Home / Face to Face: Vasanth Kumar, Arabian MEP
Face to Face: Vasanth Kumar, Arabian MEPby Cathal McElroy on Dec 3, 2012
Cathal McElroy talks to Arabian MEP Contracting CEO Vasanth Kumar about the company’s remarkable ascent from a small Doha air-conditioning firm to a Qatari MEP industry heavyweight.
Few companies can be as closely aligned to the fortunes of its homeland as Arabian MEP Contracting is to Qatar.
The company has risen from relative obscurity in the last 15 years, much as Qatar has, to become one of the leading players in the peninsula’s burgeoning MEP industry. Having successfully adapted to the rapidly-changing face of its surroundings during that time, it now seems perfectly positioned to reap the rewards of the decade-long MEP gold rush which the gas-rich state has sparked.
At the helm from the outset has been CEO Vasanth Kumar. The company has only been operating under its current name for the last two years.
At its inception in 1997, it was a simple HVAC contracting company known as Al Moayyed Air-Conditioning Contracting. This was due to its being established initially as a JV between the Bahraini Al Moayyed Group and Qatari businessman Ali Ibrahim Al Malki, who sponsored the enterprise.
The first change to the company’s name came in 2003 when Al Malki bought out the Al Moayyed share, making it a fully-owned Qatari enterprise. Its current trading name, Arabian MEP Contracting, was conceived in the wake of Qatar’s successful World Cup bid in 2010 as the company sought to clarify the full scope of its electro-mechanical operations in the face of the glut of international construction companies entering the Qatari market.
While the company is no stranger to sweeping change, the one constant through all this has been Kumar, a mechanical engineer by profession, with 25 years’ experience in such places as Saudi Arabia, Kuwait and Bahrain.
“I co-founded the company. I was the first staff member. I had been in Bahrain [with Al Moayyed Air-Conditioning] and was asked by Farouk Al Moayyed to go to Qatar to start this operation. For a year I did a survey to see who could be [Al Moayyed’s] JV partner, and we settled with our co-chairman Al Ibrahim Al Malki,” says Kumar.
Getting the company off the ground was tough going. “It was not so easy. There was a lot of hardship, a lot of sacrifices – so much hard work went into it. It was just a three-person crew when we started.
I brought an AC technician with me from Bahrain whom I shared a hotel room with to reduce the overheads. We also had an AutoCAD draftsman to produce the drawings and designs. Our first project was a small coffee shop, which is still there today, and since then we have just kept growing and growing.”
The growth of the company can be mapped during these early years by its move into trading to augment its HVAC contracting operations, which itself expanded into a fully-fledged MEP contracting business in response to market demands. Further moves into electrical and plumbing trading, duct manufacturing and maintenance contracting saw the company establish itself as a booming local business with a promising future.
Impressive as this was, few could have foreseen how the company would come to dominate the Qatari MEP market in the way it has with recent project successes. Its recent completion of Doha International Airport’s new arrivals terminal has been particularly notable.
With the population of the Qatari capital having tripled in the last ten years, and the New Doha International Airport facing delays, the government needed a swift solution to satisfy the city’s rapidly-increasing air traffic. A decision to extend the existing airport by creating a new arrivals terminal was taken, but it needed to be constructed in a short period of time.
“The tender was floated and the contract conditions were very challenging,” notes Kumar. “It was a six-month completion deadline, and the penalty for failing to meet the deadline was open or unlimited – usually it is 10%.
The payment terms were every two months, and the advance payment was only 10%, just to help mobilisation. The entire project had to be completed in six months – not just the MEP, but the civil works and the external carparks as well.”
Having assessed the scale of the challenge, the company decided to bid for the project as a JV with Irish company McNamara, which had recently completed the civil works on Dublin Airport’s newly-built second terminal. Working three shifts 24/7, the team delivered the project on deadline, much to the pride of Kumar.
“The whole market was watching us. It was the first time we were taking on a civil project. It was an international airport, and a contract with all kinds of conditions, and the market was thinking that we would go bust.
We finished on time; we got an appreciation letter; we got paid to the last riyal. Even our defects assessment period is over, so we are now free from any liabilities. The job is up and running; everyone should not forget that this project was built within six months from scratch. I feel very proud of this,” says Kumar.
Emboldened by the scale of its achievement, the company has targeted projects of greater magnitude in more diverse sectors, and with similar success. “We have been moving into hospitals and healthcare,” says Kumar.
“We have done private hospitals, pharmaceutical facilities, but now we have got the big one, Hamad Medical City. It is the biggest job for us in terms of value, around $63.2m (QAR230m).
“It is limited only to the mechanical works, and the handover is December 2013. The works are in progress, and everything is going well. Recently there was a variation to the project where an additional building was added, and it was given to us. We see this as a sign that the client is happy with our work,” says Kumar.
As a hospital project, Hamad Medical City has demanded the highest possible MEP standards in order to ensure the health and safety of the patients it will treat. As such, the company has extended its operations in order to satisfy these demands.
“Healthcare is high-quality work,” says Kumar. “Even though there are false ceilings, cleanliness is very important. To achieve that level of cleanliness, we established a special factory to manufacture the ducting.
“It is completely air-conditioned so that there is no dust and, after we manufacture the ducts, we seal them on both ends and completely wrap them so the dust does not enter the site. Also, as a hospital, it requires anti-microbial coatings to avoid cross-contamination, so we have installed such a facility in our workshop.”
It is this type of specialist project where Arabian MEP Contracting sees itself getting ahead of its rivals.
“We feel there is a good market for healthcare,” says Kumar. “We are going for these specialist areas to eliminate the competition. If you are solely focusing on traditional residential and office projects, you are lost among the others. In specialist projects where the budget is secondary and the quality is important, this is where we want to move.”
It seems this approach has already served the company exceptionally well in one area. The company is Qatar’s undisputed leader in substation contracting and, with power projects in the country being lined up by the dozen over the next decade, this specialist strategy is set to reap major dividends.
“We have more than 90% market share in that field,” says Kumar. “We took on our first substation in 1999, and we have completed 120 since then, with eight ongoing, and we have submitted our bid for Phase 11 [an upcoming major power expansion in the country]. The Qatar government is investing a lot of money in power and water projects, so I believe that for the next ten years, that is where there will be expansion.
“The population is growing; there are a huge number of buildings that will be constructed which need power, and so substations are required. KAHRAMAA [the Qatari government authority responsible for electricity and water] like our quality and performance, and we want to continue our relationship with it,” says Kumar.
What about related infrastructure projects such as the Doha Metro? “The metro is something special,” says Kumar. “It requires high skill sets and prior experience. We do not have metro experience, but what we have are resources, local knowledge and the required licenses. The tenders require prior experience, and to acquire that we have forged a partnership with Samsung.
“It has successfully completed many metro projects in the Far East and Asia, and we have tied up with its MEP division. We are confident of getting prequalified, as the combination of our local strength and its metro experience means we are as strong as anyone else. It is our intention to secure at least two packages, and hopefully this time next year we will be working on one of the packages.”
It is local knowledge that has secured Arabian MEP Contracting its place at the top of the Qatari MEP market. Kumar has witnessed many companies come into the country in recent times and falter due to their failure to fully appreciate conditions on the ground. He highlights the challenges posed by operating in Qatar, and emphasises that these differ compared to more established markets in the region.
“There are many issues here,” says Kumar. “Human resources and materials are the two key elements. There are no established sub-contractors in Qatar, so you have to bring in your own manpower. You have to accommodate them, feed them, transport them and provide medical facilities – and it is a lot more expensive to do this in Qatar than elsewhere. You need to have sufficient investment to take care of the accommodation.
“Secondly, with the materials, unlike a market like Dubai – which is the commercial hub of the Middle East – and where you can procure the materials easily, everything we need here has to come from Dubai. It takes two weeks by sea, or ten days by road. This means the material costs increase, along with the lead times,” says Kumar.
He also points to contractors’ failure to mobilise manpower for projects due to difficulties securing visas for their labour force, as well as a government grading system for trade licenses which limits the size and value of projects that contractors can undertake, based on their experience in the country. All of these factors have to be taken into consideration in order to ensure success in Qatar.
Kumar, however, is confident as to the company’s direction in the next few years. He is bullish about its growth prospects, and hopes to hit an impressive milestone. The company (including contracting, maintenance and duct manufacture) posted a turnover of $137.3m (QAR500m) in the last financial year, and Kumar says it is on course to break the $274.7m (QAR1bn) mark by 2016.
With a current contracting workforce of 3,000, Kumar says that this will soon have to be ramped up to 5,000 if current project bids are won, while the company’s own five-year growth plan estimates an eventual figure of 10,000. “There is enough work for us here in Qatar for the next ten years’ minimum,” says Kumar.
“Our focus is to stay in Qatar, and contribute to the development of Qatar. However, things can change in that time. The GCC is talking about a common currency, like the EU, and there is a rail system planned to link all the GCC states. It is also talking about a single visa. If the region becomes one economic bloc, then businesses will have greater freedom to work.”
M Umer Khan (Dec 4, 2012)
K.K.Sudhakaran (Dec 4, 2012)
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