How RITES is mapping the value of diversification

“With our in-house IT as well as outsourced development we are able to monitor the direct cost booking, the overheads allocation and the profitability of each project at anytime,” says Rajeev Mehrotra, Chairman & Managing Director, RITES Ltd. In a conversation with Ankush Kumar, he talks about how the company has diversified its business over the years to sustain its competitive edge

Edited Excerpts:

Tell us about the company’s business and how it has evolved over the years?

Rites is basically a consulting company with almost 70-80 percent business coming from the consultancy domain that we initially started for railways and then moved on to highways, airports, seaports, etc. Put together, you will find that there is a stable growth because if one sector falls, the other covers up for the deficit. In the last five years, we have grown almost 13 percent in our core area but growing forward, there is good competition coming from consultants outside India as well as Indian consultancy groups. I see lots of growth in railways investments. We have a very good order book now and as the investment continues to peak, I see good growth prospects for RITES in the next 5-7 years. Another area that has picked up very well in last one year is Airports and we have a clear dominance in the country now in terms of consulting experience. We are present in about ten large cities in the country and it’s a large organization as we have about 3200 people, of which about 2300 are engineers (technical experts). So it is really an important challenge to see that where they are deployed and what projects they are doing.

How crucial is the role of IT for your business?

We have a very good IT based support system for decision making or I would say performance management. We typically have around 800 projects of various sizes going on currently. With our in-house IT as well as outsourced development, we are able to monitor the direct cost booking, the overhead allocation and the profitability of each project anytime. We also have to allocate the manpower as well as the overheads to these projects and based on this database, we have an excellent system of management by exception.

What kind of ERP has been adopted by the company?

About ten years back we were in the range of 600 crores turnover. Today, we have almost doubled this in the last nine years. The challenge now is to keep up with the systems that give confidence to the management. Our subsystems and systems are in place to take care of the financial and other commitments. So there is a lot of focus on those procedures, systems that are adopted in the ERP system that we have introduced in the last three-four years. Earlier we used to work on a homegrown system, now we have gone for ERP from SAP. Most of the business components have been already covered in this. By the mid-of next year, we should hopefully integrate all the business units on ERP. We are now looking at data analytics.

How is the company using the online medium for solving its various business problems?

We are trying to increase the interaction with our clients through our online portals as through our inspection portal, a client can put in his request and monitor his inspection call. A major initiative that I would like to share is that we have most of the employee services online. Leave application to performance management, performance related papers; provident fund etc is now through ePortal. We call it employee self service and this is accessible through the Internet. Another major initiative is on eTendering side. Our tenders are of various sizes including services, works and small procurement. Therefore the company doesn’t need raw material very frequently. PMC (Project Management Consultancy) is one of the key areas for Rites. We have a team of people who can conceptualize a project, who can do a detail feasibility design of the project, who can do tendering and then who can also do monitoring of the project. This company was started with only 10 lakh rupees paid-up capital. From 10 lakh to 150 crores, we have grown exponentially. The government has never contributed further cash. The initial 10 lakhs has a networth of 1800 crore rupees today. Our numbers look small because we book only fee income and the total project handled.