Punj Lloyd Ltd. is one of the largest engineering construction companies in India providing services to energy and infrastructure sector projects. PLL provides engineering construction services for onshore and offshore pipelines, gas gathering systems, oil and gas tanks and terminals including cryogenic LNG and LPG storage terminals, process facilities in the oil and gas industry including refineries and for power plant projects. In the infrastructure sector, Punj Lloyd Limited has worked on various civil infrastructure projects for highways, flyovers, bridges and elevated railroads. PLL’s operations are spread across the regions of the Middle East, the Caspian, the Asia Pacific, Africa and South Asia.

Key Points

Good scale up and execution after acquisition: In the nine months ending Dec’07, Punj Lloyd posted revenues of Rs. 54.1bn as compared to Rs. 34.2bn, while the net profits went up from Rs.1.08bn to Rs. 2.41bn. We believe margins are likely to expand going forward as its acquired company, Sembawang engineers and Contractors’ Operations are streamlined and larger number of higher margin urban infrastructure projects flow through. Moreover the company has acquired Simon Craves which has strong presence in process based industries.

Emerging as a large player: Punj Lloyd is transforming itself from a construction company to a niche EPC player. It focuses on oil and gas pipeline and tankage projects (through the parent company), petrochemical plants (through its subsidiary, Simon Carves) and urban infrastructure projects (through its subsidiary, Sembawang Engg. and Contractors (SEC)). The acquisition of SEC has provided access to design capabilities as well as a large skilled manpower base, besides providing additional pre-qualifications, thus enabling Punj Lloyd’s transition to an EPC player. We expect Punj Lloyd to keep winning larger orders.

Large and diverse order book: Punj Lloyd continues to have a large overseas exposure to tap potential opportunities across the globe, especially in the oil & gas and petrochemicals space. Punj Lloyd had an order backlog of INR 191.3bn as on Feb’08. PLL also has a diverse geographical mix in its order book. The South Asia and East Asia geography accounted for 34% and 29% of the total backlog. The Middle East and Africa contribute 27% and the rest of the world accounts for the balance 10% of the order backlog. The company is reasonably diversified on the order book in terms of industry as well as geographical exposure.

Stake in PSL to strengthen presence in the offshore space: PLL has acquired 23.22% stake in Pipava Shipyard Ltd. (PSL) for a consideration of Rs. 3.5bn. The acquisition of PSL will allow PLL to target the offshore segment in the oil & gas space. PLL can use the facilities to manufacture rigs, platforms and jackets in orders for offshore pipelines.

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