Taking up a contract to paint a building may not be the perfect beginning for a chartered accountant. Building homes for shanties may not be the right path for a civil engineer to realise his towering dreams. But then, as they say, impossible is nothing.
Vyomesh M Shah, a chartered accountant and his elder brother Hemant M Shah, a civil engineer, started off as small-time construction contractors in 1981, with a loan of Rs one lakh and no assets at all.
Today, their firm, Akruti City, has helped them succeed in realising their dreams –of becoming one of the biggest real estate development companies.
Akruti Nirman (now Akruti City) was incorporated in 1989. The company offered shares to the public in January 2007 at Rs 540 per share. The shares of the company got listed in February 2007 and have more than doubled since then. Up by 117 per cent, in fact, to close on Friday at Rs 1175.90. In the process, while the investors turned richer, the promoters’ wealth soared by Rs 1,025 crore.
As per the data available on the Bombay Stock Exchange website, the promoters hold 89.9 per cent stake in the company, which has a market capitalisation of Rs 7,051 crore as on Friday.
“Our first job was to paint a building for Rs 42,000. Then we started getting contracts from the government, which helped develop our skills. We got our first real estate project in 1985. We were operating under the name Vishal Constructions then,” says Vyomesh Shah.
That was a time when Hiranandani Builders and Raheja Constructions were lapping up most projects in Mumbai.
“When we started doing real estate projects, the sector was dominated by Hiranandhani and Raheja. So we decided to develop slums,” he says.
Taking the path less travelled pays at times. Slum redevelopment formed a major revenue generator in the crucial years of the company. It formed 80 per cent of the company’s revenue for years and now contributes almost 18 per cent. Vyomesh says the days were among the most hectic and satisfying in the formative years of the company. “Rich people go to social service. We got rich by doing social service,” he claims proudly.
The most difficult part for the Shahs was winning the trust of slum dwellers. The slum dwellers were skeptical of builders as men who had promised better housing and took money from them, never to be returned.
“We never asked for any money. We worked for 18-20 hours those days, holding street meetings even late at night, when men return from work to the slum. We kept on holding meetings in slums from Grant Road to Mulund. And it paid,” says Shah.
In October 1996, the state government approved the guidelines for slum redevelopment. According to him, profit of the company has grown at more than 35 per cent since its incorporation and is set to continue.
The company is focusing on expanding its business verticals. It is building a theme based 3,000-acre housing society in Panvel, while continuing to accumulate land.
“During our IPO, we had only 20 million square feet under development. In the last 9 months, we have kept on adding land and our land bank is 40 million square feet, excluding townships and biotech parks,” Shah says. However, according to market experts, the stock is expensive at the current level as the cost of land has gone up.
“The stock looks expensive at the current levels. The benefit of slum rehabilitation has been factored in already. The recent land acquisitions have been at market price, which when added with the cost of development is likely to give a lower rate of profit hereon,” says Arun Kejriwal, director of Kejriwal Research and Investment Services.