New Delhi : India's leading water & wastewater treatment company VA Tech Wabag has started the fiscal 2016-17 on a high note, bagging Rs 800-crore worth of contracts in the very first quarter.
The Chennai-based company, with over 2,000 employees spread across entities and offices in more than 22 countries, has been slowly ramping up its presence in the Indian municipal market, bagging key projects in both the EPC and O&M segments in recent quarters, while aggressively looking for growth across its main growth markets in Asia, North Africa, Middle East and the Central and Eastern Europe states.
In an informal chat with India Water Review’s Girish Chadha, Wabag’s Global Head - Business Development Rajneesh Chopra talks about how the Group is looking forward to the growing business opportunities in the domestic water and wastewater treatment market with the launch of several flagship initiatives by the Government.
The Centre has rolled out several flagship schemes like the Namami Gange, AMRUT, Smart Cities and Swachh Bharat Mission. How will these translate into higher order flows for a company like VA Tech Wabag?
The Government of India has allocated Rs 20,000 crore for the Namami Gange project, Rs 1,00,000 crore for the Smart Cities Mission and Rs 50,000 crore for the AMRUT programme. Thus, the budgetary allocation provides substantial visibility for our sector. A large chunk of these allocations are for setting up water and sewerage treatment systems, in which Wabag has proven expertise.
Wabag has numerous references in these domains and our company provides value offerings such as power generation from sludge, advanced sludge management and water reuse systems. Being a market leader, we consider it an obligation to provide inputs to the policy makers and thought leaders while framing the policy for such schemes.
We are also working on a concrete plan to align our core competencies with the core offerings under each of these schemes. With strong credentials, we are a major contender for orders under each of these schemes, which would translate into higher order inflows once implementation starts happening.
VA Tech Wabag is already a market leader in the water management sector in India. It has several patented technologies in water and wastewater treatment, industrial water treatment as well as desalination. How will the company be able to leverage this competitive advantage in the Indian market as projects under all the above-mention schemes come up?
We are a pure play water technology player and have a huge repository of patented technologies. In addition, we have three research & development (R&D) centres across the globe that constantly work on developing new technologies in-house and efficiently integrating technologies that are recently developed.
There are two facets of dealing with technologies. First, we need to keep abreast with the latest technologies and second, we must have the know-how to efficiently deploy them.
Wabag has been successful in both developing and integrating the necessary technologies. The scope for incorporating new and complex technologies is huge with stricter norms on untreated discharge shaping up and with more types of industries planning to set up effluent treatment systems.
WABAG has proven expertise in the industrial sector, corroborated by its credentials comprising refineries, steel plants, power plants, common effluent treatment plants (CETPs) etc. Treatment of effluents from refineries solicits the most complex technologies and Wabag has successfully executed numerous effluent treatment plants (ETPs) both in India as well as abroad. The ETPs at IOCL’s Panipat Refinery and Reliance’s Jamnagar Refinery are some of our marquee projects in the petrochemicals industry.
Coming over to desalination, India is one of the fastest growing economies and considering the population explosion, there have been concerns about managing the water supply–demand scenario. The freshwater sources in India are limited and not expected to increase in tandem with the increase in population.
In such a scenario, there is a need to develop alternative sources of water. Desalination is increasingly becoming an alternative solution and Wabag has been a bellwether in this domain.
In 2013, we set up the 100 million litre per day (MLD) Nemmeli desalination plant in Chennai that employs technologies ranging from disc filtration to reverse osmosis. The desalination plant at Al Ghubra, Oman with almost double the capacity of the Nemmeli plant highlights our strong global presence. It is in this context that we have been recognized as one of the top 10 desalination companies by Global Water Intelligence, UK.
Our proven technologies are present across the globe through numerous projects and in this process, we have developed an in-depth knowledge of the different types of water that are required to be treated and the capability to treat them.
From a client’s perspective, we offer them world class technologies at a competitive price and with uncompromised quality.
What unique offering will the Wabag Group be able to offer in the domestic market as the thrust to set up better water and wastewater management & treatment facilities across states gains momentum? What capabilities are you able to bring to the table?
Wabag has proven credentials when it comes to water and wastewater treatment. To project our capabilities in a proper perspective, I wish to focus on three points.
Firstly, our water treatment capabilities. The population density in India is quite high and a majority of the states grapple with land scarcity. Usually water treatment plants treating a substantial volume of water require large tracts of land. WABAG’s repository of projects includes plants that provide the highest quality output despite being set up with minimum footprint. One such example is the Panjrapur Water Treatment Plant, Maharashtra that was set up in 2007 with a capacity of 450 MLD.
Secondly, our capabilities with respect to wastewater treatment. Electricity constitutes around 60-70 per cent of the operating expenditure. Hence, having a captive power plant would reduce the burden on the municipalities. Wabag has demonstrated this by means of employing and operating gas engine powered plants in its STPs that are fuelled by biogas produced from sludge. The 110 MLD Kodungaiyur STP, Chennai is a case in this regard, where Wabag has successfully operated the gas engine for 10 years clocking 75101 hours, thus generating 43534 MW of power.
Third, we wish to focus on water recycle and reuse. The quantum of available freshwater is not expected to increase in the coming years whereas the demand is set to grow manifold. In such a scenario, there is a need to utilize every drop of water to its maximum potential. Water reuse assumes significance in such a scenario.
The Centre has also made it mandatory for thermal plants to use treated sewage as intake water instead of extracting from freshwater sources. Wabag has, over the years, showcased the potential to provide solutions for recycle and reuse. We have the prowess to treat sewage to the levels required for the water to be used for industrial processes. We enable reuse by ensuring that sewage discharged from our plants conforms to the latest norms prescribed by CPHEEO, Union Ministry of Urban Development.
The Wabag Group is currently earning a little less than half of its domestic revenue from Government projects. What ramp up in domestic revenues are you expecting from the municipal or Government sector in the next two-three years?
India is a going to be a big market. First, once implemented, the flagship schemes such as Namami Gange and Smart Cities Mission will have numerous projects to be executed. With Wabag set to compete for a majority of the projects under these schemes, we expect a ramp up in revenues from the Government sector.
Second, currently, water and wastewater infrastructure is not so existent here. At present, only around 30 per cent of the sewage generated in India is being treated. Hence, there is a lot of scope for setting up more drinking water and sewage treatment plants. Our company possesses the necessary expertise in each of these domains.
Third, the existing sources of freshwater are limited and some of the major water bodies such as the Chilika Lake in Odisha and Pulicat Lake in Andhra Pradesh comprise brackish water. The state Governments have also begun exploring the idea of seawater as an alternative source.
In this scenario, Wabag is well poised, basis the execution of the 100 MLD Nemmeli seawater desalination plant, Tamil Nadu and the 250 MLD Al Wasia brackish water desalination plant, Saudi Arabia.
What is the current order book size and how are they largely distributed across sectors - municipal or industrial and between geographies - India and overseas?
The current order book is to the tune of about Rs 8317 crore spread between Wabag India and Wabag Overseas, including framework contracts of Rs 865 crore. This includes both EPC (engineering, procurement & construction) and operations & maintenance (O&M) orders.
Wabag India accounts for Rs 4381 while the overseas operations account for Rs 3069.5 crore. Between EPC and O&M, the overall EPC segments accounts for almost Rs 4038 crore worth of orders across India and abroad.
How does 2016-17 look like in terms of revenues as you have started the financial year well with a few large contracts?
We expect the revenues to see 20 per cent increase as against the last financial year. The revenue for FY 2015-16 was Rs 2542 crore and for FY 2016-17, we expect it to be in the range of Rs 3000–3200 crore.