With Its Sustainable Business Model, Capacit’e Infraprojects Is Towering New Highs 


The management of the country’s leading construction firm discusses in depth about the company’s strategy and turnaround story.

Housing sales in India are rising despite interest rate hikes from central banks owing to the real estate market’s buoyancy, which has created a positive atmosphere in the sector. Mumbai witnessed the highest number of property registrations in August in ten years, and while the industry is expected to grow, it’s the sustainable business models that have brought it this far.

Capacit’e Infraprojects Ltd., India’s leading building contractor offering end-to-end services for institutional, commercial, and residential structures in places like MMR, Pune, Chennai and NCR, reported a strong set of numbers in Q1FY23 with a healthy orderbook. Following an account-driven approach, it has been able to secure repeat business from customers like Raymond’s. This has enabled the company to grow its wallet share and turn its individual clients into long-term revenue-generating partners.

It has been able to invest in technologies that accelerate construction, ensure timely execution, graduate to projects with higher margins, and shorten its receivables over the past fiscal year. The company is on track to reach its goal of being net debt-free by March 2024 thanks to the moderation of its debt, improved cash flow management, and increased collection efficiency.

After the lockdown and external uncertainties, it produced an outstanding turnaround narrative that exceeded analysts’ predictions for revenue and EBITDA. For Q1FY23, its revenues increased by 70.4% YoY to Rs4.8 billion (over the estimate of Rs4.0 billion), with an improvement in execution. EBITDA came in at Rs 989 million, with EBITDAM experiencing a growth of 666 bps to 20.7% above the estimate of 16.3% due to lower raw material and employee costs aided by stringent cost controls.

The strong absorption has been supported by pent-up demand, improved affordability, and some state incentives. The performance is also supported by a preference for larger and better homes with superior amenities, a result of flexible working models adopted by corporations, and by the strong income growth in the IT/ITES sector. MMR which accounts for almost 50% of India’s sales by value is home turf for the company with marquee client groups constituting over 75% of the total order book. Due to its experience in working on ambitious projects like Lodha Altamount, Piramal Mahalaxmi and Lodha Trump tower it has emerged as the preferred EPC contractor for luxury housing projects. Capacit’e is known for its proactive approach, it completed the construction of Tata Trust’s Pt. Madan Mohan Malaviya Cancer Hospital, Varanasi in record 10 months with the highest standards of quality and safety.

Commenting on the diversified order book of the company Mr. Rohit Katyal, Executive Director and CFO of Capacit’e Infraprojects Ltd. said, “We are optimistic about the prospects that the private sector will offer in the residential space, whether they pertain to super high-rise, high-rise, commercial, or retail. In terms of the public sector, we won the project for the development of a multi-specialty hospital under MCGM in this fiscal year and with our qualifications, we have a good opportunity across segments. Opportunities in the future will arise for capacity in the areas of healthcare, institutional, hospitality, retail, commercial, and residential, as well as in the redevelopment of railway stations and the modernization or expansion of airports.”

Working capital management and capital expenditure have been a key focus, by 1QFY24, the company hopes to reduce the net working capital cycle (excluding retention) from 91 days in 1QFY23 to 60 days. It has consciously refrained from undertaking any orders that require additional capex and opted for institutional buildings over super high rises in Q1FY23, prioritizing cash flows. Capacit’e expects its credit rating to be restored to ‘A’ category from BBB stable in H1FY23, which shall reduce the banks’ margin requirement by ~5% from the current 10-15%.

Increasing input costs on the back of higher commodity prices did not pose a worry for the company because the majority of its projects have complete pass-through mechanisms which ensure a minimum impact on margins. With the festive season fast approaching, the company appears to be towering new heights thanks to its robust order pipeline across sectors, anticipated settlement from Neelkamal realtors and SRA group’s Chembur project, and recognition of revenue from MHADA and CIDCO projects.

Remarking on residential real estate Mr. Rahul Katyal, MD and CEO of Capacit’e Infraprojects Ltd. said, “Almost every city has recorded a growth in new launches. Developers continue to launch in the mid and high segments and industry consolidation continues. The traction appears to be fairly robust after these improvements. We’ll not only benefit from these new developments but also keep working on our ongoing efforts towards client service, scale benefits and cost optimization.”

As competitors struggled to retain laborers, it capitalized on growing opportunities in Factory & Buildings (F&B) from the government, private corporations, quasi-government organizations, and real estate developers by leveraging its ecosystem, which maximizes existing assets and human resources.
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