Mahindra Industrial Park: changing with the times

18 Dec 2000

1
It will be different," is the punch line of Mr. Rohit Modi, managing director and chief executive, of the Chennai-based Mahindra Industrial Park Ltd.

But the former IAS officer doesn't stop with that and continues to detail the 1,420-acre industrial park's history, present status and the facilities it would offer.

Conceived to house mainly auto ancillaries, the country's first private sector industrial park initiative has come a long way. With major car manufacturers, Hyundai Motors, Ford India (earlier Mahindra Ford) and Hindustan Motors' Lancer car project, beating their way to Chennai to make it the Detroit of India the project was to be the first of its kind in the country. However, in the process, the company has had to spend precious time to get around 300 different approvals from various government departments.

Meanwhile the fortunes of the automobile industry in India, and more particularly the passenger car segment, witnessed a downturn. The new car manufacturers located in Chennai have to pick up sufficient volumes to attract auto component manufacturers to set up a production base here. The ones who came here are mainly vendors of Hyundai Motors who have located their facilities near the Hyundai car plant.

This unforeseen development naturally had its impact on Mahindra Industrial Park's plans as it has to focus on other industries. The company has hired Andersen Consulting (to be renamed Accenture from 1 January 2001) to study the market situation and suggest target industries.

"We hope to attract computer hardware manufacturers, call centres, back office operators, electrical, electronics, high tech engineering, bio technology and other non polluting industries," says Mr. Modi.

Incidentally it is not only its business plan that has undergone a change, even its equity holding pattern has been altered recently.

Originally the two major promoters, the Mahindra group and Infrastructure Leasing and Financial Services Ltd (IL&FS), planned to hold 40 and 30 per cent respectively in the Rs. 20 crore equity based Mahindra Industrial Park and Tamil Nadu Industrial Development Corporation Ltd (Tidco) chipping in 11 per cent. The balance 19 per cent was reserved in favour of a strategic investor or an operation and maintenance (O&M) operator.

As the Park is yet to finalise the O&M operator, it has now been decided that the Mahindra Group and IL&FS would contribute the remaining 19 per cent and later dilute their holding. As a result, the revised equity holding pattern of the two promoters will be the Mahindra group 50 per cent and IL&FS 39 per cent.

According to Mr. Modi, the company is already on the look out for a good O&M operator and talks are on with JTC International Pte Ltd, Singapore for this purpose.

The Rs 220 crore two-phase project has a debt component of Rs 200 crore. For the first phase, the Park has already drawn down on Rs. 120 crore of debt, contributed by State Bank of India and Union Bank of India (Rs 30 crore each) and Rs. 60 crore from the promoters. The balance Rs 80 crore will be drawn down for the second phase.

According to Mr. Modi the project is expected to break even in three years time once phase one goes on stream.

Speaking about the project status he remarks that the major part of the earthwork relating to phase I (820 acres-saleable area 574 acres) having been completed, work relating to laying of roads, water and sewage lines etc have commenced. He states that all the amenities and facilities at the park will be ready by July 2001.

"The second phase involving 600 acres - saleable area 420 acres - will be developed later," adds Mr. George Abraham, general manager.

Simultaneously the company is planning to start its marketing efforts with road shows to be held within and outside India. The company intends to sign around three marketing tie-ups apart from the existing agreement with Mitshubishi Corporation, Japan.

"Part of the marketing efforts is the decision to put up a stall at the IT Asia Millennium, Mumbai and Infranet 2000, Delhi business fairs," says Abraham.

In what way the Park will be different?

Responds Mr. Modi, "our plots are flexible and the Park will house all the advanced features that companies would like to use. Apart from vacant plots, we will offer ready built factories and all that an entrepreneur would need to do is to plug and play."

According to him the park would sell/lease well laid out plots of varying sizes ranging from half an acre to 60 acres. According to him a container freight station is being planned inside the park. In addition, a proposal for a customs-bonded warehouse is also under consideration for easy movement of international goods as well as electronic data interface with the customs department. The entire park is to be landscaped and will have wide roads.

When queried about the high cost of the plots (Rs. 24 lakh per acre) Mr. Modi remarks, "It is true that the Park is costlier by 60 per cent when compared to the plots offered by the State Industries promotion Corporation of Tamil Nadu Ltd (Sipcot). But one has to consider the advantages - locational and other infrastructural facilities - offered by us."

"For instance our water cost might be cheaper than Sipcots' as we are surrounded by water bodies," he adds. In addition, Mahindra Industrial Park is talking with BSNL, VSNL and STPI to provide telecom/internet facilities. "Compared to similar facilities offered overseas we will be cheaper by 60 per cent," he remarks.

Nevertheless competition is going to be tough for the Mahindra Industrial Park as many states are actively promoting industrial estates to attract investments. And nearer home the company has to contend with Sipcot building several estates/parks targeting more or less the same market.

Says Sipcot's managing director, Mr. K. Deenabandu (46), "We offer plots on 99 years lease which is equivalent to owning it. We offer choice of location - whether in the hinterland or near the port/city." More important issue is the availability of investment subsidies/incentives and loans for units located within Sipcot's estates.

Sipcot is promoting six industrial estates or parks in Tamil Nadu. They are: the Information Technology Park, Siruseri, the Export Promotion Industrial Park at Gummidipoondi, two Parks at Irrungattukottai and Sriperumpudur, Growth Centres at Perundurai, Nilakottai and Gangaikondan and also a satellite industrial residential township at Nemili, Kancheepuram District, near Chennai.

It is learnt that software major Infosys Ltd is planning to take around 70 acres in the Siruseri Park.

But Mr.Modi is unfazed. "I can also help to arrange finance via IL&FS one of the promoters," he says. Ruling out competition from Delhi, Nagpur, Bangalore and Hyderabad as they lack ports or international airports, he says that the Park's location and the facilities it would offer to investors would attract industries.

The other added attractions that his park would offer are: food courts, mini marts, shops, guest houses, post office, courier services, restaurants, lakeside recreational area and a gymnasium.

Nevertheless it is going to be interesting to watch how promoters of private industrial parks fight it out while the States at the macro level tries to woo the investors to their State.

Only time will tell!

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