D. Prasanna, Chairman & MD (CEO), AVP Infracon Limited shared the company’s journey from a regional EPC contractor in Tamil Nadu to a fast-growing infrastructure company, highlighting its expansion into new geographies and verticals while targeting sustained growth and a future mainboard listing.
Karunya Rao: Tell us a bit about the company, its genesis. Back in 2009, Trichy and how things have shaped up and where you stand today.
D. Prasanna: Very good afternoon to everyone here.
AVP Infracon Limited, infrastructure based company. We hail from tier 2 city in Tamil Nadu, Tiruchirappalli, Trichy. It was started in 2009.
Three directors, three of us started this company. Prime focus is on building of infrastructure, roads, bridges. When we started in 2009, all of us, all the three of us who started, first generation entrepreneurs.
Karunya Rao: Was it a family run set up? Who were the three partners?
D. Prasanna: One is my younger brother and the other one is my college friend, college mate. So, we actually after a career in curriculum, we started a paper industry. We were into a different, entirely into a different industry.
I graduated professionally from Bharathaswamy University, Bachelor of Engineering, B.E. Computer Science and now into entirely hardcore business.
Karunya Rao: So, how did infrastructure come about? How did you decide to create this company? What was the plan, the idea behind it?
D. Prasanna: See, actually we, when we started this first industry, we were into different venture actually. We were supplying paper cup machinery, the machinery which were used to manufacture paper cups, disposable paper cups and later on this infrastructure business was added.
It was our secondary business and we never thought any of the day that this would become a primary and bread winning business. So, it was just one of my friend who was also into infrastructure, suggested that this business is growing and we were watching him grow like anything and we came as a support system for him in his business and later on got lured by the interest of this various aspects in the business and the way this can scale up or something like that. We got carried away and as a very young person, we were in our 20s when we started this business.
So, not in my wildest of dream, I thought that we will go get listed in exchange or something like that. We just started and we put it heart and soul in the business and that has brought us here and now we are targeting much more where this, where the industry which we enter just like that should fetches some good reputation and good name in the field.
Karunya Rao: So, within the infrastructure space, what all do you do? What all does your company do? Which parts of it do you guys look after?
D. Prasanna: We are primarily now located in Tamil Nadu state alone.
We are taking Tamil Nadu as our prime concentration. So, see we are the size of a small company wherein we are getting enough of projects in Tamil Nadu itself. So, we build roads and as well as bridges.
We are in the EPC segments till now. Now, we have started exploring other states and other locations geographically also. We just wanted to expand and we are now in that expansion spree.
So, we just wanted to go into other verticals also. Now, actually where we are in roads and bridges, we are now just concentrating on other, we have a subsidy which is into solar EPC also. We have our RMC division.
We have our quarry section which manufactures blue metals. So, we are expanding in that way.
Karunya Rao: What is your focus area now? Like you are saying you are expanding in different segments, different geographies also you are trying to diversify there.
Right now, how much of your business is, I mean I am guessing it is pretty much all of it is from Tamil Nadu and as you grow which are the states again or is there any order visibility you have?
D. Prasanna: Yeah, we are bidding out of Tamil Nadu in 4 or 5 states at the moment. We are bidding at Madhya Pradesh, Uttar Pradesh and our neighbouring states of Telangana and Andhra Pradesh as well as Karnataka. So, it is there is no stringent conditions for us to bid in this state or in this.
We are looking out for projects which match our requirements or which is under our, I mean what you call what is under our control or what will give us the required EBITDA or PAD which we are operating. So, we are bidding into that and apart from roads and bridges, we are trying to diversify or expand and pre-engineered buildings and pre-engineered basic structure buildings also.
Karunya Rao: This is a plan or has it already begun? No.
Karunya Rao: Have you already bagged any orders?
D. Prasanna: No, we have not bagged any orders. We are working on it. We are working on it and just as a basic structure or to start up that we have planned to implement this division only in Tamil Nadu as of now.
Karunya Rao: Okay. So, you know around the time of the IPO, you were a 100 crore turnover company. Your sales were pretty much around that figure and now it has crossed 440 crores as of your last report that I saw.
What is driving that and how are you envisaging your revenue pile shaping up given the different businesses you are expanding into and what will be the key growth driver for you?
D. Prasanna: See, every year we are at least increasing our revenue by 60 percent or CAGR 60 or something like that. What drives us is only this can be a strategy where in EPC you can succeed. See, EPC is normal business not some speciality business or something like that.
It is normal business. It is just a cut copy based business. Whatever roads you are doing in Karnataka, you can do the same road in Andhra provided you have that fund and provided you have that manpower machinery etc.
So, we are just looking in that way and scaling up. So, this scaling we are doing not at very large scale actually. We came in public in 2024.
It is almost two and a half years now. So, it was 100 then we jumped it was in 100 size and then we came into 200 and then last year it was around 290 and this year it is 440. So, we are targeting something at 600 to 700 this year.
So, this is how this growth is projected in our case and we are following something which is achievable and which is doable also. In spite of all the odds this year we have all this war conditions which is affecting the growth of most of the EPC companies because of the price clauses in most of the raw materials. We take diesel, bitumen which is all primary consumption which we have.
So, in spite of that we are planning this growth. So, hope this will. Precisely that because your margins have not shown reflected the similar kind of pace at which your top line is growing.
Karunya Rao: Margins have taken a hit. Is it primarily because of the volatility in the raw materials and because how should investors now expect your margin trajectory to shape up?
D. Prasanna: See the margins have taken a slight hit maybe around 1 or 1.5 percent. Still we are far better than our peers in this industry.
See when you are doing a small business which is under your control in a closed circuit you will have a larger control over the business and you will you can you need all your requirements in house everything will be under your control. So, you need not depend on something else or something and you need not depend upon some external factors which will influence the cost of the productivity. So, these were the conditions which we were working.
When you are scaling up either you should look to increase your top line steadily or you should you should if you want to maintain the bottom line you should not bother about the top line. If you want both it is not possible. If you want extensive top line to grow and your company to do more projects and increase extensively then there might be a hit in the bottom line in 1 or 2 percent, but that will not drastically differentiate what we were having in the last year to this year.
Karunya Rao: But you said you are doing better than your peers. So, I also want to understand there are so many players within the space you are operating in listed, unlisted, both. What makes you different? What is your uniqueness that you or financially or in terms of your services or in terms of your projects? What is the biggest differentiator?
D. Prasanna: Practically speaking there is not much of difference between company A and company B. This is actually the fact which I should admit.
I cannot just say that I am doing rocket science in this business. The way we carry the business is no one dared to enter into capital market at this small size in the infraspace. Many of my friends were advised not to do that.
So, but what I thought is this should be an entry for the company to grow and company to scale and company to be noticed by people who want to invest in the future. See, now we are almost 2 and half years after the listing and we are in the verge of migration to the main board in another 9 months. So, after the 3 year tenure is over we will be migrating to it.
So, by that time our top line will also be good and we want some visibility to the audience. So, that company will grow extensively. So, instead of growing to a level where our top line is 4000, grow 5000 and then going on public to make your pocket rich.
I thought that we will go along with the people so that profits are shared and growth is being viewed by people around us. And apart from that what we do unique other than other peers in the industry is we try to own the assets. It is we are operating on asset heavy model, not all the EPC players do this asset heavy operation because it is a real headache to maintain machinery and vehicle and to maintain very importantly the drivers and operators.
So, we have a separate division for that to take care of this. My balance sheet if I look into my P and L I will my expenses towards maintenance of vehicle and maintenance of maintenance pay to the drivers and operators whatever we have the staff welfare it will be on the higher side when compared to the other peers. But we make up at least 1 to 1.5 percent part out of this which is higher when compared to the other peer operators.
Karunya Rao: So, you started by calling it a headache to maintain all that fleet and everything, but it actually works well for you compared to an asset like leaner contractor is it?
D. Prasanna: Yes, definitely. See when there will be some sort of I mean light at the end of the road for every operation we take. So, this headache we are taking so that there will be some positivity and there will be some result out of that.
It is working out in that.
Karunya Rao: But tell us how a project life cycle typically looks like from bidding for a project to breaking ground to giving handover walk us through the whole picture.
D. Prasanna: See for APC projects the start of the bidding from the date of announcement of tenders it will take 45 days to 60 days for the tender to be open and from that it will take at least again 45 to 60 days for the results to be published.
So, this itself will take around 4 months of time and after that it will take at least 1 month time for our for the agreement to be executed and for us to get the appointed day to proceed with the project. And we have to have the design for the project to be formulated. The design we have a design in house team so that we design and we know we should get the consultants approval.
The consultants are the engaged people in the NHA segment. So, they will get it approved and the NHA officials the authorities will approve and this will take a month’s time. So, when we are sure that the project is ours we start designing and once we get the appointed date we will start presenting our design and we get it approved and we start the work.
Normally what size of project what we are handling we are having from 12 months to 24 months. This is the size of the project we are handling. We are at present only doing EPC project.
Now we are looking at targeting at the next year to enter into HAM segment also.
Karunya Rao: Okay. You know I am curious to know what is that one project that you are personally proud of or that according to you put AVP Infracon on the map.
What would be that one project?
D. Prasanna: See all projects are my eyes. Every project which we put our soul into it and the project which we have won recently and we are going to start it is in Gangaikonda Cholapuram if you know about that city. This is a place in southern Tamil Nadu.
This actually it is nearby my native and this was inaugurated by our Prime Minister four months ago. The foundation stone was laid by our Prime Minister. This is by a bypass to that city where there is a huge temple is there.
If you could google it you will find the temple it was built by Rajinikanth Cholapuram. So there is a project which we are looking at.
Karunya Rao: What is it about? What is the project about?
D. Prasanna: It is forming a bypass to the city of Gangaikonda Cholapuram.
Karunya Rao: Okay. So it connects which city like what region to what region?
D. Prasanna: It is connecting from Trichy outskirts of Trichy to Main Suri. There is a town smaller town called Main Suri.
It is just a small bypass but it just bypasses that temple which is of historic value.
Karunya Rao: Okay. Alright. Interesting. While going through your last presentation I also saw that you are looking at capital raise in the second quarter. Tell us a bit about that.
What are the capital requirements now for the company? Where do you plan to deploy that going ahead?
D. Prasanna: After the IPO we did not go for any second round of fund raise. Actually we planned one in the last year but after a sudden tumble in the price share price we did not proceed with that. I have subscribed to Warrens also.
So we have done a Warrens. So how we are planning to go for a round of equities it is for that to support our balance sheet to strengthen our balance sheet and for the projects required we are looking for some good funds to be deployed in the system.
Karunya Rao: What is the rough requirement? Are you allowed to speak about it?
D. Prasanna: No I am not.
Karunya Rao: Okay. You know you personally subscribe to Warrens and pumped capital back into the company and that clearly reflects a lot of conviction obviously as a promoter of the company. What according to you it says about you having your skin in the game and actually pumping in more from your end?
D. Prasanna: If not me who will do that? We have a strong conviction in the company.
This is a 16 year old company for people who have trusted us just by some presentation and based on what we have done if they are ready to pump in crores and crores we should do that as an example and I subscribed to Warrens when my price was 200 and now it is the price of the stock has fell almost one curve. So, still I am continuing my Warrens subscription and I am executing it. So, I am not taking a back seat on that.
So, I am of the opinion that share prices will definitely go back more than that with what we are projecting and what we are going to achieve this year. And you know if we look at the big picture we are all pretty much aware of and talking about the infrastructure the generational infrastructure push that the government you know is doing there is 2 lakh kilometres of highways, there is record NHAI spending, so much you know expenditure outlay for the infra construction space.
Karunya Rao: Where does AVP Infracon feature in all of this opportunity and all of the activity that is happening and that is likely to you know happen in the next few years?
D. Prasanna: See infrastructure is a segment which takes second place in union government s budget after defence.
Every part of India is well connected through the flags of what the union government is forming and we target at a place that where the government scheme is scheme rightly leaches to the public. So, we are in the part of nation building we target most of our projects to be involved in NHIA segment which will be driving force for the future. Our availability in the state of Tamil Nadu at present is it is not restricted to Tamil Nadu, why you are sticking on is because of the number of projects which is coming along Tamil Nadu itself is too I mean it is too high we just do not need to go out of somewhere if you are not getting your cup of cake in your vicinity you will go look for the second place, but you are getting too much of work in your itself your place itself.
So, that is the reason we are we have not thought anything about Tamil Nadu, but when we are going when we wanted the growth to be in the place where the country grows in the segment we just wanted to go out of Tamil Nadu also and growing out of Tamil Nadu is not a brilliant task for any of the company when you can do your business in your local vicinity there will be some nativity problem or language problem or something like that, but nothing more than that. So, infrastructure is driving force in India now. So, we just wanted to take the maximum I mean utilisation out of that.
Karunya Rao: Okay and in the next 5 to 10 years let us say how do you see the company shaping up in terms of the financials, the geographical expansion or the company that you want it to be?
D. Prasanna: See, we will have no boundaries in terms of geography we just do not want to restrict ourselves to any state this state that state and all we just wanted to explore each and every corners of the country even if it is going to be going abroad for some projects also we are ready to do that. So, in terms of revenue in 5 years we just want at least a company to grow 10x from our current top line in terms of revenue and as well as our market cap or something.
Karunya Rao: And in the near term since you have your eye on the main board IPO as you migrate as you transition from an SME to a main board IPO what will be that one milestone financial operational it could be anything that tells you as a promoter that you truly arrived?
D. Prasanna: See, my vision when we hit the main board is I just wanted to touch the first year itself the 4 figure mark.
The top line of 1000 crores is what we are targeting when we even we migrated to the main board. So, if we are going at if you are filing at after the March next year maybe we will be going around and whenever it is at the earliest. So, the next year we are targeting somewhere at 1000 crore mark.
So, this is our vision and we looking towards that.
Karunya Rao: Wonderful, all the very best and thank you for joining us for this candid and very very insightful chat and giving us a peek into what is going on with the company and how it is likely to shape up going forward. Thank you.
D. Prasanna: Thank you very much. Thank you.