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In Focus: Engineering Success

Buoyancy in the infrastructure sector to keep Punj Lloyd busy

Punj Lloyd (Idirect Code: PUNLLO) is a major player in engineering and construction space. Apart from operating in civil construction, the company has expertise in oil and gas infrastructure. The company specialises in laying pipelines, building oil and gas storage tanks, terminals and process facilities. The company is better placed than its peers because margins in oil and gas infrastructure are higher than civil works and Punj Lloyd derives bulk of its income from oil and gas works. It recently formed a new subsidiary for its back office operations. Its recent acquisition of the Singapore-based SembCorp and its subsidiary Simon Carves will start contributing to its bottom line from financial year 2008 onwards only. In SembCorp, Punj Lloyd has stopped taking orders, where margins are less than 10 per cent. For SembCorp orders from King Abdullah economic city will also start flowing in the near future. Simon Carves India will initially offer solutions in process engineering, petrochemicals and refinery.

Subsequently, it will expand its ambit to include auto, aeronautics and telecom sectors. The company is betting big on global engineering services outsourcing market, which it believes will treble by 2020. The company has also indicated that it is not very keen on toll-based road projects though it is bidding for various government projects which have been opened via private-public participation (PPP) route. The company's Medicity project, where it has 18 per cent stake, will propel it into other real estate forays. However, buoyancy in the infrastructure sector has led to a strong demand for manpower at all levels. The company therefore is facing attrition problems.