We are largely debt-free and our business model ensures we remain this way: Anoop Kumar Mittal, CMD, NBCC

NBCC (India's) current order book is at about Rs 80,000 crore. It was recently in the news for winning an order worth Rs 2,000 crore to build convention centres in nine different African countries. Moreover, NBCC also expects a mega high-profile contract for redeveloping Mumbai's Dharavi area, Asia's largest slum, into a modern mini-town within Mumbai. Anoop Kumar Mittal, CMD, NBCC, talks to Tradebriefs about the company's business model and growth plans.

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Tell us about the unique way you have been engaging with the government to redevelop old government properties.
The job of NBCC is from concept to commissioning. We come up with the concept, the design, drawing and architecture, master plan and estimates. Once the estimate is known, the next challenge is how to fund the project. On the basis of market survey, we decide that the money can be generated from the sale of a certain percentage of the project. This varies from place to place, depending on the rates prevailing in the area. We submit this detailed project report (DPR) to the government, and we charge a consultancy fee as the project management consultants. This varies from 8-10% on the construction cost and we generally charge 2% as marketing fee for selling the property. The initial investment is done by us and typically ranges from 1-5% and we charge 12% interest on this investment. We take our money back from the sale proceeds and we launch the project once we are through with all the designs and drawing and approvals. We don't start any construction unless we are sure there is potential for sale. We don't take risk on our balance sheet and we don't put the government also on a potentially difficult position.

Are there many properties that the government has which it wants to redevelop?
At present, we have seven-eight projects in Delhi on this model with a total value of about Rs 40,000 crore, over the next four-five years. The value of the sale will also be the same because we want to realise a similar amount of money. We do not generate any surplus money since the idea is to get the maximum built up area for the government's requirements, for their office or residential spaces. Hence, based on the rates in that area, we sell off a certain percentage of the land to generate the required funds for construction. For instance, in Mumbai, in Vadala, there is a 40-acre property belonging to the Union Finance Ministry next to the eastern freeway where we are constructing residences and housing for the Customs, Excise and Income Tax departments. The value is in the range of Rs 7,000-8,000 crore and in the next six months, I am hopeful this project will start. We will need to sell about one-third of this area to generate the amount required.

Are there other such properties in Mumbai?
Yes, there are. There are public sector properties in Mumbai also. For instance, Hindustan Vegetable Oil Corporation has property between Mumbai and Pune. We may get this in the near future. Also, there is Bengal Chemicals and they have a property around Dadar. This is the oldest pharmaceutical company in India. There is National Bicycle Corporation which has a property in Worli and Richardson and Cruddas at Byculla which is a 12-acre property, not small by any means. For all these properties, discussions are ongoing with the respective ministries under which they are set up. There is a lot of sentiment attached to these properties and to these companies as they are from the British era and even if there are only a few employees, the issue is a sensitive one. However, the reasons the government is keen to give us their old properties for redevelopment are many. In many cases, they are unable to deal with encroachments. Second, many departments are hamstrung for funds. They want to construct but are not able to arrange the finance. In this scenario, our model of generating funds from a portion of the land has proved attractive. The government gets their buildings suited to their purpose without the challenges of procuring finance. Yes, the exclusivity on their property is lost but that is a trade-off. I'd like to add that NBCC is the only company in India that is working on this self-generating revenue model. We are largely debt-free and our business model ensures we remain this way. We have about 200 acres of land across 40 different locations across the country by way of acquisitions we have done but we are not looking to acquire more land. The redevelopment model is going well for us.

You have been talking about the Dharavi redevelopment project. When are you actually getting it and what stage are the discussions at?
We have already discussed many issues and thrashed them out with the state government. In principal, they have decided to award it to NBCC. The issues relate to movement of people, how many phases it will be built in, etc. We have planned that the project will be done in ten phases. The first part will be of 20 acres so those people residing on this area will be shifted to some other place. For this, we are looking at some other place belonging to the government where we can construct some housing. The Maharashtra Housing and Development Authority (MHADA) has some land in Bandra Kurla Complex (BKC) and we are trying to buy this land. Also, the Mumbai Port Trust (MbPT) has a lot of land and we are also talking to the MbPT authorites currently to see what they can make available for us. They have huge land from one end to another and in some other places it is not on the banks of the sea. They do want to redevelop these properties through NBCC.

When do you expect something will fructify?
We need about five-seven acres to house those who will be displaced in the first phase. In the next six months, I am hoping some of these discussions will achieve closure. The total land in Dharavi to be redeveloped is 530 acres, which, as I said, is divided into 10 parts and will be redeveloped over a period of ten years as envisaged at the moment. If we get the land to shift the people for the first phase, we will be able to complete their housing in 18 months post which they can shift and we can start the redevelopment work.

- TradeBriefs Bureau -