The Financial Express


Monday, Aug 20, 2001 

Unitech: Building on a diversified strategy

Sangeeta Singh

Ramesh Chandra, MD, Unitech Group

It’s a unified strategy of diversification. That seems to be how, Mr. Ramesh Chandra (60), managing director, New Delhi-based Unitech group has established the Rs 425 crore group in the last 27 years. Although, it was built on the initial foundation of construction and real estate activities, today, the group has diversified from it’s original moorings to a host of other areas including entertainment, hospitality, education and setting of transmission lines. The group does not seem to stop at that. In the next few years, Mr. Chandra has lined up further plans to look at other promising areas too.

The New Gameplan
Unitech has a number of new projects lined up. For example, it is getting into the entertainment segment in a big way, besides, expanding in its existing businesses. “ We see the new businesses contributing 60 per cent to the group turnover in the coming four years,” says Mr Chandra. Consider the plans:

Urban Entertainment Centre: Unitech has got a blue print ready for an entertainment centre comprising a three star hotel, shopping malls, amusement joints, food plazas etc. “We are beginning to work on this project and expect to earn good dividends. But since it requires large investments we plan to go about it in a phased manner,” says Mr Chandra. The estimated cost of about Rs 450 crore will come mainly from internal accruals and pre sale of sites. The projects would be spread over Gurgaon in Haryana, Noida in Uttar Pradesh and Bangalore.

Express Highway: Unitech also plans to bid for the proposed eight lane Express Highway on NH (national Highway) 8. “Since we have done highway projects earlier and have the expertise we are planning to bid for it.” The estimated cost to the kitty: Rs 400 crore.

Franchising plans for New Delhi’s Radisson Hotel: Mr Chandra says that a number of investors from across the country have been keen on having frachisee arrangements with Radisson International, to set up various hotels in the country. “Radisson was not sure that all these hotels can maintain the same standard and for this Unitech got into a 74:26 joint venture with Radisson to form RHW Hotel Management Service. RHW will examine the proposal of franchisees for the hotels at 17 different locations (to begin with) that have been identified for building hotels.

New activities at International Institute of Management and Technology (IIMT): Seeing the potential in educational and technical institutes Unitech got into the area of education through its outfit IIMT. For this, the company forged a joint venture with Carlson Hospitality Worldwide and Radisson Edwardian of UK. It has also tied-up with Oxford Brookes University for accredition.
The Institute plans to have new courses in hospitality tourism, management, real estate management and information technology. “We hope to churn out a resource pool of talent which can used for our various activities as well,” says Mr Chandra. With an initial cost of Rs 10 crore, the total project is expected to gross Rs 28 crore in five years.

The Logic of Diversification
Mr Chandra’s strategy is clear. “As we realise that we have made a mark in a particular business and are confident about sustaining it, we move on,” he says. He and his initial founding team of three colleagues started as consultants in soil mechanics and foundation engineering in 1972. “We outgrew that business and refused to be tied down to its limited scope,” says Mr Chandra. Their next logical step was civil engineering contracts. That is how Unitech grew into various activities from 1974.

Mr Chandra as well as Mr. R.K. Kapoor, wholetime director, and Mr. S.P. Srivastava, director, have engineering background and were colleagues at Roorkee. The third director, Dr G.R. Bahri who passed away was also an engineer.

Unitech group’s clientele included Sriharikota rocket launch station, Tuticorin thermal power station and Hindustan Paper Corporation. The group then diversified into real estate and housing development and its projects are spread over the National Capital Region, Mumbai, Lucknow and Bangalore. But its geographic focus still lies is in Delhi. “We are more conversant with the local laws, business climate and labour situation in and around Delhi and we feel more confident here. He has no plans of having an all India presence.

Extension into related businesses: Mr Chandra feels that the company’s foray into transmission and prefabricated structure and ready mix concrete business are a spin-off of its construction business which it started in the mid-1990s. And the route taken for both is joint venture. While ready mix contributed Rs 38 crore transmission lines contributed Rs 40 crore in the fiscal 2000-01.

Real estate related activities: Unitech has made a strategic move by having a mix of office, residential complexes and starred hotels. Its timely completion of its office complexes and their location close to the national highway have earned it substantial premium. Its hotel foray with the setting up of Radisson Hotel in Delhi, franchised by the international hospitality major Radisson, got Unitech a well-known international brand in it’s group portfolio. “ The occupancy level was as high as 73 per cent during 2000-01 against 69 per cent of the previous year which helped the hotel earn a net profit of Rs 12.5 per cent,” says Mr Chandra.

Competitive pressures
Provisioning for continued downturn: Today, the diversified business contribute 40 per cent to the group’s total turnover. Besides, Mr Chandra is depending on these businesses to be the key drivers in future. “We are looking at a growth of 15 to 20 per cent each year which will be propelled by these businesses,” says he. However, he is cautious that the group does not lose its focus. “We are getting into areas having synergies with our existing businesses,” says Mr Chandra. He says that the group’s existing infrastructure is what goes into transmission lines, ready mix concrete, hotels and the entertainment business.

Existing businesses: Mr. Chandra says that the group has about 10 per cent of the ready mix concrete marketshare and has to compete with the industry biggies like ACC and Larsen & Toubro. It is also difficult to sell the concept vis-a-vis traditional concrete even though ready mix is only 7-8 dearer. Mr Chandra accepts that this business is facing problem but hopes to get over the problem as the concept is fast catching up. “Though only 15 per cent of the construction industry is currently using this concrete the business is growing at 35 per cent, “ says he.

Besides, the transmission line business got no special revenues for the company even though it is a extension of its construction activities (major part of it involves construction and execution at site). “But we have no plans to exit either of the two businesses,” emphasises Mr Chandra. The company also has other small businesses in areas like infosolutions investments, metals and a country club.

Today Unitech has around 1,000 acres of land to erect structures on out of which 350-400 acres are uncommitted. Mr Chandra seems to be undeterred by the the highs and lows in the real estate business while he is hopeful about his new ventures. His back ground suggests he is a fighter. “When I came after completing my studies in England in 1965 the job scene was very bad because of the Indo-Pak war.
Clearly, Mr. Chandra has a come long way from the days when he was a pool officer in Council for Scientific and Industrial Research (CSIR), Roorkee. Today, Mr Chandra is aiming bigger. He is moving from his traditional strengths to other areas that will require other skills. Unitech will also have the challenge of raising mega funds to finance its ambitious plans. There is no doubt that the next few years are going to test his mettle.

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