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COMPANY

ANALYSIS
OF

Submitted by:
Pratik Asnani
Batch 2011
09BS0003094
Company Overview
Engineers India (EIL), the public sector undertaking under the ministry of petroleum and natural gas, is
engaged in the business of project implementation and engineering consultancy services primarily for the
hydrocarbon sector in India and overseas. Of late, the company has also extended its consultancy and
turnkey service to other sectors including non-ferrous mining & metallurgy and infrastructure sector. It
offers a complete range of project services including design, engineering, procurement, construction, and
project management.

Incorporated in India in 1965, it has provided a range of engineering consultancy and project
implementation services for more than 49 refinery projects, including eight green field refinery projects,
seven petrochemical complexes, 35 oil and gas processing projects, 205 offshore platforms projects, 37
pipeline projects, 11 ports and storage and terminals projects, eight fertilizer projects and 26 mining and
metallurgy projects. In the infrastructure space, it has provided a range of engineering consultancy
services for more than 26 projects, including for airports, highways, flyovers, bridges, water and sewer
management, as well as energy-efficient "intelligent" buildings. It has also completed 16 turnkey projects,
including refinery and petrochemicals projects and offshore platforms.

The company also proposes to diversify its operations to other sectors such as water & waste
management, city gas distribution, power, fertilizers, coal to liquid, etc.

The company has leveraged its track record in India to successfully expand its operations internationally,
and have provided a wide range of engineering consultancy services on various international projects,
particularly in the Middle East, North Africa and South East Asia. It has established strategic international
offices in Abu Dhabi, London, Milan and Shanghai to expand its international operations.

The company's business is divided into two principal operating segments, i.e., consultancy & engineering
project segment (C&EP) and lump sum turnkey project (LSTK). Projects where it provides services such
as project engineering consultancy, project management and project implementation are included in the
C&EP segment. Projects that it undertakes on a turnkey basis are included in the LSTK segment.

It has two joint venture companies: TEIL Projects and Tecnimont EIL Emirates – Consultores E Servicos.
TEIL is a JV with Tata Project. EIL has a 50% stake and targets small EPC businesses in the hydrocarbon
sector. In Tecnimont, EIL has a 30% stake with the balance 70% held by Tecnimont of Italy. This JV
looks at PMC and EPC jobs in the oil & gas industry in the United Arab Emirates.

Being an offer of sale, all the issue proceedings of the FPO will go to the selling shareholder, i.e., the
Government of India.

Business Outlook
The Engineering sector’s future outlook is promising. Drivers like power projects, other infrastructure
development activities, industrial growth and favorable policy regulations will drive growth in
manufacturing. The Indian engineering industry has been witnessing significant level of capability
enhancement over the years. As export markets open up, this will help India develop a strong presence in
global engineering exports. Power sector contributes the largest to the engineering companies’ revenues.
Major players in this sector like ABB and BHEL derive 60 per cent and 69 per cent of their revenues from
supplying equipments to the power sector. Going forward, with the Government clearing the blueprint for
adding 100,000 MW in the eleventh (2007-12) five-year plans, the potential is high for the engineering
majors.

Emerging trends such as outsourcing of engineering services can provide new opportunities for quantum
growth. Engineering and design services such as new product designing, product improvement,
maintenance and designing manufacturing systems are increasingly getting outsourced to countries like
India and China.

India’s engineering sector has significant potential for future growth, in manufacturing as well as services.
With development in associated sectors like automotive, one of the largest evolving markets for
engineering and industrial goods, and a well developed technical human resources pool, India is poised to
make significant strides in all segments of engineering.

EIL: Strength
The company over the years has worked on more than 400 projects for both Indian and global energy
majors and has developed a strong track record. Given this strong project track record, it has attained
leadership position in project execution across the hydrocarbon value chain in India. Moreover, having
worked on 17 out of the 20 refineries in the country and seven out of the country's eight petrochemical
plants/complexes, the company has natural advantage when it comes for revamp/de-bottlenecking
/expansion/modernization, going forward.

EIL is a zero debt and cash rich company (Rs 1764 crore cash and bank balance as of March 2010), with
strong operating cash flow.

EIL: Weaknesses
Since majority of its business comes from the hydrocarbon sector, its fortunes are largely correlated to the
activity and expenditure levels in the energy sector globally, which in turn are correlated to the oil and gas
prices. Any downturn in the sector globally will dry down the order flow and heighten competition in the
global as well as the domestic markets, leading to pressure on margin. The company gets about 95-97%
of it revenue from the hydrocarbon sector.

The company's foray into new sectors such as water, utility power projects, city gas pipeline, etc. will
decrease its reliance on the hydrocarbon sector and give a larger canvass/opportunity to play/tap. But it
lacks experience in these new sectors. As a new entrant, the company might be forced to compromise on
profits for initial volume. This might affect the profitability of the company.

Though it enjoys domestic leadership in the hydrocarbon sector, it faces intense competition from US,
European, Japanese and Korean companies in the global market. It lacks qualification for high value
complex projects.
Conclusion
As the national economy is on the threshold of a recovery and the interest rates are more or less low, it is
the right time to invest in these sectors. While investments in oil, gas and infrastructure augur well for
EIL, the challenges are manifold, led by the overriding need for energy efficiency, reducing carbon
footprint and compliance with stricter environmental standards.

Engineers India Limited is planning to enter into the fields of nuclear and solar energy along with water in
the infrastructure sector. For enhancing the geographical base in the core competency area, the company
has already started building business contacts with major oil players in the Middle East and Latin
America. The company therefore looks to the future with a sense of confidence with abilities and
initiatives to adapt to environmental concerns to be in tune with customer needs.