Breaking into the big league

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August 2008
A consistent ability to win big contracts has helped Hasan Juma Backer Trading and Contracting to emerge as a major player in the infrastructure space, writes Mayank Singh
The year 1996 was a watershed year for Hasan Juma Backer Trading and Contracting (HJB)Hasan Juma Backer Trading and Contracting (HJB) - the company had won a RO3.3mn project to carry out infrastructure work (roads, electricity and landscaping) in Sohar Industrial Area's phase two. The contract was a quantum leap for a company, which was seen as a building contractor executing projects in the one million rial range. Says Krishnakumar Taori, Group Managing Director, HJBHJB, "It was a question of doing things on a bigger scale.

We had a team which had experience but lacked the culture and coordination of doing things on a larger scale. Things improved with time and by the time we finished the job, the client was happy." The fact that the company won and executed the project against stiff competition from bigger players gave it the confidence to train its sights on bigger projects.

Higher ground
There has been no looking back for HJBHJB as the company has gone onto execute a number of mega projects. For example in 2002 it won a tender for the expansion of Sur Industrial Estate. This was followed by a RO2-3mn contract for expansion work in Raysut Industrial Estate's phase II and phase III. In 2005 it won a RO20mn water works contract - the project was one of the biggest projects till date in the Sultanate and marked a milestone for HJBHJB. The project entailed linking 20 water locations, tanker filing stations, instrumentation etc. "Despite having to deal with challenges like increasing commodity prices, rising salaries, we had the determination to do well," says Taori.

The experience acquired on the project came handy in 2006 when HJBHJB got an RO66.2mn contract from the ministry of housing, electricity and water to supply potable water in the Batinah region. Billed as one of the largest water supply contracts to be awarded, the project entailed carrying water from the Barka desalination plant and supplying it to the five wilayats of - Rustaq, Al Awabi, Musandam, Nakhal, Wadi Al Maawil and Musannah. It also required HJBHJB to set up 45 metre tall pumping stations, 400 kms of water pipelines and transporting water to 21 villages.

The latest achievement for the company has been a RO9.7mn contract to develop the infrastructure for a significantly expanded Sohar Industrial Estate (SIE). As part of the contract HJBHJB will develop a network of roads delineating plots earmarked for industries within the expanded park. In addition, it will also put in place the requisite utilities like gas supply links, potable water and sewage lines, power supply and telecom cables, various electro-mechanical services and street lighting. The contract will enable the Public Establishment for Industrial Estates (PEIE) which manages SIE as well as seven other industrial and technology parks around the country, to create a dedicated aluminium and plastics cluster in Sohar.

DNA decoded
A litany of projects has helped HJBHJB achieve a CAGR (compounded annual growth rate) of 30 per cent over the last ten years. The company boasts of a RO125mn order book till date. Taori can take a large part of the credit for the growth of the company. In 1989 the year when he joined its ranks, HJBHJB's turnover was one million rials. Not only have revenues grown by leaps and bounds but so has its staff strength which has jumped from 90 in 1989 to 3000 in 2008.

Having made a name for itself in the Sultanate the company has in the last five years ventured into the Qatar market. Says Taori, "We are doing pipelines, reservoirs and water works in Qatar and see a lot of potential in that market." The company has a 400 man operation in Qatar and expects to beef up these numbers as it grows. The company is open to the idea of moving into other countries in the region as and when the right opportunity presents itself.

HJBHJB counts good engineering practices, team effort and the determination to do something better as its strengths. A major reason why the company has been able to finish such projects with effortless ease is because it has developed in-house competencies like an engineering team and electro mechanical skills.

A hands-on manager Taori is himself involved closely with the company's planning and execution process. A civil engineer and a post graduate in environmental engineering by education he remains partial to the stream. Taori has introduced brainstorming sessions in the company where the latest technology and processes get discussed. These sessions also come in handy in dealing with bottlenecks and challenges. And the company has had its fair share of them in the last couple of years. The increase in the price of commodities like steel, copper, aluminium has impacted the company's bottomline. For example the price of steel has escalated from US$450 per tonne to US$1800 per tonne in the last two years - a 400 per cent increase. "This unprecedented price rise has put pressure on our financials as most of our contracts have no escalation clause," says Taori.

The bad news does not end there - the non-availability of crucial raw materials has snowballed into a bigger concern for HJBHJB. There is a short supply of products like pipes in the global market. The company has been looking at alternative avenues to source these products. For instance HJBHJB has had to look at new suppliers for ductaline pipes (used in waterworks) from countries like Saudi Arabia, Egypt and India. Most companies are also being forced to import Chinese cranes as their supply from Japan and Europe are in short supply.

Taking charge
The company is also investing in in-house capacities to ensure supply. Thus it has set up its own asphalt plant in Rusayl and Buraimi. HJBHJB has also put up six concrete batching plants in different parts of the Sultanate bringing down its dependence on outside sources. Escalating manpower costs is another problem confronting the industry. Better salaries and opportunities in the Indian subcontinent is putting a strain on HJBHJB's manpower resources. The increase in infrastructure work within the GCC region has made matters worse. HJBHJB has been forced to give three raises to its artisans in 2007 instead of the usual one.

The industry remains an intensively competitive one with both local and international players, but HJBHJB's local knowledge and impeccable track record is something that will remain unbeatable.

© Oman Economic Review 2008