Sometimes low-oil prices, brutal competition, and tough economic challenges prove beneficial to small-to-medium-sized enterprises. And Dubai-based MEP contracting company Emitech has been reaping the benefits of such challenging times.
Rahul Duragkar, managing director, Emitech, explains: “A lot of big players are not very active in the market either because of their internal issues or because they were handling big jobs, and there are not many big projects in the market; for instance, there are no huge projects of the size of Burj Khalifa, which is in the range of AED1bn plus. There are good projects in the range of AED100m to AED300m, and this leaves a lot of opportunities for companies like us to grow and make an impact in the market.
“Also, these top five or six companies are being restructured or re-organized, and there is always a demand for good companies like us. When there are fewer top-level companies available, naturally the clients and the main contractors will look for other capable companies to offer projects. It all depends on how we adjust with our resources and how we can accommodate and manage such opportunities.”
Emitech is a company serving four verticals, the major one being MEP. “Apart from MEP,” Duragkar says, “we have a standalone department that focuses on HVAC projects either directly with the clients or with the MEP contractors. The third vertical is solar-heating systems, and the fourth is facilities management.”
Some of Emitech’s current projects include the Dreamz Project for Danube, which is in the final stages of handover. Talking about the project, Duragkar says: “It has got 171 townhouses and our scope is to complete the entire electromechanical activities; we are working under the main contractor United Engineering Construction (UNEC). This whole project is divided into three zones. Zone-1 and zone-2 are now ready for handover, and zone-3 is in the final stages, where we are involved the MEP works.
“Then, we completed two projects for Bhatia General Contracting Company (BGCC) – one is a residential building in Dubai Investment Park, and the other is a residential building in Al Karama. We are working on another project in Jumeirah Golf Estate with BGCC. Apart from this, we havee projects for pharmaceutical industries in Jebel Ali Free Zone for example Wockhardt. Wockhardt is a pharmaceutical organisation and they have factories all over the world. This is its first venture in the Middle East. It is more or less like a design–build project,” Duragkar remarks.
When asked about how the year 2016 was for Emitech in terms of projects, Duragkar says: “In 2016, we completed a project for Shapoorji Pallonji at Dubai Investment Park (DIP), and for Geltec Pharmacare, with complete DEWA, Civil Defence and Trakhees approvals. We are also providing our ongoing support to Geltec.”
2016 in hindsight
Despite the glut of projects in 2016, Duragkar admits that it was a tough year. He says: “The beginning of last year was very promising and we were expecting good growth, but then, the second half of the year was not so good. Projects were there but they were at very tight margins, and so we had to turn down a lot of projects. We also lost a lot of projects because of competition.
“However, we had a good backlog of projects in hand, and that kept us busy throughout 2016. Early 2017, we picked up three to four good projects. We have kept a target of booking orders of AED200m, and we are expecting revenue of around AED150m in 2017. We tried to channel our resources in such a way that we maximised our booking orders in the first quarter.”
Competition is one of the challenges facing the MEP sector, according to Duragkar. He adds: “In terms of the residential sector, most of the developers are focusing on affordable housing, which is again lowering the ‘per square feet’ prices and eventually the pressure is on the contractors. But in terms of construction or MEP, there is very little we can do on reducing the prices.
“We cannot reduce the quality of the work or the quality of services that we are offering. We are focusing more on industrial projects or where there is a design–build kind of approach needed; there are a lot of warehousing projects coming through where there is demand for MEP. Those are the areas where we can expect good margins.”
Another challenge, Duragkar says, is that customer expectations are becoming more unrealistic and that the deadlines are too stringent. Lastly, he says that getting the financial support from different banks is a big obstacle, which can be resolved with VAT.
When asked whether the introduction of VAT will add to the list of problems to MEP firms, Duragkar surprisingly answers otherwise. He elaborates: “VAT will bring in a lot of transparency in place because in a tax-free era, people tend to put in random figures. With VAT, everybody will be liable to report their financial in a more tangible manner, because there will be more focus and more onus on the auditors and the financial managers to report the correct figures. It will bring a lot of corrections to the market and I hope the banking sector will be happy with that. So it is a good thing. It should bring some kind of a positive impact for companies like us who are growing, and we want to get support from financial institutions.”
Despite such obstacles, there are a lot of demand drivers for the MEP sector. Duragkar gives his analysis: “The first half of 2017 looks good and promising. In 2016, people were thinking more about oil prices, US elections, and other external factors. In the first three months of 2017, there was a lot of positivity in the market and a lot of projects were getting finalised. We see movement which is not directly linked to the EXPO2020; people are gearing up to develop the infrastructure because they know the next few years will be too crazy. People are preparing ahead of time.”
Amidst all this Duragkar is proud to say that the company recently won the Asia Pacific Entrepreneurship Award for the construction segment. He is also proud that in 2015, Emitech was named as one of the top 100 best-performing small to medium-sized enterprises (SMEs) in Dubai. But for the future, careful calculations with a positive outlook will drive Emitech forward and upwards, Duragkar insists.