After Megha Engineering’s name figured in the list of electoral bond buyers, there was unbridled curiosity about its business, promoters and just about everything. Here are the details

Big Move: The Zoji-la tunnel that MEIL is building to connect Jammu & Kashmir with Ladakh

"Please come to Tower 3," says the helpful voice on the phone once the person realises we are lost at the foot of the six gleaming towers housing Megha Engineering & Infrastructures Ltd (MEIL) that stand out in Balanagar, a decrepit industrial zone in Hyderabad. In Tower 3, we are ushered into a large conference room with a table that can seat 17 (the boss’s chair at the head has the regulation white towel on its armrest) and two massive TV screens hooked up to Megha’s projects. Zoji-la tunnel, anyone? Or a Mongolia refinery in real-time?

With 4,000 people working out of this office, it is a beehive of activity. Venkatakrishna Reddy Puritipati, 53-better known as P.V. Krishna Reddy-walks in briskly. He is a lithe 5’8” or so and looks very fit. "I work out for at least an hour every morning. There is no stress in my life," says the MD of the closely-held company that has been in the news ever since it was revealed as the second-biggest buyer of electoral bonds (worth Rs 966 crore) between 2019 and 2023. A little over 60% of those bonds were encashed by the Bharatiya Janata Party (BJP), which is in power at the Centre, followed by the Telangana-based Bharat Rashtra Samithi (BRS) (See chart Political Bonds). According to a CRISIL report, the company is India's second-largest EPC player by revenue and the largest in irrigation and drinking water works. As an EPC or engineering, procurement, and construction company, MEIL also does projects in hydrocarbons, roads, power, buildings, railways, electric vehicles, and city gas distribution. 

"People would like to interpret our growth in many ways. In India, many companies have won large projects, and I am just one of them”

P.V. Krishna Reddy
Managing Director,
Megha Engineering & Infrastructures

Reddy’s white full-sleeved shirt with the MEIL logo on the breast pocket goes well with his black trousers and slip-ons. Nothing fancy, but that’s exactly what he wants to be seen as. He declines even to be photographed. The interview with BT is his first big media interaction, and if the electoral bonds issue had not come to light, one would have ignored Reddy and MEIL. Fiddling with a notepad and use-and-throw pen, Reddy does not look like the owner of a Rs 32,000-crore diversified business. “I am just a common man,” he says several times during the chat. 

That line might have worked in the past. Today is another story, though, as Reddy is suddenly in the limelight-after the electoral bond donations to both national and regional political parties-emerging as the entity that made the single-largest contribution to any one party, in this case the BJP. We grill him to get to the bottom of the MEIL story.

The entrance to the Zoji-la tunnel

MAKING IT BIG

Reddy does not hold any fancy degrees. A commerce graduate, he got into his uncle Pitchi Reddy Pamireddy’s business in the early 1990s and learnt on the job. Pamireddy launched his business of making pipes for local civic bodies in 1989. “We trained together,” says the nephew. A big break came in 2004 when the then Andhra Pradesh government led by Y.S. Rajasekhara Reddy unveiled the JalaYagnam project to irrigate the state’s neglected areas. Media reports then said MEIL got projects worth close to Rs 37,000 crore. It later won the high-profile Kaleshwaram and Polavaram projects. (Kaleshwaram is billed as the world’s largest lift-irrigation project, while Polavaram is an irrigation project that engineers have dreamt of since 1941.) The uncle is not visible in corporate circles but is known as the man whose house on Jubilee Hills is designed to look like a giant diamond.

MEIL has several big and high-tech projects in the works: the 14-km Zoji-la tunnel under the Zoji-la (Zoji-pass) at an altitude of 11,575 feet in Jammu & Kashmir, the 213-km Rishikesh-Karanprayag tunnel in Uttarakhand, a new port in Andhra Pradesh’s Machilipatnam, a super-speciality hospital in Hyderabad, 47 rigs for ONGC, and the railway station in Mumbai’s Bandra Kurla Complex for the Mumbai-Ahmedabad bullet train (in a joint venture with Ajit Gulabchand’s Hindustan Construction Company). 

For an organisation of this size, Reddy runs a tight ship. MEIL had a total debt of less than Rs 5,500 crore on a consolidated basis at the end of FY23 and a debt-equity ratio of 0.25. CRISIL’s report says MEIL’s order book was Rs 1.87 lakh crore at the end of the quarter ended September 30, 2023. Larsen & Toubro, the big boy in the EPC business, had an order book of Rs 4.7 lakh crore at the end of the quarter ended December 31, 2023, with its international business accounting for 39%. Reddy downplays his numbers and says dealing with many issues is to be expected if one is in the infrastructure business. “Be it laying a pipeline, transmission line, or discussions with farmers, this is certainly not a cakewalk. Constructing a project on an end-to-end basis is very difficult,” he tells us during our hour-and-a-half long conversation.

(The interview occurred before reports that the CBI had filed a case against MEIL for allegedly bribing officials of NISP, NMDC and MECON a total of Rs 78 lakh to clear MEIL’s bills of Rs 174 crore, relating to work done on a steel plant in Jagdalpur.)

A rival infrastructure player in Hyderabad says MEIL outsources large parts of its projects to sub-contractors. “That way, it reduces the working capital burden and focusses on technology. In the process, the debt component remains small,” he says. He adds that Reddy has friends across political parties and "keeps everyone happy”.

To be sure, Reddy is known for his political connections across parties. Given the disproportionate number of industrialists from Andhra Pradesh and Telangana involved in infrastructure, the levels of intrigue are understandable. Be it GVK, GMR, Lanco, or Navayuga Engineering Company (which was in the news when the Silkyara tunnel in Uttarakhand, which it was building, collapsed), the list is long, and more names keep getting added. 

When we ask him about his connections, Reddy pauses before answering. “Look at the Thane-Borivali tunnel project, Zoji-la or our work in refineries worldwide. Our bids have been very competitive, and much money has been saved,” he explains in a mix of English and Telugu. A big moment was when Minister of Road Transport & Highways Nitin Gadkari praised the company in March 2022 in Parliament for offering to do the Zoji-la tunnel at less than half the budgeted Rs 12,000 crore. Interestingly, the Rs 14,400-crore Thane-Borivali tunnel project was clinched by Megha a month after it made a contribution of Rs 140 crore by way of bonds in April 2023.

Reddy says MEIL’s books are transparent. “People would like to interpret our growth in many ways. In India, many companies have won large projects, and I am just one of them,” he emphasises, adding that all bids are also open to foreign companies. “In a world of e-procurement, one can bid from anywhere, and a process must be followed. I don’t like to get worked up about what people say.” Looking at his watch, he tells us in Telugu it’s time for lunch. “I am hungry, so let’s continue this conversation after that.”

MEIL is helping build HPCL’s Rajasthan Refinery in Barmer’s Pachpadra, which is located in the Thar desert

E FOR EXECUTION

The interest in technology shows up in the annual report of MEIL where each of the initiatives is outlined across two pages under the heading ‘Technology Absorption’. For example, Megha uses infrared technology in the Zoji-la tunnel to record all movements during construction. MEIL’s "cylinder bottom box" in its oil rigs, a global first, works on hydraulic force to elevate the mast. “MEIL is known for using cutting-edge technology in its projects,” it states. The report cites the shale shaker tank, “an intensive vibrating device used in oil and gas drilling rigs”, which sieves silt, granules, and cuttings from the mud of the drilling well using vibration.

It’s the last day of the Muslim holy month of Ramzan, and the cafeteria menu stars haleem, a staple at this time of the year in Hyderabad. There is also a typical Andhra meal of chicken curry, rice, pulses and vegetables. The workforce sitting in the cafeteria hardly looks up as their boss enters. Reddy leads us into a private room, plays the good host and casually converses with his top team. “I run a very democratic organisation, and I like people going about their work. No one looks at me when I walk in,” he says.

Reddy points out how (and why) MEIL acquired Drillmec. This Italian company makes rigs for the oil and natural gas industry, and its acquisition gave MEIL’s business an edge. His optimism on India’s technological prowess is clear, and he believes no country “can beat us on that, hard work, involvement and talent”.

He says his message to the team is: build your project the way you would build your home, with the same attention to quality and finishing. “I have the same commitment and lead by example.” A diffident Reddy is not comfortable taking questions on electoral bonds. “I became visible only because of the recent developments,” he says with half a smile. MEIL’s political contacts cut across parties-it also made electoral bond contributions to the DMK, YSR Congress Party, Telugu Desam Party and the Indian National Congress.

Dodging the subject of bonds, Reddy says his biggest skill is high-quality execution within timelines. “The Zoji-la project is 50% done, and we are very happy with the progress. You must look at our factories in India and worldwide to understand our execution skills and the employment we generate,” he says. He rolls off locations in Odisha, Kerala, J&K, Mexico, and Brazil, where projects are underway, the factories in Houston in the US, Milan in Italy, Zambia, Mongolia, Russia, Rwanda and the Middle East or a factory he once owned in Belarus. “We don’t work like a typical contractor. One must understand that water, refineries, thermal power, hydel, solar, transmission lines, roads, sewerage, drinking water, desalination, and irrigation are vastly different,” Reddy says.

The Thane-Borivali tunnel project (involving the construction of two road tunnels of 10.8 km each) was a significant win. Megha beat L&T’s bid. L&T went to court but lost. The road tunnel will cut travel time between Thane and Borivali from an hour today to 15 minutes. “It will be ready in less than four years. Even in Zoji-la, there were five or six bidders (L&T and Ircon were the prominent names), and MEIL won it,” he declares. He repeatedly stresses on MEIL’s professionalism and cites the Bandra Kurla Complex station project win as an example. “You will not win projects otherwise,” he says.

Thirsting for Growth: The Mahabubnagar Water Grid in Telangana that MEIL built

Getting the pricing right is MEIL’s strong point. And it claims to do so without cutting corners on technology or quality of work. (Clue: it is not crazy about fat margins.) Take the case of Mongolia, where it won a $648-million contract last September for a crude oil refinery. "We went through a regular bidding process, and ours was the lowest. It was 30-40% lower than the next bid," he says. Each part of the infrastructure business interests him, whether it is hydrocarbons, roads, or anything else on MEIL’s plate. "Our prices are always competitive, and we want to own them. With many global bids today, it becomes even more necessary to get it right on price.”

"We have the capabilities and zeal. Of course, we will take risks and will also fail sometimes," he says. In many ways, the chutzpah of the infrastructure player in this part of the world often comes to the fore during the chat.

So, when we mention how challenging the business can be at various levels, Reddy smiles and confidently says there is a solution for each problem. "Without a problem, there is no solution. At Megha, our success lies in finding a solution." Some food for thought.

TECHNOLOGY AND MORE TECHNOLOGY

In 2018, MEIL acquired a 50.01% stake in the listed Olectra Greentech, which makes electric buses. Reddy is clear about the strategic rationale. "There will be a huge requirement in India for green energy. When we bought into the company, it was a very small business," he says. Since then, the company’s revenue and share price have increased. “As a country, our oil and gas import is substantial, and converting that to electricity interests me. However, this is a long-gestation business, and one must be patient.”

Analysts tracking Olectra note that it has orders for 8,088 electric buses from state and central bodies. Olectra is also setting up a factory in Telangana’s Seetharampur (its first factory is in Hyderabad). Olectra gets traction from its joint venture with China’s BYD, the world’s largest electric vehicles company, in which Berkshire Hathaway, the holding company of billionaire investor Warren Buffett, has invested. "We have a lot of ideas and are keen to do battery storage. There is also a technical partnership with Reliance for a hydrogen bus project," he says.

Saji John, research analyst at Geojit BNP Paribas, says Olectra’s order book is healthy. “That gives the company revenue visibility, and revenues can double in FY25 if execution is good,” he explains. The challenges could largely be around the availability of semiconductors. “We have large players like Tata and CG Power getting into the space, but that will take three to four years. Until then, there will be a high dependence on China.”

BYD’s presence has given Olectra the confidence to expand its product line in e-mobility with electric tipper trucks and the hydrogen bus.

“We will experiment with many ideas, and of 10 businesses we enter, two or three may not work,” Reddy says. Take the case of aviation, where MEIL acquired a stake in TruJet, an airline that began operations in 2015. TruJet bet on connecting small towns. “It did not work out because of the pandemic, and we realised it was not our cup of tea,” he explains. In mid-2022, MEIL sold TruJet to WinAir. ”We do not have the expertise to run an airline, and there is no question of getting back to the business," says Reddy quite firmly.

As for the way forward, he says he has his hands full and thinks getting MEIL listed is possible. But please, no timeline. "We have 2,000 km of road projects, and under PM-KUSUM, we are doing 2 GW of projects," he says. PM-KUSUM helps farmers instal solar-powered pumps.

Just how long can he continue to do this? "I am not on social media and sleep very well for eight hours. I work six and a half days a week, and that tells you how much I love what I do." For the extremely low-profile Reddy, there is no lack of ambition. Now that he is in the news thanks to his electoral bond contributions, his moves will not go unnoticed. That is a certainty.