Dilip Buildcon: The Fundamentals Behind Its Consistent Revenue Explosion | Best B-school in Bangalore

Posted by Dr. Rajasulochana On 14/03/2022 12:36:13

An Analysis of Dilip Buildcon’s Continual Growth

The Backstory- Dilip Buildcon (publicly traded on the NSE as DB since 2016) is one of India’s most extensive private infrastructure development and construction companies as of this year. Based in Bhopal, Madhya Pradesh, its conception was in the year 1987 by Mr. Dilip Suryavanshi. Primarily a proprietorship concern (1988-89), Dilip Buildcon is now a Class A-V Firm, registered with Public Works Department Bhopal and the Water Resource Department, Madhya Pradesh, and was also incorporated in 2006 under the Companies Act, 1956, as Dilip Buildcon Private Limited (later registered as a Public limited company in August of 2010). Best MBA college in Bangalore

The company was not always first-rate like it is now. After experimenting with small ongoings such as residential projects, petrol pumps, and specific government contracts, the company decided to turn to better endeavors in the 2000s. They resorted to building and restoring roads in Madhya Pradesh, which was not necessarily an easy, straightforward task. The authoritative figure responsible for constructing roads is NHAI (National Highways Authority of India), which is popularly known to delegate this process to private contractors. 

How does this model work?

The basic process here is that private contractors are to construct roads, operate them, break even + profit by collecting toll and hand over said road back to NHAI after a period of 10-15 years. This is the Build-Operate-Transfer (BOT) model. That being said, it is to be taken into consideration that most private contractors do not want to bid for projects following the BOT model. The significant reasoning behind this notion is that the contractor would potentially have to wait for 15 years to reach the break-even point, including the costs of maintaining and operating the road during the said period.

After this would be the EPC model (Engineering, Procurement & Construction), wherein the NHAI would be the private contractors first. Here, the contractors will neither have to operate the road nor collect toll. They can complete the construction project and move on with profits. AICTE Approved MBB college in Bangalore

Lastly, we have the Hybrid Annuity Model or HAM. As the name suggests, it is a mixture of EPC and BOT, i.e., NHAI pays a fraction of the money (upfront), and the private contractor puts in the remainder required capital.

Subcontracting: The Life-Saving Alternative

Dilip Buildcon continued with the infrastructure space as a subcontractor (and not a private contractor).  As road construction took off this century, more and more private contractors were asked to undertake projects with the BOT model.  Most of them had to borrow capital, build roads and then collect tolls for years before breaking even. After the 2008 financial crisis, this model was deemed counter-lucrative, and it led to enormous debts. Although, subcontractors (like Dilip Buildcon) did not have to go through such a problem as they were getting paid a fixed fee and did not have to collect tolls.

The Step-Up

The company decided to become a full-on contractor by bidding on government projects. This happened when the government wanted to rapidly increase highway construction rates, thus introducing the EPC model, making it a lucrative and debt-reducing process for private contractors. This idea was put forth in action, and in about 3-4 years, India went from 10 kilometers a day to 27 kilometers per day of building roads. This is where Dilip Buildcon went on to thrive; from only Rs. 230 Cr in FY10 to a mind-boggling Rs. 9700 Cr in FY 20, the revenues exploded.

Is everything sunshine and rainbows?

Dilip Buildcon announced that it completed 95% of its projects on time. Acquiring government projects is not a simple task here, as a company has to match its promises with fast action. There is most definitely a certain amount of chance and influence taking part here. Dilip Buildcon can complete most of its projects on time because it does all of these projects on its own, as opposed to hiring subcontractors. All employees (38,500+ of them) and assets (including construction equipment) are their own. Managing these particulars can be a hassle at times and comes expensivePGDM course in Bangalore

They have been investing lots of money along with the government in anticipation of future profits; thus, following the HAM model. These may or may not be worth the risk, as they have been burdened with boatloads of debt to get to where they are now. Debts reached a whopping Rs. 9000 Cr in FY20, from just Rs. 100 Cr in FY10. There exists a direct proportion concerning the increase in debt and its interest. The higher the debt, the higher the interest expense, which further consumes the profit margins. 


Road construction proves to be complicated. However, Dilip Buildcon continues to stay afloat and soar. They keep getting orders and have an estimated Rs. 26,000 Cr worth of orders (as of Q3FY21) in their pouch. Successful execution of these projects on time would mean more attraction from investors.

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