Feature

Recession Rests on HDO's Growth Path

Posted on 11 February, 2010 | Tags: Cover Story

"Where the world was in for a slowdown, during the last six months of FY2008 we have bagged orders worth Rs1000 crores. There is no recession as far as HDO goes," quips SC Sekaran, Executive Director, Hindustan Dorr Oliver (HDO) right in the beginning of the conversation. Albeit the industry was talking about the global meltdown and the projects getting shelved, HDO was busy filling its order book.

Until 2006, the company took its own course of growth with Shaw Wallace Group as a majority stakeholder. In 2006, IVRCL Infrastructure and Projects took acquired majority of shares from Manu Chhabria of Shaw Wallace Group. Acquisition of HDO a strong engineering and technology based company with a stable global brand image and core competencies in engineering and technology was a strategic move of IVRCL as a part of its own growth strategy to synergize the strengths to the core. Currently, IVRCL holds 55 percent of shares and is the majority stakeholder. Post this acquisition, turnover of HDO that was Rs 85 crores in 2005 went up to Rs 522 crores in 2008.

Forte and Core Strengths
HDO is globally renowned for its competencies and is a preferred EPC company. In India, HDO has been present since the last more than six decades and has been associated with metal processing industries ever since. The organization boasts of esteemed clientele like NALCO, BALCO and Vedanta from the alumina sector. HDO has also been associated with Uranium Corporation of India since 1970s when HDO supplied equipments for the first plant in Jharkhand and again in 2003 when UCIL went in for expansions. In Feb 2009 HDO has bagged the single largest project worth Rs 440 crores from UCIL. 

Mineral Beneficiation and Environment Management are the core practice areas of HDO that form close to 80 percent of the companies business. Hindustan Dorr Oliver offers expertise in alumina refining and has supplied equipments for solid-liquid separation in Copper and Zinc mines. NALCO, BALCO and Vedanta are some of the key clients of HDO. "HDO is the preferred vendor of Vedanta and Vedanta the preferred customer of HDO," says Sekaran.

Water, that is the second leading business area of expertise of HDO provides latest technologies for industrial water treatment mainly and offers value in terms of recycling and reuse of water.

The company has expanded its portfolio and also offers expertise in the execution of projects in the fields of paper, pulp and phosphatic fertilizers.

HDO has the capabilities to offer turnkey solutions as any other renowned EPC services provider for industries through licensing for technology transfer from providers and carrying out in house detailed engineering, manufacturing, procurement and construction of process plants for the various segments in the industries. With the order book already grown close to ten folds from 2005 to 2008, HDO is one of the fastest growing companies and loaded with new projects in the kitty.

Sekaran feels extremely proud of the fact that out of a staff of 1083, there are 850 engineers who are the backbone of the organization and credits growth of the organization to team of engineers.

HDO has its own facility for manufacturing of process equipments for metals and mineral processing and water treatment industries. Equipments of world-class standards are manufactured in the facility as per industrial norms and manufacturing facility has approvals from regulatory authorities like CCE, IBR, and ASME U that is mandatory for supplying process equipment to the USA. Company is further focused on getting Six-sigma and Green Belt certifications for the manufacturing facility.  Currently, a new installation has been set up to manufacture pressure vessels and heat exchangers with the foresight for increase in demand of these equipments in the Indian markets and India poised to become one of the manufacturing hubs for the global process industry. Facility in Ahmedabad already has many global players visiting to source the equipments for the strict quality norms and standards that are followed.

India - the Growth Market
India has around 16 per cent of world population but only 4 per cent of water resources. As per the current statistics, current demand of water in India is 800 billion cubic meters per year and with the growing urbanization and industrialization, demand is expected to increase to 1050 billion cubic meter per year by 2050. India used to be water abundant country but is now on the track of becoming water stressed region. Fresh water resources are depleting thus leading to an increase in the demand supply gap for domestic and industrial purposes. 

Water market in India is huge that runs into billions of dollars of business. To meet with the deficit in supplies, State Governments are diverting a major chunk of capital funds for development of water sources for consumption. The Government is imposing stricter EPCB norms for the industries for effluent treatment and reducing water and carbon footprint on the environment.

The Challenge Ahead
Water is going to be tomorrow's business and as per media reports, in twenty years from now, water will be like what oil is today, advocates Sekaran. Number of players from the organized sector who provide complete solutions in the field of water treatment, recycle and reused of water are lesser in comparison with that from the unorganized sector. Government has already increased pressure on industries for recycle and reuse of wastewater and also install desalination facilities wherever possible. Although conventional technologies are practiced by the industry for effluent treatment new technologies are fast replacing the conventional ones. Many organizations are upgrading their effluent treatment facilities and going for process intensification by integration of new technologies. At present, desalinated water is mainly used by the industries.There are very few desalination projects being put up by State Governments in India to meet the supply deficit of potable water. According to Mandar Desai, Head-Water Business, HDO, though the process is energy intensive but cost of conversion from seawater to potable water is pretty low at around 50 paise per liter.

Water is critical for everybody. Desalination is one of the key focus areas of the Government and this is the priority since water is required in huge quantities for the agriculture sector as Indian economy is dependant on agriculture. IVRCL is setting up the first desalination project in Chennai where Chennai Metro will purchase desalinated water to meet the drinking the supply deficit. HDO has supplied some of the key equipment for this project. In fact, the company is working with some of the R&D bodies on its own and also along with some help from global and local R&D organizations for how the potable water can be reached to the rural areas.

Industries consume huge quantities of water and the cost incurred by them is high as compared to the cost of water for domestic consumption. Moreover with the increasing stress on availability of fresh water Governments is taking all the necessary steps to make desalination mandatory for the industries. Seawater desalination is an attractive proposition for the industries that are located in the coastal areas, but for landlocked areas desalination is still a costly affair.

Power sector is the other area that will show substantial growth in India and will offer ample opportunities. Nuclear energy is looked upon as one of the clean solutions, which is quite contrary to earlier notions of its extreme hazards. In order to meet with the increasing demand of energy within the country, investments in the power sector will boost the growth of water industry in India.

Projects Update
Slowdown has hardly had an impact on the business of the company and during the last six months of FY 08 company has bagged contracts worth Rs 1000 crores. "Our hands are already full with the big size projects mainly in the refineries sector that are almost in final stages of completion," says Sekaran.

HDO is almost doing all Refinery Utilities Projects countrywide. At Bina Refinery, HDO has integrated some of the latest technologies for treatment of wastewater. These include Sequential Batch Reactor (SBR) followed by Membrane Bioreactor (MBR). MBR offers complete biological treatment that replaces all the conventional age-old technologies. Process intensification thus achieved by integration of these technologies results in substantial savings of space, energy and operating cost. Ultrapure water thus generated from MBR can straight away be transferred to the Reverse Osmosis (RO) plant and does not require pressure sand filtration in any of the intermediate stages of the process. Engineers India Ltd (EIL) is the Project Management Consultant (PMC) for the project in Bina Refinery. The company has even tied up with technology providers for transfer of technology for reduction of VOCs and Oil Emissions and undertaking projects on turnkey basis.

HDO is integrating SBR, MBR, VOC and RO technologies for effluent treatment in HPCL Bombay where all the treated water will be recycled back into their Demineralization (DM) process and practically this will be a zero discharge effluent treatment plant. HDO is the first company to carry out integration of these technologies in India at the HPCL Refinery that will be commissioned within next three to four months.

HDO is also setting up the largest Effluent Recycling plant for IOCL-Haldia refinery in India. This plant will be one of the largest capacity for similar application. At Cochin Refinery, HDO is building new Effluent Treatment Plant (ETP) based on conventional technology as recommended by the Project Management Consultant.

Hindustan Dorr Oliver has been recently awarded with all the utility contracts worth about Rs 300 crores, viz. Raw water Treatment Plant, RO based DM plant and ETP from HMEL (HPCL Mittal Energy) for Bhatinda Refinery. The project will be commissioned in one and a half years from now. 

HDO has bagged the single largest order worth Rs 440 crores from Uranium Corporation of India. Association of HDO with Uranium Corporation goes way back to the 1970s when HDO had supplied equipments for the Corporations' first processing plant in Jharkhand. The company received the repeat order to supply process equipment when the facility went in for expansion in 2003.

Diversification is the Key
In the current industry scenario, diversification is the mantra for stable and sustainable growth of any organization. Until 2005 Dorr Oliver was more specific on being equipment provider. Under the umbrella of IVRCL, the company has further strengthened its position in other industrial segments and growing as one of the leading EPC service providers.

Sekaran observes that manufacturing of process equipments is yet another area that is expected to show exemplary growth during the next few years in India.  Working cost in India is much lower as compared with that in the western countries. With the world awakening to the quality standards offered by the Indian manufacturing industry, Indian manufacturing industry is definitely going to get the much needed impetus. Sekaran further adds that a change of mindsets can be seen in the process industry regarding sourcing of equipments from China and India is already on the path of becoming the manufacturing hub in this region for the global process industry. Many companies from the West are now looking at buying the process equipment from India than from China.

 "Earlier our factory never produced more than 10 crores of equipment and last year, we have produced 85 crores for the domestic and foreign markets" states Sekaran. With many foreign players testing the waters in the Indian markets, the company expects the margins to grow fairly this year as well. He adds, "We manufacture own equipment for utilization in our core strength area that could be water process plant or uranium or any kind of process plants." A new division has already been commenced recently to manufacture pressure vessels and heat exchangers with the foresight for increase in demand for use in future nuclear power projects. To enhance the manufacturing portfolio, company will set up its second workshop in Chennai.

HDO is looking at diversifications in the metals and minerals sector, which is the core area of specialization. The company has the vision of offering long distance conveyors, conveyor material handling equipment and rapid load systems that are already in steel industries for the mineral processing industries as well. Future plans include diversification into the field to offer design-engineering solutions for various process industries. 

"We want to be Rs. 2500 crore company by 2012. Oil and Gas, Nuclear Power and Power Plants have been identified as the new areas of growth in India and the company is exploring new ventures. We are moving at a much faster pace and becoming a giant is only a matter of time. With basic infrastructure and the proven brand we will achieve our goals soon," concludes Sekaran.

SC Sekaran  Executive Director; Hindustan Dorr - Oliver Limited