a minimum cost. A third party called as project manager consultant is appointed by the client. This third party has to be communicated about the happenings of the project. This third party also monitors the tit-bits of the project like TQM, cost reduction, productivity and lean manufacturing.

Implementation of the process 1. Engineering- includes designing as well as close monitoring of the raw materials and equipments. 2. Ordering- Ordering of raw materials like sand, bricks, electrodes, cement as well as the finished products eg. Heat exchanger vessels, boilers, tanks etc. 3. Manufacturing-they check on the following details: o Total Quality Management (TQM) o Cost reduction o Lean manufacturing o Timely delivery o Productivity 4. Construction- assembling of the raw material as well as finished products to deliver the end user. 5. Commissioning- periodic check up and monitoring of the industrial happening to remain updated.

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ADVERTISEMENT STRATEGIES  MEDIA BROADCAST Company advertisements are exclusively flashed in NDTV Profit channel only because it‟s the only channel which has the major viewership among the industrial clients and customers.

 PRINT ADS The leading business magazines such as India Today, Business Line, Forbes flashes the print advertisements of Punj Lloyd. Apart from this they also have hoardings at Delhi airport and metro stations.

 SPONSERSHIPS It exclusively sponsors Narayan Karthikeyan‟s attire (Formula1 racer) and also features its logo on the Formula1 car. Recently in 2008, Mumbai held a squash tournament which was sponsored by Punj Lloyd.

 TRADE SHOW A recent conference was conducted by PUNL last month in Delhi in Taj Residency, Dhaula Kuan. This conference was attended by several other B2B firms that showcased their product and services in the trade show which included companies like PUNL, L&T, GAMEN, Uday Energy, BHEL.

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L&T VS PUNJ LLOYD: A COMPARISON

ORDER BACKLOG AND TOPLINE COMPARISON: L&T‟s E&C arm has an order backlog of nearly Rs 537 bn as on June 2008 (2.6 times its FY08 E&C divisions sales) while PUNL‟s order backlog stood at over Rs 200 bn (2.6 times its FY08 sales). PUNL‟s topline and order backlog have been rising rapidly over the past three years. As we can see in the adjacent chart, in FY04, L&T‟s order backlog was 7.1 times that of PUNL‟s, but at present times, it has come down to 2.7 times its peer‟s order backlog size. During the same period, the sales have tapered down to 2.7 times from 5.6 times in FY04. PUNL‟s acquisitions of Sembawang E&C (SEC) and its wholly owned subsidiary Simon Carves (SC) have been one of the main reasons behind this high growth. While PUNL‟s sales have been growing at a four-year CAGR of 49%, L&T‟s topline has been growing at a CAGR of 25% over the past four years. FINANCIAL PERFORMANCE COMPARISON: Due to reasons such as the delay of road projects and the acquisitions‟ low margin legacy orders, PUNL‟s consolidated margins have significantly dampened since FY06. Infact, the company‟s EBIT margins have reduced to 7.4% as of its FY08 results as compared to 13.5% margins in FY04. On the other hand, L&T‟s performance has been steadily improving over the past few years. In FY08, the company‟s EBIT margins were 9.8% as compared to its FY04 margins of 7.5%.

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STOCK VS INDEX PERFORMANCE: The BSE Capital Goods index is one of the worst hit indices since the beginning of this year. Infact, L&T has fallen nearly 53% from its 52 week high, while PUNL has fallen a whopping 61% from its 52 week high as compared to the index, which fell by 49%. If one would have had invested Rs 100 in Punj Lloyd, L&T and the BSE Capital Goods index in January 2006 (since PUNL got listed then), it would have been worth Rs 120, 251 and 146 respectively as of today. Currently, PUNL is trading at Rs 222, a trailing twelve months price to earnings of 21x. L&T on the other hand, is trading at Rs 2,217, a price to earnings of 31x on trailing twelve months basis.

We believe that both these players will continue to dominate the E&C space going forward. We are positive on both the companies‟ future outlook, as the potential remains immense in the hydrocarbon and infrastructure space. Due to L&T‟s vast experience, size and long history, it will always continue to play a dominant role in the domestic E&C space. However, looking at PUNL‟s fast growth, it will not lag far behind its peer group leader.

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REFERENCES

http://deadpresident.blogspot.com/2009/10/annual-report-punj-lloyd-2008-2009.html http://www.citefin.com/160-final-report-punj-lyod.html http://www.acchoksi.com/update/Fundamental_Reports/2007_06_04(Punj%20Lloyd %20Ltd).pdf http://info.shine.com/company/Punj-Lloyd-Limited/867.aspx

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