x Abu Dhabi, UAEMonday 24 July 2017

Dubai’s DSI wants a slice of India’s big spending programme

The move comes as the company won a $16 million contract to provide mechanical, electrical and plumbing works on four towers in the New Cuffe Parade project in Mumbai.

Khaldoun Tabari, the CEO of Drake and Scull. Ravindranath K / The National
Khaldoun Tabari, the CEO of Drake and Scull. Ravindranath K / The National

Dubai’s Drake and Scull International is hoping to tap contracts emerging from India’s planned US$154 billion spending on infrastructure projects.

The move by DSI comes as the Dubai-listed company won a $16 million contract to provide mechanical, electrical and plumbing (MEP) works on four towers in the New Cuffe Parade project in Mumbai.

DSI already has an order backlog worth $67m in India for MEP works on a coal power project and World Crest, one of the tallest towers in the country.

It recently also delivered a $25m thermal project in Odisha, formerly known as Orissa, and a solar power project in Tamil Nadu.

“The new contract further strengthens our market position as we consolidate our stronghold in the subcontinent,” said DSI’s chief executive Khaldoun Tabari in a statement posted on the Dubai bourse on Sunday.

“We expect to secure more project wins from India next year and hope it becomes one of our major markets in the near future.”

India, which is estimated to overtake Japan to become the world’s third largest economy by 2028, has introduced a raft of investment opportunities in infrastructure through public private partnerships amid an aggressive bid to lure foreign capital as the US Federal Reserve seeks to limit a programme that has supported capital flows to emerging markets, such as India. The rupee, India’s currency, went into free fall this summer, losing as much as 20 per cent against the US dollar before it recovered.

“India is a phenomenal market, but since June its being hit quite hard by the FDI [foreign direct investment] equation where they have had to adjust to the new environment with the US quantitive easing programme being tapered,” said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi. “The rupee has weakened, the central bank has started a drive for foreign direct investment. For DSI, will they benefit? Definitely. It’s a market that will continue to grow on the infrastructure side.”

Shares of DSI, listed on the Dubai Financial Market, have risen 96 per cent this year, trading at Dh1.38, compared with a rise of 103.1 per cent for Dubai’s index.

The main catalyst for DSI has been the recovery of Dubai’s property sector, as investors expect the company to charge for work on new projects.

DSI “has been swept up with the rest of Dubai,” Mr Khokhar said. “Dubai’s real-estate sector should perform well, that was the starting point. It had some good wins and its backlog is pretty good too.”

Third-quarter profit jumped almost sixfold to Dh23.8m from a year ago as the Dubai contractor targeted oil and gas as well as MEP projects, which have higher margins than other civil engineering projects.

The company’s order backlog rose to Dh12.4bn in the third quarter, from Dh7.5bn in the year earlier period. Income from contracts on a quarterly basis jumped 60 per cent to Dh995m, while costs fell to 6.6 per cent of sales in the first nine months of the year from 10.5 per cent a year earlier.

halsayegh@thenational.ae