Building on a diversified strategy
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
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
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
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.
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
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