with Rohit Singhal, CEO, Fernas Construction Indi
Fernas had an explosive entry into the Indian market two years ago, and you chose the oil and gas sector as the industry through which you would build the business. Why was oil and gas the right decision for Fernas in India?
Oil and gas was the right decision for two reasons. Fernas as an infrastructure company is strongly oriented towards the oil and gas sector. Oil and gas comprises almost 70% of our global business in the infrastructure construction and EPC division, so therefore oil and gas is definitely our first preference. The second reason was that oil and gas is a good sector in infrastructure: it is a more technically oriented job, and therefore you face less competition. When Fernas first started thinking about India, the company explored the various sectors that had potential and oil & gas sector was found to be more lucrative. The growing sectors were oil and gas, roads and other infrastructure, but concluded that oil and gas had the most potential because it was an easy segment to enter and there was less competition.
How did the company take its first steps into the market?
Other international EPC contractors who are working in India came to the market earlier than Fernas, established their businesses and eventually started to bid for tenders. From its headquarters in Turkey, Fernas saw an opportunity in India, which was an upcoming project to construct a 48-inch 400km pipeline for GAIL. It was an international competitive tender, so we participated from Turkey, gave a competitive price and eventually won three out of five spreads of the project and hence entered successfully Indian market with project in hand.
Fernas has experience in oil and gas in Turkey as well, including the Doğubeyazıt- Erzurum Natural Gas Pipe Main Transmission Line, the Giresun Province Natural Gas Pipe Transmission Line, and has laid more than 2500km of oil and gas pipelines across the world. Was it this experience that enabled you win the tender without a foothold in the country?
We are definitely strong in pipelines and in the EPC side of the oil and gas business and our international experience of pipelines helped us in meeting the qualification requirements of the tender.. . Before participating in the tender we had done due diligence on the country. We were aware of the challenges of entering into India, one of the most critical of which was the competition levels and the fact that prices are competitive when compared to the international market. Fortunately at that time we had just finished one project in the Middle East so our pipeline equipments were free and readily available in the region. So,we thought that this would be the right project for us to enter India.
Now that you have arrived and consolidated your presence with two projects, what is next for Fernas India?
When we started back in 2009, our first focus was to finish the project that we had won. For almost one and a half years we were primarily focused on establishing ourselves on the project. After one and a half years, in May 2010, we felt we had to take the next step and focus on our future. We started bidding for new Indian tenders. In the last quarter we have won orders worth close to $500 million USD in India. Two projects: Indian Oil Corporation export pipelines and associated works for Paradip refinery and offsite & utilities package for ONGC’s Petro additions Limited, petrochemical complex coming up at Dahej,
We understand Indian market and its challenges and are confident of finishing the projects successfully. We want to first focus on the projects in hand and consolidate ourselves. We are also looking for opportunities in other Indian infrastructure sectors like roads, power, city gas distribution etc.
One of the most interesting aspects of the Indian market is the dominance of the PSUs and the role that they have historically in building up the industry and in energy security. How has it been for you to work so closely alongside these big state-owned companies?
Government owned companies control the majority of the Indian oil and gas industry. There are both positive and negative aspects to this. The positive points are that there is quite a lot of transparency in the processes and procedures that are followed by these companies because of being government controlled. They are also financially well-off companies so project finance is never a problem..
However, one negative point is that the decision-making is a little time consuming.
We are very impressed with the project management system of our first client GAIL They are able to complete large sized pipeline projects at lower rates and much faster than the normal standards due to the experience they have gained over the years.
You have grown Fernas India from one man to 1600 employees in two years. Will it be difficult to continue at that rate of growth?
As of now, Fernas India employs almost 1600 people, and we have to now grow ourselves to close to 5000 people in the next few months. We understand the challenge, and the same challenge was there two years back when we started in India. However, Fernas India has very strong support from Turkey and we intend to mobilise our teams from our international projects and from the local market;
With such a high growth rate, maintaining a sustainable business and one that has a culture of the parent company about it must be a challenge for you. How are you approaching that aspect of it?
Maintaining a sustainable growth is definitely a challenge and we are fully geared for that. We have the right mix of resources consisting of experienced personnel, high end construction equipments and well developed techniques that will ensure business sustainability. Fernas has very well laid-down systems and procedures which have proved well in the 16 countries around the world where Fernas is present and these procedures are very much applicable in India also These systems help us in maintaining Fernas culture. Fernas would not have been successful in India without the support of its parent company in Turkey, both in terms of technical, procedural, management style and financial guidance.
Every day, international EPC companies and pipeline constructors are arriving in India. What is it about Fernas India that separates you from your competition in India today?
Fernas has very good technical qualifications, strong international experience, experienced personnel, good project management techniques and high end construction equipments. All this together gives us the winning edge. We have done complex EPC oil and gas projects all over the world. Our project execution capabilities are very strong and we are able to move the projects fast because of quick decision making process. Financially we are very strong. The Indian subsidiary does not have its own financial muscles – it is all supported by the parent company, which matters a lot, and the management willingness is there. Fernas is a closely held company. The Nasiroglu family owns Fernas, and one of the board members, Mr. Engin Nasiroglu spends majority of his time in India ensuring faster projects.
You used to work for Engineers India. You went to work for Shell/PDO, you worked abroad in the Middle East and in the Netherlands, but now you have come back to India with a Turkish company. What was it that attracted you to Fernas and what made you want to come back to India?
Having worked with Engineers India, I worked with an engineering consultancy. Having worked with Shell/PDO, I worked with a client organisation. Now I am with the contractor, so I have a wide variety of experience. When I was with Shell, I began to think about coming back to India, having been out of the country for more than fifteen years. I had been associated with Fernas previously and I found them to be very good and efficient company So, when Fernas had the opportunity in India, I found it attractive enough to resist.
What is it that is currently motivating you?
The most important challenge is to successfully execute the projects in hand. Our company has a very strong philosophy that when you take a project, you have to make sure that you are very fast in moving it on, and in an EPC project business, the first six months are critical. If you are able to control the project schedule and the project direction and movements in the first six months, you are definitely going to be successful in the project. It is the Fernas culture, the zeal for progress and the support of our parent company, which motivates every employee of Fernas to provide its best.
Today Fernas, in India has moved to that next level. We started in India as a construction contractor, we have moved to the next level of EPC, and we still growing.
If we were to come back and see you in five years, what would you like to have achieved at Fernas India?
Two years back we started in a modest way and today we have got a good order book, and a successful project that we are about to finish. For the next five years, we want to consolidate our position and move to the topmost bracket of EPC contractors for oil and gas, aiming to be the number one.
In India we are also looking at other sectors, such as power, roads and irrigation. We have ten power plants in Turkey wherein, we are the operators and owners – hydroelectric, wind and others. Also, city gas distribution is going to be another area where we may compete as an operator, rather than as a constructor. Fernas is also looking at aviation and tourism, which is another area where we see that India has potential. We would definitely like to have some asset ownership within India. We have started participating in a roads sector and have put bids for couple of BOT road projects The company outside India, especially in Turkey, has moved away from construction to asset ownership like BOT. We want to follow a similar strategy in India. In terms of the financials, I would like to take the company to a turnover of $1 billion USD by 2016-17, with good margins. That is our target, and hopefully we should be able to meet it.
Do you have a final message that you would like our readers to know about Fernas India?
Fernas is a well-established organisation with international experience and expertise. We are capable of executing any kind of critical EPC project of any size and magnitude on time. We are financially strong, and have well laid-down systems, and are technically strong . We are aggressive and hungry for more work, not only in India but outside India as well. We are looking for new opportunities, new markets, and are a dependable EPC contractor.