India Real Estate Link

Driving on the country’s first expressway connecting Mumbai with Pune is always a pleasure, so much so that people have started shuttling between the two cities daily. All this courtesy the swanky road’s meticulous upkeep by a company that was once a family-owned business doing road-building works for local bodies.
At the helm of it all is Virendra Mhaiskar, 37, who has been able to transform the firm into a modern business enterprise—IRB Infrastructure Developers—that looks after the maintenance of one of India’s showcase projects. IRB, a Rs 784-crore company based out of Mumbai, took the public route this year.
Within five years of his joining the business on completion of civil engineering from a lesser-known college in 1990, Mhaiskar led the company to pioneer the now-famous PPP (public private partnership) model in the road sector, making it the first in India. Mhaiskar said, “The condition of the Thane-Bhiwandi bypass was pathetic in 1995. We convinced the authorities and successfully implemented the PPP model on the stretch making the ride smoother”.
The company was to redo the road in return for toll collection rights over it and this modest beginning led the company to register a profit of Rs 114 crore last fiscal.
What makes the present-day IRB different from the rest in its league? Mhaiskar said, “It is the only company that has integrated its businesses offering multiple services under one roof”. Further he said, “We are into road building, its maintenance and also collecting toll, whereas other firms specialize only in one job like being road contractors or mere developers”. As of today, IRB has orders exceeding Rs 6,500 crore with Rs 3,800 crore worth of work to be completed in 10 months’ time. It collects a toll of over Rs 1.2 crore daily on 800 km of roads from 35 different points and holds the toll collection rights over 7% of the ambitious Golden Quadrilateral project in the Bharuch-Mumbai-Pune stretch.
IRB’s operations can broadly be classified into three verticals—toll roads, road construction and the recently added real estate arm (part of the diversification process on which the company is betting big time). Mhaiskar said, “In toll collection, we have to maintain the roads well, and more importantly, add new infrastructure on it like increasing the lanes, which adds to its value”.
After the PPP project in 1995, the other big thrust, which helped the company, was the setting up of the National Highways Authority of India in 2000 due to which the size of projects grew. Mhaiskar further declared, “Earlier, Rs 100 crore projects were unheard of in road building but due to NHAI, we could eye such lucrative deals, which also resulted in capacity expansion”.
Turning the Rs 10-crore firm into a professionally-run enterprise was not easy, says Mhaiskar, who promoted IRB Infrastructure Limited in 1998 to fund the group’s various initiatives. Family members, who were having minority stakes in the company, had to be convinced. He said, “It was an evolving process and I was successful in making them believe that there was value in the company. Their confidence was further strengthened as some private equity players showed interest in us”.
Today, Deutsche Bank, Merrill Lynch and Goldman Sachs, which collectively invested over $60 million in 2007, own 10.24 % stake in the holding company. The next step was to go public and at a time when the IPO market was sluggish.
The issue in February this year was oversubscribed four times over. Mhaiskar claims that IRB has been successful in outbidding formidable competitors like Larsen and Tourbo, Gammon India and Reliance Energy in landing lucrative road projects in Maharashtra and Gujarat: “Our edge is in offering all the necessary services in-house, like putting up the asset, its operation and maintenance and investing in it for expansion”.
He said that Looking beyond India, IRB is considering a foray into toll collection for some important highways in Europe and South East Asia and is in talks for the same with various entities. The company is also betting big on real estate, investing Rs 200 crore in a residential-cum-commercial township spread over 1,400 acres located off the Mumbai-Pune expressway.