Government is mulling the merger of about half a dozen state-owned consultancy firms like Engineering Projects (India) Ltd with Engineers India Ltd (EIL) to create a mega consultancy firm that can take on the might of global giants like Bechtel. Shares of EIL rallied 6% on the back of this news.
There are close to a dozen PSUs that provide range of consultancy services - from education to EPC -- and there is a scope of merging some of them to create a company of global standards, a senior government official said.
“Finance Minister Arun Jaitley in his Budget for 2017-18 has spoken about mergers and consolidation in the public sector. We feel there should be one mega consultancy company providing services across portfolios,” the official said.
While EIL is the biggest state-controlled consultancy firm providing engineering consultancy and EPC services principally focused on the oil and gas and petrochemical industries, Engineering Projects (India) Ltd also provides turnkey execution of projects in the infrastructure space.
Then there is MECON Ltd that provides technical consultancy and project implementation in infrastructure and services sector.
In the telecom space, there is Telecommunications Consultants (India Ltd) whereas WAPCOS provides consultancy and engineering, procurement and construction (EPC) for water, power and infrastructure projects.
“There is a case for merging the array of consultancy companies into Engineers India Ltd to create a mega company that will provide consultancy across the spectrum of projects,” the official told PTI.
The new company, as and when it emerges, can take up projects across sectors and compete with the likes of Bechtel of the US and domestic majors like Larsen & Toubro (L&T).
“We see opportunities to strengthen our Central Public Sector Enterprises (CPSEs) through consolidation, mergers and acquisitions. By these methods, the CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders,” Jaitley had said in his Budget speech on February 1.
The official said that a merged entity would have opportunities to save on costs and improve operational efficiency. It can also diversify into sectors not touched so far.
The merger could reduce inefficiencies across the sector. It would also create an entity that is better placed to compete globally, he said adding such a consolidation would give the new entity much stronger bargaining power for projects.
Shares of EIL were trading 0.37 per cent down at Rs 150.05 on BSE.