Sujit Kanoria, Managing Director , Shrishti Infrastructure Development Corporation

What, according to you, have been the main factors driving Shrishti’s growth?
We are a very conservative company and so instead of aiming for the sky right away, we go ahead in measured steps. This is because if you dream of the sky then chances are that you may have a great fall. We have three divisions viz. construction, infrastructure development and consultancy. For consultancy we have a tie-up with HUDCO and have carried out planning projects for many cities across India such as for Sikkim and for cities in Uttar Pradesh and Rajasthan under the JNNURM scheme. With urbanisation on the rise, there has been a paradigm shift towards Tier 2 and Tier 3 cities and our model is in tune with such developments. This can be witnessed in Durgapur where the construction of the City Centre was a great success.

Enthused by the response, we have started building townships in that area. We are now building Shrishti Nagar in Asansol as also an industrial township in Jalpaiguri. Maruti Suzuki Ltd has bought a large tract of property in and around that area. In Haldia we are building a sports city, which means a township with a stadium. In the construction segment we have started focusing on power plants which require an engineered approach and provide better margins. The margins have, however, declined in the road construction business. We have already received an EPC order for a 2,000 MW power plant. Our focus is also on integrated development and hotels. With 6.8 million tourists coming to India every year and a mis-match between the demand and supply of accommodation, the hotel business has good potential.

Could you elaborate about the premium that you charge?
We have two models. In the Tier 2 and Tier 3 cities we go by the market rate and do not charge any premium. However, for projects like service apartments where the facilities offered are on par with the best of hotels, we charge a premium. By doing so, we have created our own brand. If you look at Rajarhat in Kolkata, you will see that Unitech is selling at Rs 3,000 per sq feet but we are selling at Rs 10,000 per sq feet. This is because we want to create exclusivity.

How do you select the locations for your hotel projects?
We are taking a slow and steady approach towards this venture. It is not that we are picking up 100 locations at a time. We have selected Kolkata because we believe that this is the most under-penetrated market in the country while the average occupancy of more than 93 per cent holds out good scope for further development. We are also coming up with projects in Udaipur in Rajasthan and Shantiniketan in West Bengal and have signed up a project in Pondicherry. We were suggested Bangalore and Delhi but there already is a saturation of hotels in these two cities. The prime consideration while choosing a location for a hotel is that it should be able to provide a steady yield in the future.

What are the modes of financing such projects?
We have SPV (special purpose vehicle) structures for our business. For example, the hotel in Kolkata is under the SPV of Shrishti Hotels with investments from a fund, bank and our own equity. We also have a joint venture with the Government of West Bengal and HUDCO and these all are separate SPVs.

Doesn’t a small-cap company face a big challenge when it comes to sourcing finance? How do you manage that?
I agree that a small-cap company faces a challenge of sourcing finance. In our case, we have overcome the problem by taking land on long-term leases. This has been better than investing huge amounts in land banks.

It is said that if small-cap companies form a consortium, the potential is much higher for them. What are your views on that?
I agree with this perception. If you look at real estate and infrastructure development you will observe a lot of partnerships. For instance, a company owning land may tie up with another company to develop the property and so on. It is always better to form a joint venture rather than going on a stand-alone basis as it minimises the risk factors.

What is your take on technological upgradation? How does it help?
I am always of the opinion that information at the right time reduces your cost. The issue is how to create that information at the right time. If you are handling multiple projects and you do not have an ERP system then there will be a problem. Technology gives you the viability of the cost that can be incurred during the projects and that will help you give out consolidated orders.

Have you been facing challenges in terms of human resources?
In a growing country like India getting and retaining the right talent will always remain a big challenge. You have to therefore treat your employees as your partners. Nowadays people want comfort, job security and the scope to tap their passion and talent along with good salaries. We have been fortunate in this respect since our attrition rate has always been low, especially at the higher levels.

Are there any sectoral risks that you foresee?
The biggest risk in this business is execution and that can get compounded with the shortage of labour. It is important to fulfill your commitments and therefore it is best to stay away from grand promises. In fact your completion dates should be such that they offer scope for delivering before time. For instance, we have started our sales in Kolkata only after the sixth floor has been constructed. That also helps boost the buyers’ confidence.