The Financial Express 24.12.2009
‘Demand for housing is very high, but buying sentiment has taken a hit’
Kavitha Venkatraman: Ramky Group, a specialist multidisciplinary organisation with emphasis on civil, environmental and waste-management infrastructure, focuses primarily on public-private partnership projects. Ramky Group has, over the years, expanded its scope of business and now works on infrastructure projects either as a consultant, contractor or a developer. The Rs-2,400 crore group is looking at new opportunities in water, waste-water and projects as a developer and is also keen to participate in the railways and tunneling business as a contractor. In an exclusive interview to FE’s Kavitha Venkatraman, M Goutham Reddy, executive director, Ramky Group, talks about the company’s plans for an IPO and the future growth strategy. Excerpts:
The Ramky Group has been recognised as a well-diversified infrastructure company. How do you plan to develop new lines of business?
Ramky Group is a civil, environmental and waste-management infrastructure group. Under civil infrastructure, we deal with roads, buildings, irrigation projects, industrial construction and industrial estate projects, while in environmental infrastructure we handle projects like water-treatment plants, waste-water treatment plants, sewage treatment and underground drainage. The flagship company of the group is Ramky Infrastructure Ltd, which handles a substantial part of civil and environmental infrastructure, both as a contractor and as a developer.
As a contractor, our focus has been on water and waste water, roads, buildings, irrigation projects, industrial construction, power transmission lines, while as a developer, we focus on industrial parks, roads, property development and transport terminals. In the future, we want to enter the power, water and waste-water sectors as a developer since this sector is opening up. It is the government which still owns the projects. As and when a PPP model is promoted, we would try and cash in on the opportunity. Our order book in the contracting division is about Rs 8,500 crore and as a developer, we are doing 11 projects, including three road assets, four industrial parks, one transport terminal and three real estate projects.
The group also aims to foray into the railways sector and tunneling business as a contractor. Besides, it is also planning to take up the EPC of power plants and ports.
What is the position of the company’s funds and what is the estimated financial requirement for the next fiscal?
We are a well-balanced company and so far, we have had only Rs 125 crore of PE investment with 14%-15% dilution of stake. Our debt is between Rs 400 crore and Rs 500 crore.The group has been able to achieve all this with low working capital. We will continue with such execution capabilities. However, the company is also planning to come out with an IPO within the next 5-6 months. Our immediate requirement, in terms of equity, over the next 18 months will be about Rs 300 crore. The size of the issue is not yet finalised and we believe that visibility for us through listing is more important at this point of time.
What is the status of the planned integrated township project in Hyderabad?
We have already launched a couple of projects in Hyderabad, like Ramky Towers, Ramky Enclave and Ramky Pearl, but as far as the integrated township is concerned, we are contemplating to launch it in June-July 2010. It is a 600-acre project with 14 million square feet of built-up area, and will include residential, commercial, institutional, education, entertainment and healthcare plots. It will have around 5,000 residential units. It is a complete integrated township project, developed in a phased-out manner over a period of 10 years. The estimated cost of execution of the project is Rs 7,000 crore. Of this, about Rs 600 crore will be the capital and the balance will be secured through internal accruals. Of the Rs 600 crore, 70% would be the equity component, while the balance will be debt. The company has already completed the equity closure but the debt part is yet to be tied up. We will finalise the debt as we get closer to the launch. The company is looking at project revenue of Rs 12,000 crore from this integrated project. If the market sentiments improve, we will launch the project by June-July 2010, if not, we might defer the project for some time.
The demand for housing is definitely very high but buying sentiment has taken a hit. Therefore, I think the developers, instead of following the ‘build and sell’ model, should look at implementing the build and lease’ model. This will require a different structure of funding and financing but it can be worked out. Developers need to have a long-term view on real estate while choosing their business model. Ramky might also think of adopting the ‘build and lease’ model for the township project. We will analyse the situation over the coming months and take a pragmatic view on changing the model and chart out a method for financing the project.
