Big Interview: Subhash Pritmani, SEMCO
SEMCO boss Subhash Pritmani talks chasing projects and payments
The last time MEP Middle East spoke with Subhash Pritmani, he was barely eight months into his current role as vice-president of Al Sabbah Electro-Mechanical (SEMCO). Back then the MEP contractor had recorded revenues of around $80m (AED293.8m) for 2013, and Pritmani spoke passionately about turning the company into one of the top three players in the UAE by 2019.
Fast-forward to 2016, and he still retains that same optimistic outlook. After all, as he points out, he’s “a born optimist”. Almost two years on from his comments in May 2014, he argues that Abu-Dhabi-based SEMCO can be considered among the top 10 MEP contractors in the country.
However the construction market has changed in the last two years and SEMCO has had to change with it. Contractors and consultants are competing in a market of diminishing returns as less projects come to tender; while ongoing schemes are beset by financial issues. A double-whammy.
Pritmani, who has pretty much seen it all in his 30 plus years in the industry, says he have never known the likelihood of getting paid on time by clients to be as uncertain as it is now.
“Getting money from contractors, partially for variations or claims, is a Herculean task. We have spent a lot of time trying to get this sorted,” he says. “We’ve clawed money back reasonably well.”
The lack of liquidity in the market has resulted in SEMCO adopting a more cautious approach to choosing the companies it works with.
“The current state of the market sends out a message that you have to be very careful in selecting your business partners,” Pritmani says. “And you need a lot of courage to refuse work where you feel the contract is unfair or you have doubts about whether you will get your money.”
The catch-22 in a slowing market, however, is that as projects recede, the temptation increases to accept risky jobs to keep money flowing into the business and the workforce busy. In Pritmani’s case, he is responsible for profit and loss, and the welfare of more than 2,400 employees.
“We will not take on projects that risk the long-term welfare of the company – and that in turn means its workers. Some of our staff have been with us for a very long time and we have invested a lot in their career development,” he says.
“They are always at the forefront of my mind when we make a decision about whether to bid for a project or not.”
Yet despite falling oil prices lowering liquidity, the GCC construction market is still growing. Investment bank Alpen Capital, for instance, calculates its current value to be around $126bn; having grown by a CAGR (compound annual growth rate) of 11% since 2013.
“The enquiry level is the same,” Pritmani says. “It’s just that there’s been a slowdown in the finalisation of the tenders. It’s not as brisk as one would like it to be.”
Such a scenario has left MEP contractors in an uncomfortable position. It is not uncommon for projects to take two years to be awarded after the tender is floated.
SEMCO has about “two or three” contracts it hopes to conclude shortly, however Pritmani accepts that it will need to secure more work in the second half of the year, especially as the majority of ongoing projects are scheduled to have concluded by then.
“We planned to go much higher this year than last year in terms of order book/turnover when we did our budget forecasts, but with the way the market has gone this year we have had to revise that down slightly,” he says.
Turnover for this year is forecast to hit around AED450 ($122.5m) – compared to the AED400m ($108.9m) in 2015. But Pritmani believes that the market will start to pick up in 2017 as projects related to Dubai Expo 2020 will have to get going if they are to be ready in time for the event.
“Dubai Expo 2020 needs to be completed in 2019. To use cricket terminology: now we are getting into the slog overs – we need to go much faster,” he says. “I’m very sanguine about the market.”
SEMCO is on the hunt for large-sized, fast-track projects similar to the AED384m ($104.5m) contract it is close to completing with fellow MEP contractor EFECO: the Advanced Military Maintenance, Repair and Overhaul Centre (AMMROC), in Al Ain.
“The key point is to find good and established main contractors we can work with,” Pritmani says, before adding that around a third of its ongoing work is for sister company Al Fara’a General Contracting.
Within SEMCO, a concerted effort has been made to improve staff recruitment and training procedures so that it is in better shape to win and deliver those bigger projects Pritmani so craves. An extra 900 workmen have been recruited in the last year alongside new engineers, technicians and senior management. There has also been what Pritmani describes as a “skills mapping” of the entire existing workforce.
“This approach has engendered a sense of appreciation within the workforce,” Pritmani says. “Those that are excelling are being rewarded and those that need more support are being supported.”