Bangalore's benchmark builder aims for global impact

The Sobha group, one of the leading builders in Bangalore which has established a reputation for quality, is formulating plans to become a "serious international player in the next five years," according to P N C Menon, group chairman.

The strategy is to form an international company here and take it out in order to win large international orders in partnership with other international companies. Korean and Chinese companies are already doing this, as is Larsen and Toubro.

Menon, who came from Oman in 1994 to set up the group in India, feels that his initial goal of making world class buildings in India has been largely achieved. Infosys chairman N R Narayana Murthy, while inaugurating the Hyderabad campus of Infosys built by Sobha, said India has not seen a builder like this in a hundred years.

The desire to go global has arisen from the way in which the processes and information systems of the company have forged ahead of that of many global players and design and engineering skills have been acquired.

Menon now wants to "benchmark my group globally" by competing globally. The Sobha group is targeting a turnover of Rs 500-600 crore in the current year and wants to double the annual output from the present 5 million sq. ft. of built up space to 10 million in five years. What is significant is that this is projected to translate into a three-fold rise in turnover to Rs 1,500 crore.

In the next five years, Menon sees the average cost of floor space going up by 50 per cent in the metros, mainly on the back of a hundred per cent rise in land prices in the periphery of metros.

There will be no shortage of demand at these prices. But the calculation could go haywire and prices could rise faster, affecting demand, if steel prices keep going up the way they are, cautions Menon. Significantly, Menon does not see property prices going into a depression after a period of rapid rise as happened before and after 1995.

"The rise in incomes currently taking place, and the unlikelihood of massive satellite townships coming up in the next 5-10 years, will lead to metros expanding radially" and ensuring a balance between demand and supply, he explains.

Menon is confident of growing rapidly in India and venturing out overseas because of several reasons.

First, the Sobha group runs a positive bottom line, making a net margin of 6-7 per cent in Menon's words but popularly seen to be doing much better.

Second is the process and design capabilities and quality standards achieved.

Third, the world outside India is not new to Menon as he began his business in West Asia, with current annual revenues of $ 20 million, before starting out in India.

The difference between the earlier and proposed overseas foray is that while earlier Menon's outfits executed contracts with given specifications, now they are in a position to evolve specifications and formulate detailed designs so as to comprehensively handle projects.