SP Singla: A slow and steady route to success
Image: Amit Verma
The first project Sat Paul Singla, 57, completed as an entrepreneur was a small bridge over the Yamuna in 1996, valued at a mere ₹10 lakh. A first-generation entrepreneur, he started with no capital and worked his way up, going from project to project, gradually building the company named after him—SP Singla Constructions.
Today, SP Singla specialises in constructing river bridges across the country. The company is present in 15 states and has posted revenues of ₹1,150 crore in the year ended March 2017. What’s impressive is that the company has managed to do this without diluting any equity (it is still 100 percent owned by Sat Paul Singla) and without taking on an excessive amount of debt. (Total debt stands at ₹52 crore taken for financing equipment purchases.)
How did Singla manage to build a large construction company with little capital? What is it about the industry structure that allowed him to grow without taking on significant debt? And how has an entrepreneur, who employs about 5,000 people, still managed to retain full ownership?
Until 1996, Singla, a civil engineer, had been working with small construction companies in Punjab and Haryana for 12 years, constructing river bridges in Jammu and Kashmir, Punjab and Himachal Pradesh. The work was challenging and helped him hone his skills. The only problem was he would have to stay at a particular location, complete the project and move on to the next location. “Shifting my family was an issue and shifting schools frequently for my two sons was difficult,” recalls Singla. CLICK HERE FOR MORE STORIES FROM THE 'BOOTSTRAPPED SPECIAL' SPECIAL REPORT
It was around then that he realised that the Public Works Department allowed engineers to bid for small projects as long as they had the requisite experience and an engineering degree. Singla quit his job and took the plunge, winning a contract to construct a bridge for ₹10 lakh as an EPC (engineering, procurement, construction) contractor.
This would mean he could be based in a single place and travel when needed. What’s more, under this model, the government pays upfront within a certain time period as and when a part of a project is completed, which meant that Singla only had to raise a few lakhs and get to work.
Over the years Singla has been careful not to get into PPP (public-private partnership) or BOT (build-operate-transfer) projects. These have proved to be a death knell for many construction companies as they are held responsible for making money from the asset: They have to raise funds from banks, and then if the projections for road traffic go awry (as they often do) the companies lose money.
India’s infrastructure story is strewn with such examples—companies like HCC, Gammon India and Jaiprakash Associates are groaning under the debt they have raised.
Singla, on the other hand, grew his company in a slow and steady manner. “I spent the first five years building my credentials so that states would be confident to award larger projects to the company,” he says. The fact that he was a civil engineer was a plus as was his expertise in bridges, which he continued building; the quantum of work gradually increased. His first big break came in 2000 when the state of Chhattisgarh was formed and his company won the bid for a ₹12-crore bridge. “The state had just been formed and a lot of contractors were not interested in working there. Lesser competition allowed us to win bids for bigger projects and further enhance the repertoire of our work,” he says.
Since then, SP Singla has continuously worked on even larger projects. The next big leap for the company came in 2006 when it entered Bihar.
“We built the largest [4.5-km long] extradosed bridge [extradosed bridges are cable-stayed bridges, like the Bandra-Worli Sea Link in Mumbai] over the river Kosi between Chhapra and Arrah in Bihar,” says Singla. That project, valued at ₹700 crore, placed the company at the forefront of bridge-contracting companies in the country. Another project, also valued at ₹700 crore, undertaken by SP Singla is the largest bridge over the river Bramhaputra at Tezpur in Assam.
The job is highly specialised and building bridges over fast-flowing rivers is a significant engineering challenge. The company now has a 20-strong team of engineers who work full-time on designing bridges; they are currently tasked with 35 projects across India.
Given its increased size, SP Singla is now working in partnership with larger infrastructure companies. It has tied up with PNC Infratech and Gammon India to do the bridge portion for projects that have been awarded to them. Recently, in collaboration with IL&FS Engineering Services it has also placed a bid for the Mumbai Trans Harbour Link, a proposed 21.8 km road bridge to connect Mumbai with Navi Mumbai.
Growing in a measured manner with steady cash flows has meant that SP Singla has not needed to raise significant debt. Once the company completes a portion of a project, it receives payment within 30 days from the government.
Over the last five years revenues have risen 15 percent a year, from ₹570 crore to ₹1,150 crore in 2017. Ebidta (earnings before interest, taxes, depreciation and amortisation) margins at 11 percent are in line with the industry while profit after tax came in at ₹48 crore in 2017. Singla would like to take his company public but admits “that I am still to understand how the capital markets work”.
For now, Singla is hesitant to put a number on how rapidly the company can grow in the next two years. “A lot depends on when projects that have been awarded to us see the start of construction,” he says.
The government, in a recent decision, had stipulated that no infrastructure projects shall start work unless 80 percent of the land acquisition has been completed. “If the projects we have won bids for commence soon we may even cross ₹2,000 crore in revenue next year,” he says.
And that is not a bad result for a company that started two-score-and-one years ago with a single ₹10 lakh project in hand.CLICK HERE FOR MORE STORIES FROM THE 'BOOTSTRAPPED SPECIAL' SPECIAL REPORT
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(This story appears in the 18 August, 2017 issue of Forbes India. To visit our Archives, click here.)