In conversation with Hemant Sharma, Chairman and Managing Director, and Ashish Saxena, Full-Time Director of NACDAC Infrastructure Ltd., discussing their remarkable journey from ₹60 crore to ₹90 crore in order book size and plans for sustainable growth. Watch the full interview here!
Hello and welcome to Small Cap Spotlight. I’m Rumela Banerjee and today we will catch up with Hemant Sharma, Chairman and Managing Director and Ashish Saxena, Full-time Director at NACDEC Infrastructure Limited. Established in 2012, NACDEC Infra is a construction company that’s going to make its Dallas Street debut soon.
Rumela Banerjee: Let’s know more about this from Hemant and Ashish. Many thanks for joining us. Hemant, tell us a bit about NACDEC Infra.
You’re a relatively young company in the infrastructure space.
Hemant Sharma: Yeah, to tell you about the company is similar. The company was registered back in 2012 while we were in the final year of engineering.
Me and Ashish both, we are childhood friends and we did the schooling together, engineering together. But the actual work in the company that started in 2017. So from past seven years, we are continuously working for the growth of the company and we work like we do work for governments also and private clients also.
And majorly we build buildings with the steel structures, MEPs, firefighting works, plumbing, electricity. These are the major portions of our company that we do right now. So right now we have say around 90 colours of water books in hand.
Major part of this water book is from the government. This is the little brief of what the company is.
Rumela Banerjee: Okay, Ashish, what prompted you to enter an industry that’s admittedly a tough one?
Ashish Saxena: As me and Hemant both are from the civil engineering background and after our graduation like we have from APJ Abdul Kalam University.
So after that we have done a lot of groundwork, especially me in various companies like Caltech Infrastructure Limited and Manisha Projects which build my core interest into these development works. So this is how we chose to do the construction work, construction activities into these for governments and for private clients. Basically, being a tough competition in this line is a very interesting part also so that we can show anyone that yes, this project is done by us and be like this project was completed by us, by our company from our hands.
So this was my interest personally to enter this construction business.
Rumela Banerjee: Okay, going back to you now Hemant, your key focus is on construction of multi-storey buildings. How does it work and do developers subcontract projects to you?
Hemant Sharma: No, for now we are taking projects directly from the clients, private clients or the public or the government clients.
Right now we are not working under any subcontract with any bigger company for the building projects but we do some of the subcontract projects like smaller ones for the like renovation and upgradation like office buildings, this type of small projects but for the bigger projects we do take procure tenders directly from the government or the big client.
Rumela Banerjee: Alright Ashish, what is the biggest challenge you encounter either in day-to-day operations or during bidding etc?
Ashish Saxena: During bidding the cost is the main factor which is a competition nowadays to build the lowest price to get a work allotted for our company. So for that plenty of research like includes the site visits, then the market rates, labor availability and the engagement of the TNPs to the different type of TNPs to different type of projects.
So these are the basic challenges we are facing but we as per our expertise we just overcome all these challenges and tries to deliver and execute the project very smoothly.
Rumela Banerjee: Hemant, you are primarily in the northern parts of India with a concentration in the hilly Uttarakhand region, given the tough landscape is the cost of infrastructure setup more expensive?
Hemant Sharma: Yeah, it’s a bit on the higher side in the hilly regions but to counter that the government that the rates government provides us to work is also on the higher side. It takes the evaluation of the say hill regions or the terrain so the rates that is offered by the government is on the higher side also.
So it is not a much problem to work on the hilly areas. Government also applies a cost index for the hilly or terrain area on the available current market rates so to encounter the issues of like higher rates so they also include a cost index on every render like five to seven eight percent depends upon the terrain from where the work is being located.
Rumela Banerjee: All right Ashish, any plans to expand beyond Uttarakhand, UP and Delhi?
Ashish Saxena: Yes definitely I am planning we are planning to expand our business in the region of Haryana, Rajasthan, MP, Jammu and Kashmir.
Currently I am working on a project for Anantnag like I am just the project is under evaluation if it suits me then definitely I’m going to bid that tender.
Rumela Banerjee: Now Hemant, the cost of materials, fuel etc has only been rising. Do you have a clause especially in long-term contracts that protects your margins from compressing or too much?
Hemant Sharma: Yeah well it depends on department to department like if we are working for the Indian Railways they do provide us with the PVC clause price variation clause but some of the departments like Uttarakhand they these tenders are for the fixed cost so we have to take the inflation and rising everything while we do bid the project or we are doing the costing of the project.
So it depends on the department for which we are bidding a tender we do costing in that way only. We do have like for the particular contracts where the price variation clause is not applicable so we do have for the major construction material like steel, cement or for the basic rate like for those particular items we have been given basic rates that the estimate for this work has been considered as at x rate so in case the rate of the market goes above x then the difference of the items will be paid to us in our upcoming bills.
Rumela Banerjee: Ashish, infrastructure is capital intensive and has long implementation periods. How do you meet your financing requirements?
Ashish Saxena: The financing requirements first of all many of the governments have started many of the government departments have started giving the mobilization advances to mobilize the sites which gets deducted from the running bills later on after the execution of the project or during the execution of the project so it helps us rather except in that we also go for like short-term borrowings from banks in the case of in the type of business loan or unsecured loans so this is how we meet our financial requirements for a particular project to be completed.
Rumela Banerjee: Hemant, you’ve mentioned the purpose of your idea is to fund working capital requirements which so far you’ve been doing by external financing. Any reason for the change in our source of funds?
Hemant Sharma: We need to increase our project profits so in order to increase our profits we need to decrease our interest costs so IPO is the best solution or best way out of our platform through which we can reduce our debt and increase our equity so equities are best for the company to grow rather than debt so we want to grow in a very positive way with equity finance with our stakeholders we just don’t want to be stuck to the debt we need to reduce our debt too for the growth of the company.
Rumela Banerjee: All right Ashish, the government has a massive hundred trillion infra plan for the next five years. Do you see yourself well positioned to capitalize on this?
Ashish Saxena: Yes obviously like currently I am working with Indian Railways over Amrit Bharat station scheme which is a main project of Narendra Modi ji currently. All over India the redevelopment of each and every small and big stations are being encountered for the redevelopment phase and out of those I have two stations currently on which I am working in Uttarakhand especially Roorkee and Dehradun and in fact else than that I am still looking over the more projects for Amrit Bharat only for like I have told you the plan is to expand so we are looking in Bulandshahr Uttar Pradesh along with the Dehradun along itself a second project of Amrit Bharat which we are looking to bid for so there are plenty of projects and we are especially after the IPV proceeds we’ll definitely start a new vertical of road infrastructure because nowadays as we all know that roads network is growing very rapidly and very speedily and along the across the whole country so we’ll definitely bid some road works also so definitely we’ll utilize this budget allocated for next five years we’ll try to maximize the things and maximize bidding processes so that we can bid more projects and back more number of contracts into our company.
Rumela Banerjee: Hemant what are your capabilities in terms of size of the projects that you are able to undertake to what extent do you tend to look for reliable joint venture partners and on joint bids?
Hemant Sharma: If we talk about the current situation we can easily bid for a tender say to the tune of 60 crores like our technical and financial viability of our company allows us to build tender for 60 crores and if we go with the joint venture with joint venture we can easily bid for 120-130 crores and in some of the departments it can go till 150 crores also using the joint venture schemes but for now we are not looking for any joint ventures currently for this financial year we have built some of the tenders are under process some are under evaluation so from next year we will definitely look for some joint ventures to build a tender for say 200 crores or Any interesting projects that you’ve executed that you can share? Yes I have done a 250 capacity of auditorium for Bharat Electronics Limited that was an interesting project as well a lot of experience I gathered over there because there are n number of items which was being executed in that project like acoustical wall paneling acoustical fall ceiling which is a especially a specialized job and along with that we are doing multi-story projects in Uttarakhand as well and like a pre-engineered building is being under the process at Roorkee railway station we are constructing that so basically as I told earlier this line this construction business is very interesting and we came across day-to-day different type of projects each and every project is interesting and is of my interest so the best answer to this is this only.
Rumela Banerjee: All right Hemant how has your order book evolved in the last seven years and where does it stand now?
Hemant Sharma: In last seven years our order book has evolved very robustly to start with right now we have an order book of say around 90 cr approximately and some 30 to 35 cr of contracts in addition to this is under a bit under technical evaluation with the government and we are in talks with some of the our previous clients like L&T, India TV, some of the private works are also under consideration so we will easily achieve 100 crore plus order book within couple of months only and for last seven years we have completed say roughly around 60 projects for different clients and we have repeated clients also whom for whom we are working from last three to four years ago so for now to say that we have a order book in hands of 90 crores as of now we are talking.
Rumela Banerjee: Ashish could you tell us about the key people helping you execute the vision within the management team what role do they play in helping you achieve the company’s goals?
Ashish Saxena: Actually to answer this the complete organization each and every person from top to bottom is helping us to grow day by day so every project has all the managers on the sides to deal with the day-to-day operations along with that our managing director Mr. Hemant Sharma has a good experience for finance he is looking about the finance and legal aspects in every field for our company along with myself I am looking over all the projects operations, procurement, tendering everything like which project suits us to bet along with Mrs. Uma Sharma who’s also help us for the decision making in our projects along with our company secretaries and CFOs everyone plays a vital role for the growth of the company and we always look good support from everyone to grow us day by day.
Rumela Banerjee: Alright Hemant, FI24 in particular you’ve seen a massive jump in revenues accompanied with margin expansion what’s contributed to this and will this sustain?
Hemant Sharma: Yeah of course it will sustain to the say corrections of say 5 to 10 percent but majorly it will sustain and the reason for the growth is we procured some very good tenders in the last 10 years to start with we procured a one contract from Uttarakhand government to build a work what we say it a bus terminal workshop building in Ramnagar, Jim Corbett area that was the tender of around 25 CR and in addition to this we procured a couple of tenders from the L&T company at the Delhi airport it was they were between 10 crores so these two contracts helped us very much to increase our revenues and the profit margins also and this will sustain of course this will sustain.
Rumela Banerjee: Okay the last question is for you Ashish what’s your vision for the company in the next five years?
Ashish Saxena: For the next five years we are planning to add new verticals to our company like we are currently doing multiple building projects along with some interior fit out and renovation works so in addition to this we’ll definitely open a vertical of road infra along with I’m also planning for some pre-engineered buildings also like as I have told you I’ve been working for Roorkee railway station a pre-engineered building with the experience of that we’ll definitely move into pre-engineered building which will lead us to central warehousing corporation where a number of pre-engineered warehouses are being required and is being required on a higher basis nowadays so for the next five years we’ll try to open as many as verticals we can along with our specialization in building works and we’ll try to back new projects as in we get to know about the tenders so this is our vision to take our company from this level to a higher and higher only not going back in any circumstances.
Rumela Banerjee: All right that’s all for now it was a very insightful conversation thank you for speaking to us and thank you for watching for more videos like this hit the subscribe button and stay tuned to SmallCap Spotlight.