Manish Patel (L), Managing Director and Tarak Gor (R), Director of Generic Engineering Company at their Vikroli office
Manish Patel (L), Managing Director and Tarak Gor (R), Director of Generic Engineering Company at their Vikroli office

Timely implementation of strategy based on market needs has worked for Generic Engineering Construction and Projects. Pankaj Joshi writes…

These days finding a contracting company which is not troubled, but is looking forward at good growth prospects, is a rarity. Mumbai-based Generic Engineering Construction and Projects (Generic) fits this description just right.

Listed on Bombay Stock Exchange (BSE), Generic Engineering has a market capitalisation value in the range of Rs 400-450 crore. Given that it closed FY2019 with an income of Rs 202 crore, the capitalisation is not too expensive. It does look high when juxtaposed against the net profit of Rs.15.6 crore and cash profit of Rs 20.4 crore.

But this comparison does not faze Tarak Gor, whole-time director and CFO. He points out, the current net worth of the company is more than Rs 150 crore and against that the fund-based borrowings stands at a modest Rs 18 crore— two numbers which hold a lot of weight in the current times.

5 decades of journey

Generic Engineering started originally as a proprietary company in 1964, under Ravilal Patel. The business changed status from proprietary to partnership during the years until 2004, when it was converted into a private limited company. The company has always focused on general contracting.

The projects span across commercial, residential, industrial, health and leisure with a greater focus on special projects like pharma, data centers and cold storage facilities. Affordable housing to high rises, hospitals, IT parks, data centers, malls, workshops and factories – all these are part of the portfolio of work.

Within this, the company brags that there has been no penalty levied by any clients. In the MIDC estates of Navi Mumbai, this company has built a formidable reputation, having executed more than 300 industrial and special projects, just in that particular belt.

Generic Engineering Construction: Name is ‘Generic’ but work is distinct

Such a varied product offering indicates that the company has invested considerably in-house design capabilities and moved up the value chain from a mere contractor to providing end-to-end solutions. The company services IKEA, Kolte Patil Developers Ltd, Kesar Group, Idemitsu, AND Design, Aarti Industries Ltd.

Glenmark, Toyota, Bharat Electronics Ltd., Reliance Hospital, Sterling and Wilsons Pvt. Ltd. and JSW Steel among others. The gross order book as of today stands at more than Rs 1,000 crore and the company estimates that this would be executed within 36 months.

Generic Engineering Construction: Name is ‘Generic’ but work is distinct
Generic Engineering Construction: Name is ‘Generic’ but work is distinct

The listing was done through a process of reverse merger, and not through the IPO route. One of the main rationales for the company listing was to strengthen the brand profile of Generic. Listing brings with itself the obligations of disclosures, processes which only strengthen the company. Additionally, listing creates a possible avenue of fund-raising.

Work-wise, the company has been predominantly focused on Maharashtra throughout its five-decade tenure. It has however branched out recently into Gujarat, where it has recently completed a project, and another is in progress in Bengaluru. Over a threeyear period, both Gujarat and Bengaluru geographies offer immense opportunities.

Future growth story

Another growth initiative is to get deeper into existing operational territories through infrastructure projects. Here, Gor is categorical that ‘the company will stick to its core strength of structural construction’.

The company would not want to get into roads and bridges, which is a different operational ballgame altogether, not to mention the financial challenge that these projects bring with itself. Meanwhile, Gor believes that if pre-approvals are in place and funds are secured, affordable housing is a good option in infrastructure.

He adds building structures at ports and airports is another good growth option. The current order book does not reflect the impact of any of these initiatives. The expansion of activities in such direction would ensure that the company’s administration and monitoring infrastructure is used better in the existing geographical pockets, thus, lowering overhead cost.

The company has so far been cost-effective in its manpower and administration outlays. Gor reveals, “Overall manpower strength is 350, wherein around 80 engineers and 10 architects comprise the technical core team. Around 200 personnel are contracted by the company, but the scale of work is such that these are pretty much dedicated to the company itself.”

The site manpower recruitment is entirely need based and the company can deploy anywhere up to 10,000 people as it starts adding orders. Generic is looking at large opportunities in the space of Engineering Procurement Construction (EPC) going ahead. This would require both capital investment and shoring up manpower—both skilled and semiskilled workforce.

Generic Engineering Construction: Name is ‘Generic’ but work is distinct

Likewise, the scale of operations would need more investment in monitoring, control and compliance. With currently limited debt on books, bank funding and internal accruals can drive growth. In that context, there are funds currently dedicated to the construction, infrastructure and real estate segments and this company can be a good investment play.

Generic Engineering Construction: Name is ‘Generic’ but work is distinct

Investor’s attraction

  • There are not many organised construction companies in the Rs 25-100 crore project size segment which have lucrative margins.
  • In difficult times, real estate project sizes tend to get crunched and large projects sidelined in favour of small ones.
  • Generic has huge experience in small-ticket projects, both in industrial and residential segments. Generic is a low debt company.
Generic Engineering Construction: Name is ‘Generic’ but work is distinct

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