While the government’s stimulus package for the housing industry is welcome, more initiatives are required, says Archana Sinha
Home buyers have something to smile about as middle-income groups looking for smaller homes can now buy without burning a hole in their pockets. All public sector banks will now offer loans at 8.5 to 9.5 per cent for homes costing between Rs 5 lakh to Rs 20 lakh. According to the banks this will help mobilise the housing industry, as nearly 80 per cent of their portfolio consists of this segment.
Nayan Shah, managing director, Mayfair, who has many projects in Virar, Nala Sopara and areas around, says, " Home loans have come back to 2007 rates and will give a big fillip to buyers in the middle class segments. Our project at Virar, Mayfair Virar Garden, with two bedroom flats between Rs 14 to 19 lakh in a well laid out township, good roads, good supply of water and connectivity to the station, will see more enthusiastic enquiries from buyers who were holding back.”
Anil Mittal, director, Mittal Builders, too has expressed happiness saying, "We have a low-cost housing project called Mittal Enclave at Naigaon east where we
are selling 450-500 sq.ft. for Rs. 2000-2100 per sq ft. With home loans being slashed, we expect more customers to turn up. Private banks should also reduce rates for the momentum to continue."
While industry experts have hailed this as a positive step they also feel that more is required to be done.
Says Sanjay Verma, executive managing director, South Asia and Australia, Cushman and Wakefield, "The decision to rationalise home loan rates for the priority sector by public sector banks is a positive move and will trigger demand. The concern of lack of credit for developers remains despite the announcement and till the time a feasible solution is found, it may cause inflationary pressure if we end up with a demand-supply mis-match."
Harsh Roongta, chairman, Apna Loan also echoes similar sentiments when he says, "This will boost the housing segment more towards the outskirts, but not in the city or even in the western suburbs, where land prices are high and developers have built at exorbitant prices. Of course in tier 2 and tier 3 cities this will give a small fillip. One needs to remember that in the bigger cities there is no supply in this category, so there is no scope to buy."
Renu Sud Karnad, joint managing director, HDFC Ltd, feels that while interest rates are important, "Higher interest rate is not a big determinant in the buying decision of the end user because housing is a real need and during a tenure of 15- 20 years the interest rates will continue to vary as per market conditions. Interest rates although very important, only affects his affordability that is, his capacity to borrow in terms of the absolute loan amount. So cutting of rates will help. But for the end user the price of the property matters more as once he decides to buy at a particular price, the price stays forever. He is not going to sell if tomorrow the prices rise as his need for a roof is not going disappear."
Most feel that in metros where the capital values are high, this move will only help recently announced affordable housing projects or development for the economically weaker sections.
Kumar Gera, chairman, Confederation of Real Estate Developers Association of India, says, “Flats costing between Rs 5- 20 lakh would be available way beyond municipal limits and commuting hassles and resultant costs would mean people will be hesitant .”
He adds, "I think the government has made moves to stimulate the market, but it should have spread it across segments. For example, for metro cities they should have come out with schemes for homes up to Rs 40 lakh, which would have really seen activity even among buyers from the corporate sector, especially now when
some builders are also softening their prices to some extent. This would have enthused the entire industry, across segments, seeing more production and consumption of cement, steel, paint and other collaterals, in turn generating employment and boosting the economy."
The other deterrent is the deadline of June 30, 2009. Asks Roongta, "Is this meant to rush the buyer? He feels the buyer will also want to factor in other considerations, like quality of construction and other amenities. "Moreover it also creates a suspicion, whether the loans will go up later, whether the government's intention is right," he says.
On the other hand, it is not realistic for developers either, says Gera. "Even if they redesign their new projects they cannot complete them before 18 months. That much time will be required for land acquisition, clearance and finishing one phase of construction," he adds.
What is required of the government is to increase liquidity, to lend to banks at lower rates so that there is money in the market, feel experts. The government also has to make land available at lower price.
Kumar Gera says, "This is a welcome move, but a very meek step. Bolder steps are required. There is a reserve of more than 250 billion dollars of foreign exchange. If one compares our spending with Japan and China, where they are operating under similar economic condition, ours is just a speck. Being too cautious will not help."
Says Abhinandan Lodha, of Lodha group, "More incentives are of course required from the government but developers should bear in mind that buyers are sensitive to pricing and have to launch their projects accordingly. Housing from Rs 35-45 lakh should be available in good locations."
Saturday, December 20, 2008
Housing Industry - Just the Beginning
While the government’s stimulus package for the housing industry is welcome, more initiatives are required, says Archana Sinha
Home buyers have something to smile about as middle-income groups looking for smaller homes can now buy without burning a hole in their pockets. All public sector banks will now offer loans at 8.5 to 9.5 per cent for homes costing between Rs 5 lakh to Rs 20 lakh. According to the banks this will help mobilise the housing industry, as nearly 80 per cent of their portfolio consists of this segment.
Nayan Shah, managing director, Mayfair, who has many projects in Virar, Nala Sopara and areas around, says, " Home loans have come back to 2007 rates and will give a big fillip to buyers in the middle class segments. Our project at Virar, Mayfair Virar Garden, with two bedroom flats between Rs 14 to 19 lakh in a well laid out township, good roads, good supply of water and connectivity to the station, will see more enthusiastic enquiries from buyers who were holding back.”
Anil Mittal, director, Mittal Builders, too has expressed happiness saying, "We have a low-cost housing project called Mittal Enclave at Naigaon east where we
are selling 450-500 sq.ft. for Rs. 2000-2100 per sq ft. With home loans being slashed, we expect more customers to turn up. Private banks should also reduce rates for the momentum to continue."
While industry experts have hailed this as a positive step they also feel that more is required to be done.
Says Sanjay Verma, executive managing director, South Asia and Australia, Cushman and Wakefield, "The decision to rationalise home loan rates for the priority sector by public sector banks is a positive move and will trigger demand. The concern of lack of credit for developers remains despite the announcement and till the time a feasible solution is found, it may cause inflationary pressure if we end up with a demand-supply mis-match."
Harsh Roongta, chairman, Apna Loan also echoes similar sentiments when he says, "This will boost the housing segment more towards the outskirts, but not in the city or even in the western suburbs, where land prices are high and developers have built at exorbitant prices. Of course in tier 2 and tier 3 cities this will give a small fillip. One needs to remember that in the bigger cities there is no supply in this category, so there is no scope to buy."
Renu Sud Karnad, joint managing director, HDFC Ltd, feels that while interest rates are important, "Higher interest rate is not a big determinant in the buying decision of the end user because housing is a real need and during a tenure of 15- 20 years the interest rates will continue to vary as per market conditions. Interest rates although very important, only affects his affordability that is, his capacity to borrow in terms of the absolute loan amount. So cutting of rates will help. But for the end user the price of the property matters more as once he decides to buy at a particular price, the price stays forever. He is not going to sell if tomorrow the prices rise as his need for a roof is not going disappear."
Most feel that in metros where the capital values are high, this move will only help recently announced affordable housing projects or development for the economically weaker sections.
Kumar Gera, chairman, Confederation of Real Estate Developers Association of India, says, “Flats costing between Rs 5- 20 lakh would be available way beyond municipal limits and commuting hassles and resultant costs would mean people will be hesitant .”
He adds, "I think the government has made moves to stimulate the market, but it should have spread it across segments. For example, for metro cities they should have come out with schemes for homes up to Rs 40 lakh, which would have really seen activity even among buyers from the corporate sector, especially now when
some builders are also softening their prices to some extent. This would have enthused the entire industry, across segments, seeing more production and consumption of cement, steel, paint and other collaterals, in turn generating employment and boosting the economy."
The other deterrent is the deadline of June 30, 2009. Asks Roongta, "Is this meant to rush the buyer? He feels the buyer will also want to factor in other considerations, like quality of construction and other amenities. "Moreover it also creates a suspicion, whether the loans will go up later, whether the government's intention is right," he says.
On the other hand, it is not realistic for developers either, says Gera. "Even if they redesign their new projects they cannot complete them before 18 months. That much time will be required for land acquisition, clearance and finishing one phase of construction," he adds.
What is required of the government is to increase liquidity, to lend to banks at lower rates so that there is money in the market, feel experts. The government also has to make land available at lower price.
Kumar Gera says, "This is a welcome move, but a very meek step. Bolder steps are required. There is a reserve of more than 250 billion dollars of foreign exchange. If one compares our spending with Japan and China, where they are operating under similar economic condition, ours is just a speck. Being too cautious will not help."
Says Abhinandan Lodha, of Lodha group, "More incentives are of course required from the government but developers should bear in mind that buyers are sensitive to pricing and have to launch their projects accordingly. Housing from Rs 35-45 lakh should be available in good locations."
Home buyers have something to smile about as middle-income groups looking for smaller homes can now buy without burning a hole in their pockets. All public sector banks will now offer loans at 8.5 to 9.5 per cent for homes costing between Rs 5 lakh to Rs 20 lakh. According to the banks this will help mobilise the housing industry, as nearly 80 per cent of their portfolio consists of this segment.
Nayan Shah, managing director, Mayfair, who has many projects in Virar, Nala Sopara and areas around, says, " Home loans have come back to 2007 rates and will give a big fillip to buyers in the middle class segments. Our project at Virar, Mayfair Virar Garden, with two bedroom flats between Rs 14 to 19 lakh in a well laid out township, good roads, good supply of water and connectivity to the station, will see more enthusiastic enquiries from buyers who were holding back.”
Anil Mittal, director, Mittal Builders, too has expressed happiness saying, "We have a low-cost housing project called Mittal Enclave at Naigaon east where we
are selling 450-500 sq.ft. for Rs. 2000-2100 per sq ft. With home loans being slashed, we expect more customers to turn up. Private banks should also reduce rates for the momentum to continue."
While industry experts have hailed this as a positive step they also feel that more is required to be done.
Says Sanjay Verma, executive managing director, South Asia and Australia, Cushman and Wakefield, "The decision to rationalise home loan rates for the priority sector by public sector banks is a positive move and will trigger demand. The concern of lack of credit for developers remains despite the announcement and till the time a feasible solution is found, it may cause inflationary pressure if we end up with a demand-supply mis-match."
Harsh Roongta, chairman, Apna Loan also echoes similar sentiments when he says, "This will boost the housing segment more towards the outskirts, but not in the city or even in the western suburbs, where land prices are high and developers have built at exorbitant prices. Of course in tier 2 and tier 3 cities this will give a small fillip. One needs to remember that in the bigger cities there is no supply in this category, so there is no scope to buy."
Renu Sud Karnad, joint managing director, HDFC Ltd, feels that while interest rates are important, "Higher interest rate is not a big determinant in the buying decision of the end user because housing is a real need and during a tenure of 15- 20 years the interest rates will continue to vary as per market conditions. Interest rates although very important, only affects his affordability that is, his capacity to borrow in terms of the absolute loan amount. So cutting of rates will help. But for the end user the price of the property matters more as once he decides to buy at a particular price, the price stays forever. He is not going to sell if tomorrow the prices rise as his need for a roof is not going disappear."
Most feel that in metros where the capital values are high, this move will only help recently announced affordable housing projects or development for the economically weaker sections.
Kumar Gera, chairman, Confederation of Real Estate Developers Association of India, says, “Flats costing between Rs 5- 20 lakh would be available way beyond municipal limits and commuting hassles and resultant costs would mean people will be hesitant .”
He adds, "I think the government has made moves to stimulate the market, but it should have spread it across segments. For example, for metro cities they should have come out with schemes for homes up to Rs 40 lakh, which would have really seen activity even among buyers from the corporate sector, especially now when
some builders are also softening their prices to some extent. This would have enthused the entire industry, across segments, seeing more production and consumption of cement, steel, paint and other collaterals, in turn generating employment and boosting the economy."
The other deterrent is the deadline of June 30, 2009. Asks Roongta, "Is this meant to rush the buyer? He feels the buyer will also want to factor in other considerations, like quality of construction and other amenities. "Moreover it also creates a suspicion, whether the loans will go up later, whether the government's intention is right," he says.
On the other hand, it is not realistic for developers either, says Gera. "Even if they redesign their new projects they cannot complete them before 18 months. That much time will be required for land acquisition, clearance and finishing one phase of construction," he adds.
What is required of the government is to increase liquidity, to lend to banks at lower rates so that there is money in the market, feel experts. The government also has to make land available at lower price.
Kumar Gera says, "This is a welcome move, but a very meek step. Bolder steps are required. There is a reserve of more than 250 billion dollars of foreign exchange. If one compares our spending with Japan and China, where they are operating under similar economic condition, ours is just a speck. Being too cautious will not help."
Says Abhinandan Lodha, of Lodha group, "More incentives are of course required from the government but developers should bear in mind that buyers are sensitive to pricing and have to launch their projects accordingly. Housing from Rs 35-45 lakh should be available in good locations."
WIDER OPTION IN REALITY
Developers are looking to aggressively market housing projects for the mid-income group, where the demand is huge, says Padma Ramakrishnan
The Indian real estate sector is going through interesting times, with developers increasingly looking at projects for mid and low income housing segments as well as value for money projects, catering to those who can afford slightly more.
Housing, say experts, should be viewed as any other industry where options have to exist at all possible price points. Currently, there is a dearth of housing options at the lower end of the spectrum and this situation should change. Affordable housing projects have become the high focus area as builders have realised that therein lies the largest market, with the fastest absorption rates.
The Reserve Bank of India's recent rate cuts, which are expected to make home loans easier and cheaper are aimed at easing the interest burden in the Rs. 20 lakh category of housing loans and is expected to give a boost to the affordable housing market.
Reputed builders who concentrated largely on mid-toupper end homes are now launching budget home schemes in the western suburbs beyond Borivali,in central areas like Thane and Kalyan and in the nodes of Navi Mumbai. While such projects are not coming up in prime locations, many of these are being developed within a radius of five to six kms from the nearest suburban station like Thane,Vasai-Virar, Kalyan,Panvel,and Kalamboli.Developers like Rustomjee Group,Lodha Group, Akruti City, Neptune Group, Acme Group, Nirmal Lifestyle, Puranik, Prajapati Constructions, Godrej Properties are actively launching projects catering to the affordable segment.
Affordable housing, says architect Ramakrishnan Iyer, can be categorised into various segments where affordable can be purely in the sense of absolute terms, and the cost criteria comes into play. There could also be projects above Rs 30 lakh, affordable in term of value for money which incorporate features like green building criteria. These factors are cost saving in the long run and would strive to bring down maintenance costs and transport costs. The Lodha Group's Casa Univis project launched this week at Ghodbunder Road,Thane, seeks to target the midincome professional. Spanning across a sprawling 55 acres of land, the project, under the new Casa sub-brand, will feature 26 towers of 18-27 storeys; offering multiple residential configurations - 2 BHK, 3 BHK Optima, 3 BHK Ultima and 3 BHK Luxe apartments. The apartments will have fully air-conditioned residences, video door phones, and even walk-in wardrobes, in a project that will have several amenities including a school and clubhouse, at a value-for-money price. At an invitation price of Rs 2997, a luxurious air-conditioned 2BHK residence would work out to just Rs 30 lakh.
According to Abhisheck Lodha, director, Lodha Group, with the Casa subbrand,the Group looks forward to making available valuable and premium quality lifestyle residential offerings. "We believe there is a substantial market of opportunities and the key is to offer differentiated products and patterns," he adds.
Players like Rustomjee Group are planning 5,000 homes in the next two or three years, all in the affordable segment. Boman Irani, director, Rustomjee Group, says there is a huge need for affordable housing and no recession can halt a person who is providing what the market wants.
According to property consultants, Jones LangLaSalle Meghraj, the government should release land held by its various agencies for development which would help ease the rates on what is currently available. It should also offer to put in place baseline infrastructure to increase accessibility to underdeveloped and neglected areas to make them attractive.
Experts also point out that it is important to tie up funding with banking institutions before marketing low income projects.
Urban planner R K Jha explains that while constructing in peripheral areas, it is important to ensure that there is good transport system to the nearest station, and other essential facilities. If this does not happen simultaneously along with real estate development, both customers and developers will lose interest.The momentum has to be kept alive through better facilities in these locations.
The Indian real estate sector is going through interesting times, with developers increasingly looking at projects for mid and low income housing segments as well as value for money projects, catering to those who can afford slightly more.
Housing, say experts, should be viewed as any other industry where options have to exist at all possible price points. Currently, there is a dearth of housing options at the lower end of the spectrum and this situation should change. Affordable housing projects have become the high focus area as builders have realised that therein lies the largest market, with the fastest absorption rates.
The Reserve Bank of India's recent rate cuts, which are expected to make home loans easier and cheaper are aimed at easing the interest burden in the Rs. 20 lakh category of housing loans and is expected to give a boost to the affordable housing market.
Reputed builders who concentrated largely on mid-toupper end homes are now launching budget home schemes in the western suburbs beyond Borivali,in central areas like Thane and Kalyan and in the nodes of Navi Mumbai. While such projects are not coming up in prime locations, many of these are being developed within a radius of five to six kms from the nearest suburban station like Thane,Vasai-Virar, Kalyan,Panvel,and Kalamboli.Developers like Rustomjee Group,Lodha Group, Akruti City, Neptune Group, Acme Group, Nirmal Lifestyle, Puranik, Prajapati Constructions, Godrej Properties are actively launching projects catering to the affordable segment.
Affordable housing, says architect Ramakrishnan Iyer, can be categorised into various segments where affordable can be purely in the sense of absolute terms, and the cost criteria comes into play. There could also be projects above Rs 30 lakh, affordable in term of value for money which incorporate features like green building criteria. These factors are cost saving in the long run and would strive to bring down maintenance costs and transport costs. The Lodha Group's Casa Univis project launched this week at Ghodbunder Road,Thane, seeks to target the midincome professional. Spanning across a sprawling 55 acres of land, the project, under the new Casa sub-brand, will feature 26 towers of 18-27 storeys; offering multiple residential configurations - 2 BHK, 3 BHK Optima, 3 BHK Ultima and 3 BHK Luxe apartments. The apartments will have fully air-conditioned residences, video door phones, and even walk-in wardrobes, in a project that will have several amenities including a school and clubhouse, at a value-for-money price. At an invitation price of Rs 2997, a luxurious air-conditioned 2BHK residence would work out to just Rs 30 lakh.
According to Abhisheck Lodha, director, Lodha Group, with the Casa subbrand,the Group looks forward to making available valuable and premium quality lifestyle residential offerings. "We believe there is a substantial market of opportunities and the key is to offer differentiated products and patterns," he adds.
Players like Rustomjee Group are planning 5,000 homes in the next two or three years, all in the affordable segment. Boman Irani, director, Rustomjee Group, says there is a huge need for affordable housing and no recession can halt a person who is providing what the market wants.
According to property consultants, Jones LangLaSalle Meghraj, the government should release land held by its various agencies for development which would help ease the rates on what is currently available. It should also offer to put in place baseline infrastructure to increase accessibility to underdeveloped and neglected areas to make them attractive.
Experts also point out that it is important to tie up funding with banking institutions before marketing low income projects.
Urban planner R K Jha explains that while constructing in peripheral areas, it is important to ensure that there is good transport system to the nearest station, and other essential facilities. If this does not happen simultaneously along with real estate development, both customers and developers will lose interest.The momentum has to be kept alive through better facilities in these locations.
WIDER OPTION IN REALITY
Developers are looking to aggressively market housing projects for the mid-income group, where the demand is huge, says Padma Ramakrishnan
The Indian real estate sector is going through interesting times, with developers increasingly looking at projects for mid and low income housing segments as well as value for money projects, catering to those who can afford slightly more.
Housing, say experts, should be viewed as any other industry where options have to exist at all possible price points. Currently, there is a dearth of housing options at the lower end of the spectrum and this situation should change. Affordable housing projects have become the high focus area as builders have realised that therein lies the largest market, with the fastest absorption rates.
The Reserve Bank of India's recent rate cuts, which are expected to make home loans easier and cheaper are aimed at easing the interest burden in the Rs. 20 lakh category of housing loans and is expected to give a boost to the affordable housing market.
Reputed builders who concentrated largely on mid-toupper end homes are now launching budget home schemes in the western suburbs beyond Borivali,in central areas like Thane and Kalyan and in the nodes of Navi Mumbai. While such projects are not coming up in prime locations, many of these are being developed within a radius of five to six kms from the nearest suburban station like Thane,Vasai-Virar, Kalyan,Panvel,and Kalamboli.Developers like Rustomjee Group,Lodha Group, Akruti City, Neptune Group, Acme Group, Nirmal Lifestyle, Puranik, Prajapati Constructions, Godrej Properties are actively launching projects catering to the affordable segment.
Affordable housing, says architect Ramakrishnan Iyer, can be categorised into various segments where affordable can be purely in the sense of absolute terms, and the cost criteria comes into play. There could also be projects above Rs 30 lakh, affordable in term of value for money which incorporate features like green building criteria. These factors are cost saving in the long run and would strive to bring down maintenance costs and transport costs. The Lodha Group's Casa Univis project launched this week at Ghodbunder Road,Thane, seeks to target the midincome professional. Spanning across a sprawling 55 acres of land, the project, under the new Casa sub-brand, will feature 26 towers of 18-27 storeys; offering multiple residential configurations - 2 BHK, 3 BHK Optima, 3 BHK Ultima and 3 BHK Luxe apartments. The apartments will have fully air-conditioned residences, video door phones, and even walk-in wardrobes, in a project that will have several amenities including a school and clubhouse, at a value-for-money price. At an invitation price of Rs 2997, a luxurious air-conditioned 2BHK residence would work out to just Rs 30 lakh.
According to Abhisheck Lodha, director, Lodha Group, with the Casa subbrand,the Group looks forward to making available valuable and premium quality lifestyle residential offerings. "We believe there is a substantial market of opportunities and the key is to offer differentiated products and patterns," he adds.
Players like Rustomjee Group are planning 5,000 homes in the next two or three years, all in the affordable segment. Boman Irani, director, Rustomjee Group, says there is a huge need for affordable housing and no recession can halt a person who is providing what the market wants.
According to property consultants, Jones LangLaSalle Meghraj, the government should release land held by its various agencies for development which would help ease the rates on what is currently available. It should also offer to put in place baseline infrastructure to increase accessibility to underdeveloped and neglected areas to make them attractive.
Experts also point out that it is important to tie up funding with banking institutions before marketing low income projects.
Urban planner R K Jha explains that while constructing in peripheral areas, it is important to ensure that there is good transport system to the nearest station, and other essential facilities. If this does not happen simultaneously along with real estate development, both customers and developers will lose interest.The momentum has to be kept alive through better facilities in these locations.
The Indian real estate sector is going through interesting times, with developers increasingly looking at projects for mid and low income housing segments as well as value for money projects, catering to those who can afford slightly more.
Housing, say experts, should be viewed as any other industry where options have to exist at all possible price points. Currently, there is a dearth of housing options at the lower end of the spectrum and this situation should change. Affordable housing projects have become the high focus area as builders have realised that therein lies the largest market, with the fastest absorption rates.
The Reserve Bank of India's recent rate cuts, which are expected to make home loans easier and cheaper are aimed at easing the interest burden in the Rs. 20 lakh category of housing loans and is expected to give a boost to the affordable housing market.
Reputed builders who concentrated largely on mid-toupper end homes are now launching budget home schemes in the western suburbs beyond Borivali,in central areas like Thane and Kalyan and in the nodes of Navi Mumbai. While such projects are not coming up in prime locations, many of these are being developed within a radius of five to six kms from the nearest suburban station like Thane,Vasai-Virar, Kalyan,Panvel,and Kalamboli.Developers like Rustomjee Group,Lodha Group, Akruti City, Neptune Group, Acme Group, Nirmal Lifestyle, Puranik, Prajapati Constructions, Godrej Properties are actively launching projects catering to the affordable segment.
Affordable housing, says architect Ramakrishnan Iyer, can be categorised into various segments where affordable can be purely in the sense of absolute terms, and the cost criteria comes into play. There could also be projects above Rs 30 lakh, affordable in term of value for money which incorporate features like green building criteria. These factors are cost saving in the long run and would strive to bring down maintenance costs and transport costs. The Lodha Group's Casa Univis project launched this week at Ghodbunder Road,Thane, seeks to target the midincome professional. Spanning across a sprawling 55 acres of land, the project, under the new Casa sub-brand, will feature 26 towers of 18-27 storeys; offering multiple residential configurations - 2 BHK, 3 BHK Optima, 3 BHK Ultima and 3 BHK Luxe apartments. The apartments will have fully air-conditioned residences, video door phones, and even walk-in wardrobes, in a project that will have several amenities including a school and clubhouse, at a value-for-money price. At an invitation price of Rs 2997, a luxurious air-conditioned 2BHK residence would work out to just Rs 30 lakh.
According to Abhisheck Lodha, director, Lodha Group, with the Casa subbrand,the Group looks forward to making available valuable and premium quality lifestyle residential offerings. "We believe there is a substantial market of opportunities and the key is to offer differentiated products and patterns," he adds.
Players like Rustomjee Group are planning 5,000 homes in the next two or three years, all in the affordable segment. Boman Irani, director, Rustomjee Group, says there is a huge need for affordable housing and no recession can halt a person who is providing what the market wants.
According to property consultants, Jones LangLaSalle Meghraj, the government should release land held by its various agencies for development which would help ease the rates on what is currently available. It should also offer to put in place baseline infrastructure to increase accessibility to underdeveloped and neglected areas to make them attractive.
Experts also point out that it is important to tie up funding with banking institutions before marketing low income projects.
Urban planner R K Jha explains that while constructing in peripheral areas, it is important to ensure that there is good transport system to the nearest station, and other essential facilities. If this does not happen simultaneously along with real estate development, both customers and developers will lose interest.The momentum has to be kept alive through better facilities in these locations.
Part of Indonesia Sinking in Mud
by Sarah Williams
Volcano Threatens Heavily Populated Area
Her children insist, so every week or two Lilik Kamina takes them back to their abandoned village to look at the mud. “Hey, Mom, there’s our house, there’s the mango tree,” she said they shout. But there is nothing to see, only an ocean of mud that has buried this village and a dozen more over the past two-and-a-half years.
The mud erupted here during exploratory drilling for natural gas, and it has grown to be one of the largest mud volcanoes ever to have affected a populated area. Unlike other disasters that torment Indonesia — earthquakes, volcanoes, tsunamis — this one continues with no end in sight, and experts say the flow of mud could go on for many years.
The steaming mud keeps bubbling up, spreading across the countryside, driving people from their homes, burying fields and factories. As the earth disgorges the mud and the lake of mud grows, the land is sinking by as much as 40 feet a year and could subside to depths of more than 460 feet just one hour’s drive from Indonesia’s second city, Surabaya.
Siti Maimunah, an environmental advocate, said people who lived nearby had begun getting sick, with about 46,000 visiting clinics with respiratory problems since the mud eruption. Siti, who is national coordinator for the Mining Advocacy Network of Indonesia, said the gas that emerged with the mud was toxic and possibly carcinogenic.
Attempts to stem the flow have failed. These have included a scheme to drop hundreds of giant concrete balls into the mouth of the eruption; the concrete balls simply disappeared without effect. A project to divert some of the mud into the nearby Porong river has raised fears that the buildup of silt on the riverbed could cause severe flooding, possibly in Surabaya itself.
The disaster has become an embarrassment to President Susilo Bambang Yudhoyono, who faces a new election next year, with groups of displaced people demonstrating in the distant capital, Jakarta.
The drilling company that critics say caused the disaster, Lapindo Brantas, is indirectly owned by the family of one of Indonesia’s most influential men, Aburizal Bakrie, who is a major financial backer of President Yudhoyono and serves in his cabinet as coordinating minister for the people’s welfare.
Volcano Threatens Heavily Populated Area
Her children insist, so every week or two Lilik Kamina takes them back to their abandoned village to look at the mud. “Hey, Mom, there’s our house, there’s the mango tree,” she said they shout. But there is nothing to see, only an ocean of mud that has buried this village and a dozen more over the past two-and-a-half years.
The mud erupted here during exploratory drilling for natural gas, and it has grown to be one of the largest mud volcanoes ever to have affected a populated area. Unlike other disasters that torment Indonesia — earthquakes, volcanoes, tsunamis — this one continues with no end in sight, and experts say the flow of mud could go on for many years.
The steaming mud keeps bubbling up, spreading across the countryside, driving people from their homes, burying fields and factories. As the earth disgorges the mud and the lake of mud grows, the land is sinking by as much as 40 feet a year and could subside to depths of more than 460 feet just one hour’s drive from Indonesia’s second city, Surabaya.
Siti Maimunah, an environmental advocate, said people who lived nearby had begun getting sick, with about 46,000 visiting clinics with respiratory problems since the mud eruption. Siti, who is national coordinator for the Mining Advocacy Network of Indonesia, said the gas that emerged with the mud was toxic and possibly carcinogenic.
Attempts to stem the flow have failed. These have included a scheme to drop hundreds of giant concrete balls into the mouth of the eruption; the concrete balls simply disappeared without effect. A project to divert some of the mud into the nearby Porong river has raised fears that the buildup of silt on the riverbed could cause severe flooding, possibly in Surabaya itself.
The disaster has become an embarrassment to President Susilo Bambang Yudhoyono, who faces a new election next year, with groups of displaced people demonstrating in the distant capital, Jakarta.
The drilling company that critics say caused the disaster, Lapindo Brantas, is indirectly owned by the family of one of Indonesia’s most influential men, Aburizal Bakrie, who is a major financial backer of President Yudhoyono and serves in his cabinet as coordinating minister for the people’s welfare.
Part of Indonesia Sinking in Mud
by Sarah Williams
Volcano Threatens Heavily Populated Area
Her children insist, so every week or two Lilik Kamina takes them back to their abandoned village to look at the mud. “Hey, Mom, there’s our house, there’s the mango tree,” she said they shout. But there is nothing to see, only an ocean of mud that has buried this village and a dozen more over the past two-and-a-half years.
The mud erupted here during exploratory drilling for natural gas, and it has grown to be one of the largest mud volcanoes ever to have affected a populated area. Unlike other disasters that torment Indonesia — earthquakes, volcanoes, tsunamis — this one continues with no end in sight, and experts say the flow of mud could go on for many years.
The steaming mud keeps bubbling up, spreading across the countryside, driving people from their homes, burying fields and factories. As the earth disgorges the mud and the lake of mud grows, the land is sinking by as much as 40 feet a year and could subside to depths of more than 460 feet just one hour’s drive from Indonesia’s second city, Surabaya.
Siti Maimunah, an environmental advocate, said people who lived nearby had begun getting sick, with about 46,000 visiting clinics with respiratory problems since the mud eruption. Siti, who is national coordinator for the Mining Advocacy Network of Indonesia, said the gas that emerged with the mud was toxic and possibly carcinogenic.
Attempts to stem the flow have failed. These have included a scheme to drop hundreds of giant concrete balls into the mouth of the eruption; the concrete balls simply disappeared without effect. A project to divert some of the mud into the nearby Porong river has raised fears that the buildup of silt on the riverbed could cause severe flooding, possibly in Surabaya itself.
The disaster has become an embarrassment to President Susilo Bambang Yudhoyono, who faces a new election next year, with groups of displaced people demonstrating in the distant capital, Jakarta.
The drilling company that critics say caused the disaster, Lapindo Brantas, is indirectly owned by the family of one of Indonesia’s most influential men, Aburizal Bakrie, who is a major financial backer of President Yudhoyono and serves in his cabinet as coordinating minister for the people’s welfare.
Volcano Threatens Heavily Populated Area
Her children insist, so every week or two Lilik Kamina takes them back to their abandoned village to look at the mud. “Hey, Mom, there’s our house, there’s the mango tree,” she said they shout. But there is nothing to see, only an ocean of mud that has buried this village and a dozen more over the past two-and-a-half years.
The mud erupted here during exploratory drilling for natural gas, and it has grown to be one of the largest mud volcanoes ever to have affected a populated area. Unlike other disasters that torment Indonesia — earthquakes, volcanoes, tsunamis — this one continues with no end in sight, and experts say the flow of mud could go on for many years.
The steaming mud keeps bubbling up, spreading across the countryside, driving people from their homes, burying fields and factories. As the earth disgorges the mud and the lake of mud grows, the land is sinking by as much as 40 feet a year and could subside to depths of more than 460 feet just one hour’s drive from Indonesia’s second city, Surabaya.
Siti Maimunah, an environmental advocate, said people who lived nearby had begun getting sick, with about 46,000 visiting clinics with respiratory problems since the mud eruption. Siti, who is national coordinator for the Mining Advocacy Network of Indonesia, said the gas that emerged with the mud was toxic and possibly carcinogenic.
Attempts to stem the flow have failed. These have included a scheme to drop hundreds of giant concrete balls into the mouth of the eruption; the concrete balls simply disappeared without effect. A project to divert some of the mud into the nearby Porong river has raised fears that the buildup of silt on the riverbed could cause severe flooding, possibly in Surabaya itself.
The disaster has become an embarrassment to President Susilo Bambang Yudhoyono, who faces a new election next year, with groups of displaced people demonstrating in the distant capital, Jakarta.
The drilling company that critics say caused the disaster, Lapindo Brantas, is indirectly owned by the family of one of Indonesia’s most influential men, Aburizal Bakrie, who is a major financial backer of President Yudhoyono and serves in his cabinet as coordinating minister for the people’s welfare.
UK-based Firm Files Motion Against Satyam
By M H Ahssan
Seeks Testimony From Top Satyam Officials Regarding Its Abortive Attempt To Buy The Two Firms
In a fresh blow to Satyam Computer, which came under fire for its proposed deal to acquire two family-related firms, UKbased Upaid Systems has asked a US court to seek testimony from top Satyam officials in connection with its abortive attempt to buy the two firms.
Upaid has filed a motion in Collin County, Texas district court to seek a testimony from top Satyam officials including the chairman Ramalinga Raju, CFO Srinivas Valdamani and global head corporate governance G Jayaraman in connection with the proposed buy, Upaid said in a statement.
Upaid, the online and mobile payment services firm further alleged that the IT major was trying to deplete its assets by acquiring the firms ahead of a judgment in a legal battle against it.
That Satyam would proceed with a transaction that seems so clearly designed to deplete its assets in advance of a judgment, rightfully concerns Upaid that Satyam may be willing to engage in fraudulent transfers to avoid its legal obligations, it said. Upaid CEO Simon Joyce told in an interview to a private news channel that had Satyam succeeded in siphoning this money off into the Maytas transaction that would have the effect of riching a number of members of the founders family.
Moreover it would have made it more difficult for the entity Satyam to meet any damages which the Texas jury might eventually award against them. Further Joyce said, “Our interest really is, we believe and the motion is arguing that it is right and proper that we should have an opportunity to ask the people who proposed this transaction and then defended it in a public domain to ask them what was in their mind when they were contemplating it.”
Satyam is facing suits in US Federal and state courts filed by Upaid claiming fraud forgery and breach of contract as a result of which Upaid has suffered damages to its business and prospects in excess of 1 billion dollar.
Federal court proceeding is scheduled for a Texas jury trial in June of 2009 and Satyam is facing the potential of a very sizeable judgement against it.
At present Satyam has cash resource to pay a one billion dollar plus judgment or the liquidity to support a supersedeas bond.
However on December 16, 2008 Satyam announced a plan to strip 1.6 billion dollar of cash out of the company, an amount that exceeds its cash in a transaction to acquire Maytas properties and Maytas Infra whereby the large majority of this cash would go to the family of Satyam chairman Ramalinga Raju.
“We are very concerned to be compensated for the huge damage which Satyam has done to us by perpetrating forgeries and fraud,” he said adding that Upaid is concerned to defend against the accusations that Satyam is making about defaming them. “I think our view of the world is Satyam’s behavior does more than enough. We don’t need to disparage them,” he added. Satyam declined to comment saying the matter was subjudice.
Sebi studying Satyam-Maytas deal: The Maytas deal that Satyam Computer had recently proposed, and then backtracked on the face of huge investor outcry, has come under the regulatory radar. On Friday, C B Bhave, chairman, Securities and Exchange Board of India (Sebi), said the regulator was studying the corporate governance issues concerning Satyam, Maytas Infrastructure and Maytas Properties.
“We do not want to react immediately to the incident (the acquisition bid that triggered investor outrage)...we will study issues involved and then come to a conclusion,’’ Bhave told reporters on the sidelines of a conference on securities markets hosted by National Institute of Securities Markets.
Bhave refused to comment any further on the issue saying that would be premature. The study would take whatever time it requires, he said.
On Monday evening, Hyberabad-headquartered Satyam had said it would spend about $1.6 billion from its reserves and also take some debts to gain majority control in Maytas Infra, a listed entity, and unlisted Maytas Properties. Both the companies which were proposed to be acquired were under the management control of Satyam’s promoters and their family members. According to one estimate, if Satyam had its way, the promoters would have made at least $1.4 billion at the cost of other non-promoter shareholders of the company.
Following huge investor outcry about dilution of corporate governance standards by Satyam’s board members, that included three promoters of the company, the company back tracked and hastily announced a buy back proposal. However, with several questions being raised about the conduct of the board members, including some by large institutional investors, the regulator has now decided to have a close look at the company’s recent decisions.
Other than the Satyam-Maytas affair, Sebi was looking at easing some of the restrictions in the currency futures segment and the possibility of including more market participants in that market, Bhave said. “There are some restrictions in this market on who can trade and we are now looking at if these restrictions can be relaxed,’’ Bhave said. The Sebi chief was responding to a question on whether other types of participants will be allowed in futures trading. At present, foreign institutional investors and non-resident Indians are not allowed to trade in currency futures.
Seeks Testimony From Top Satyam Officials Regarding Its Abortive Attempt To Buy The Two Firms
In a fresh blow to Satyam Computer, which came under fire for its proposed deal to acquire two family-related firms, UKbased Upaid Systems has asked a US court to seek testimony from top Satyam officials in connection with its abortive attempt to buy the two firms.
Upaid has filed a motion in Collin County, Texas district court to seek a testimony from top Satyam officials including the chairman Ramalinga Raju, CFO Srinivas Valdamani and global head corporate governance G Jayaraman in connection with the proposed buy, Upaid said in a statement.
Upaid, the online and mobile payment services firm further alleged that the IT major was trying to deplete its assets by acquiring the firms ahead of a judgment in a legal battle against it.
That Satyam would proceed with a transaction that seems so clearly designed to deplete its assets in advance of a judgment, rightfully concerns Upaid that Satyam may be willing to engage in fraudulent transfers to avoid its legal obligations, it said. Upaid CEO Simon Joyce told in an interview to a private news channel that had Satyam succeeded in siphoning this money off into the Maytas transaction that would have the effect of riching a number of members of the founders family.
Moreover it would have made it more difficult for the entity Satyam to meet any damages which the Texas jury might eventually award against them. Further Joyce said, “Our interest really is, we believe and the motion is arguing that it is right and proper that we should have an opportunity to ask the people who proposed this transaction and then defended it in a public domain to ask them what was in their mind when they were contemplating it.”
Satyam is facing suits in US Federal and state courts filed by Upaid claiming fraud forgery and breach of contract as a result of which Upaid has suffered damages to its business and prospects in excess of 1 billion dollar.
Federal court proceeding is scheduled for a Texas jury trial in June of 2009 and Satyam is facing the potential of a very sizeable judgement against it.
At present Satyam has cash resource to pay a one billion dollar plus judgment or the liquidity to support a supersedeas bond.
However on December 16, 2008 Satyam announced a plan to strip 1.6 billion dollar of cash out of the company, an amount that exceeds its cash in a transaction to acquire Maytas properties and Maytas Infra whereby the large majority of this cash would go to the family of Satyam chairman Ramalinga Raju.
“We are very concerned to be compensated for the huge damage which Satyam has done to us by perpetrating forgeries and fraud,” he said adding that Upaid is concerned to defend against the accusations that Satyam is making about defaming them. “I think our view of the world is Satyam’s behavior does more than enough. We don’t need to disparage them,” he added. Satyam declined to comment saying the matter was subjudice.
Sebi studying Satyam-Maytas deal: The Maytas deal that Satyam Computer had recently proposed, and then backtracked on the face of huge investor outcry, has come under the regulatory radar. On Friday, C B Bhave, chairman, Securities and Exchange Board of India (Sebi), said the regulator was studying the corporate governance issues concerning Satyam, Maytas Infrastructure and Maytas Properties.
“We do not want to react immediately to the incident (the acquisition bid that triggered investor outrage)...we will study issues involved and then come to a conclusion,’’ Bhave told reporters on the sidelines of a conference on securities markets hosted by National Institute of Securities Markets.
Bhave refused to comment any further on the issue saying that would be premature. The study would take whatever time it requires, he said.
On Monday evening, Hyberabad-headquartered Satyam had said it would spend about $1.6 billion from its reserves and also take some debts to gain majority control in Maytas Infra, a listed entity, and unlisted Maytas Properties. Both the companies which were proposed to be acquired were under the management control of Satyam’s promoters and their family members. According to one estimate, if Satyam had its way, the promoters would have made at least $1.4 billion at the cost of other non-promoter shareholders of the company.
Following huge investor outcry about dilution of corporate governance standards by Satyam’s board members, that included three promoters of the company, the company back tracked and hastily announced a buy back proposal. However, with several questions being raised about the conduct of the board members, including some by large institutional investors, the regulator has now decided to have a close look at the company’s recent decisions.
Other than the Satyam-Maytas affair, Sebi was looking at easing some of the restrictions in the currency futures segment and the possibility of including more market participants in that market, Bhave said. “There are some restrictions in this market on who can trade and we are now looking at if these restrictions can be relaxed,’’ Bhave said. The Sebi chief was responding to a question on whether other types of participants will be allowed in futures trading. At present, foreign institutional investors and non-resident Indians are not allowed to trade in currency futures.
PALE SHADOW OF THE PAST - UP & DOWN THE HILLS
By M H Ahssan
Twenty years ago, the first name that came to mind while talking of corporates in Hyderabad was the Nagarjuna Group. But that was then. It is now a downhill journey for the group whose boss K S Raju is cooling his heels in judicial custody these days.
It was a bright star that shone on the business horizon of Hyderabad in the early 1970s when the city was dominated by public sector units and there were hardly any private businesses in the reckoning. The Nagarjuna group is still synonymous with a prominent locality in the upmarket area that goes by the name Nagarjuna Hills where many of the groups offices are located. Superfluous though, employment in the group was a prize job for the youth in the state.
Founded by KVK Raju, a first generation technopreneur, the group’s first foray was into steel with Nagarjuna Steels. Then came Nagarjuna Fertilisers and Chemicals Limited (NFCL), that became the flagship company of the group which commissioned the first gas-based fertiliser plant in south India at Kakinada in 1992 and currently has a capacity to produce 12 lakh MT of urea per annum.
However, the now-beleaguered Nagarjuna Finance Ltd (NFL) was established in 1982 to foray into the financial services business. Interestingly, at one point of time it was a highly respected company. “It was a solid company with branches all over the country and at one point of time was the top financial services company in south India,” recalls an old timer. But what went wrong? “I think later, by the time they gained momentum in collecting deposits, there was heavy competition with interest rates being paid going really high. So they couldn’t service the deposits and that did it in,” explains a former senior executive of the group.
Even as the group’s chairman K S Raju is facing criminal charges for fraud at the moment, there are supporters who feel that he was surrounded by the wrong kind of people whom he trusted. They in turn misled him with their advice. But then the leader has to take responsibility for the consequences of both his right and wrong decisions. “The group’s luck ran out and many of its plans did not fructify,” quips another employee.
The group had a very good run for many years as it slowly diversified into packaging with Nagarjuna Signode and later into power and oil refining. “The group had a lot of futuristic ideas and was probably ahead of its times. In 1995, the group employed almost 40 IIM graduates, perhaps the highest in corporate India,” says the executive.
The group’s foray into oil refining saw the emergence of Nagarjuna Oil Corporation, a sixmillion metric tonnes per annum (MMTPA) petroleum refinery at Cuddalore at an estimated cost of Rs 4,790 crore. But later it sold off 20 per cent of its holdings to the Tatas.
Further, after starting Nagarjuna Power Corporation with a bang, setting up a Rs 4,300-crore, 1,015-MW, coal-fired, Nagarjuna Power Plant at Mangalore in Karnataka, the group sold a 74 per cent stake to the Hyderabad-based Lanco group two-and-half-years ago. The first company in the group, Nagarjuna Steel, has been sold off to Pennar Steels.
One wonders why such high-profile projects the group got into seemed to simply lose steam after a while necessitating selling off stakes to others. One, it reveals that the projects are fundamentally sound. If not, there wouldn’t be buyers for that. “But what’s missing is a commitment and the necessary drive to see the projects through. It’s basically lethargy.
Moreover, over the years many retired bureaucrats have been appointed in key positions as advisors and consultants. And many of them were actually a drag on the company, both financially and on its pursuit and focus. This prevented fresh and innovative ideas from being pursued for better results,” points out a senior executive who was with the group. However K S Raju now nearing 60 and presently cooling his heels in jail is responsible for these half-hearted initiatives. “In a way he lacks the drive his father had and that zeal to implement projects right to the last T,” says a former senior manager of the company.
Today, some of the group companies include a part from the flagship Nagarjuna Fertilisers and Chemicals, Nagarjuna Agri Chem, Vijayalakshmi Insecticide and Nagarjuna Agri Research Institute and of course the Nagarjuna Foundation in Kakinda.
After all the highflying growth now the group seems to be heading towards a downward path and away from its founder’s vision. It has become a pale shadow of its fine past.
WHAT DID K S RAJU DO?
K S Raju, chairman, Nagarjuna group, after his arrest on Monday was sent to 14 days of judicial custody by a city magistrate at Nampally court on Tuesday. His partner in crime is P K Madhav, who is presently President and CEO of Maytas Ltd. The charge by the police was that Nagarjuna Finance Ltd has failed to return depositors about Rs 100 crore that was due to them.
They were arrested under Section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act and under Sections 420 and 406 of the Indian Penal Code after scores of complaints were filed by aggrieved depositors.
Interestingly, Madhav was finance director on the board of Nagarjuna Fertilisers and Chemicals Ltd for nearly two decades during 1982-2001.
In fact, this is a culmination of a fiveyear battle wherein Raju has been fighting lawsuits filed against him by the ministry of corporate affairs through the Registrar of Companies, which moved the economic offenses court against him and other directors responsible for raising public deposits that were not returned. However, Raju has been arguing to absolve himself of the responsibility of paying the depositors. Since the group had divested its equity holding in NFL in favour of the Mumbaibased Mahalakshmi Factoring Services Ltd (MFSL) in September 2000, the onus now lies on MFSL to pay dues by way of realising receivables, he says.
As the case takes a new turn and the court takes its time to deliver its verdict on Raju and Madhav, there are different opinions. “I give Raju a clean chit as I believe he had no malafide intentions to cheat anyone. However, he had neglected the running of the company and left it to others. Moreover, people deposited their money with faith in the name of Raju and Nagarjuna Fertilisers, which enjoyed good brand equity. So, one cannot escape that responsibility,” explains a banker who was associated with the company. He adds that to say NFL and NFCL are two different companies is not entirely correct as there was an association. The fact that a PSU bank got a letter of comfort from NFCL for the bank’s exposure to NFL some years ago proves this beyond doubt, though this was not public knowledge.
But a former executive of the Nagarjuna group says, “You have not returned the hard earned money of middle class and lower middle class people. But you live in a mansion and move about in swanky cars. How do you justify all this?” he asks.
Twenty years ago, the first name that came to mind while talking of corporates in Hyderabad was the Nagarjuna Group. But that was then. It is now a downhill journey for the group whose boss K S Raju is cooling his heels in judicial custody these days.
It was a bright star that shone on the business horizon of Hyderabad in the early 1970s when the city was dominated by public sector units and there were hardly any private businesses in the reckoning. The Nagarjuna group is still synonymous with a prominent locality in the upmarket area that goes by the name Nagarjuna Hills where many of the groups offices are located. Superfluous though, employment in the group was a prize job for the youth in the state.
Founded by KVK Raju, a first generation technopreneur, the group’s first foray was into steel with Nagarjuna Steels. Then came Nagarjuna Fertilisers and Chemicals Limited (NFCL), that became the flagship company of the group which commissioned the first gas-based fertiliser plant in south India at Kakinada in 1992 and currently has a capacity to produce 12 lakh MT of urea per annum.
However, the now-beleaguered Nagarjuna Finance Ltd (NFL) was established in 1982 to foray into the financial services business. Interestingly, at one point of time it was a highly respected company. “It was a solid company with branches all over the country and at one point of time was the top financial services company in south India,” recalls an old timer. But what went wrong? “I think later, by the time they gained momentum in collecting deposits, there was heavy competition with interest rates being paid going really high. So they couldn’t service the deposits and that did it in,” explains a former senior executive of the group.
Even as the group’s chairman K S Raju is facing criminal charges for fraud at the moment, there are supporters who feel that he was surrounded by the wrong kind of people whom he trusted. They in turn misled him with their advice. But then the leader has to take responsibility for the consequences of both his right and wrong decisions. “The group’s luck ran out and many of its plans did not fructify,” quips another employee.
The group had a very good run for many years as it slowly diversified into packaging with Nagarjuna Signode and later into power and oil refining. “The group had a lot of futuristic ideas and was probably ahead of its times. In 1995, the group employed almost 40 IIM graduates, perhaps the highest in corporate India,” says the executive.
The group’s foray into oil refining saw the emergence of Nagarjuna Oil Corporation, a sixmillion metric tonnes per annum (MMTPA) petroleum refinery at Cuddalore at an estimated cost of Rs 4,790 crore. But later it sold off 20 per cent of its holdings to the Tatas.
Further, after starting Nagarjuna Power Corporation with a bang, setting up a Rs 4,300-crore, 1,015-MW, coal-fired, Nagarjuna Power Plant at Mangalore in Karnataka, the group sold a 74 per cent stake to the Hyderabad-based Lanco group two-and-half-years ago. The first company in the group, Nagarjuna Steel, has been sold off to Pennar Steels.
One wonders why such high-profile projects the group got into seemed to simply lose steam after a while necessitating selling off stakes to others. One, it reveals that the projects are fundamentally sound. If not, there wouldn’t be buyers for that. “But what’s missing is a commitment and the necessary drive to see the projects through. It’s basically lethargy.
Moreover, over the years many retired bureaucrats have been appointed in key positions as advisors and consultants. And many of them were actually a drag on the company, both financially and on its pursuit and focus. This prevented fresh and innovative ideas from being pursued for better results,” points out a senior executive who was with the group. However K S Raju now nearing 60 and presently cooling his heels in jail is responsible for these half-hearted initiatives. “In a way he lacks the drive his father had and that zeal to implement projects right to the last T,” says a former senior manager of the company.
Today, some of the group companies include a part from the flagship Nagarjuna Fertilisers and Chemicals, Nagarjuna Agri Chem, Vijayalakshmi Insecticide and Nagarjuna Agri Research Institute and of course the Nagarjuna Foundation in Kakinda.
After all the highflying growth now the group seems to be heading towards a downward path and away from its founder’s vision. It has become a pale shadow of its fine past.
WHAT DID K S RAJU DO?
K S Raju, chairman, Nagarjuna group, after his arrest on Monday was sent to 14 days of judicial custody by a city magistrate at Nampally court on Tuesday. His partner in crime is P K Madhav, who is presently President and CEO of Maytas Ltd. The charge by the police was that Nagarjuna Finance Ltd has failed to return depositors about Rs 100 crore that was due to them.
They were arrested under Section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act and under Sections 420 and 406 of the Indian Penal Code after scores of complaints were filed by aggrieved depositors.
Interestingly, Madhav was finance director on the board of Nagarjuna Fertilisers and Chemicals Ltd for nearly two decades during 1982-2001.
In fact, this is a culmination of a fiveyear battle wherein Raju has been fighting lawsuits filed against him by the ministry of corporate affairs through the Registrar of Companies, which moved the economic offenses court against him and other directors responsible for raising public deposits that were not returned. However, Raju has been arguing to absolve himself of the responsibility of paying the depositors. Since the group had divested its equity holding in NFL in favour of the Mumbaibased Mahalakshmi Factoring Services Ltd (MFSL) in September 2000, the onus now lies on MFSL to pay dues by way of realising receivables, he says.
As the case takes a new turn and the court takes its time to deliver its verdict on Raju and Madhav, there are different opinions. “I give Raju a clean chit as I believe he had no malafide intentions to cheat anyone. However, he had neglected the running of the company and left it to others. Moreover, people deposited their money with faith in the name of Raju and Nagarjuna Fertilisers, which enjoyed good brand equity. So, one cannot escape that responsibility,” explains a banker who was associated with the company. He adds that to say NFL and NFCL are two different companies is not entirely correct as there was an association. The fact that a PSU bank got a letter of comfort from NFCL for the bank’s exposure to NFL some years ago proves this beyond doubt, though this was not public knowledge.
But a former executive of the Nagarjuna group says, “You have not returned the hard earned money of middle class and lower middle class people. But you live in a mansion and move about in swanky cars. How do you justify all this?” he asks.
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