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Betting big on realty

In the last of our series on wealth creators, we look at a company that began with building irrigation canals in rural Andhra Pradesh, reports Vyas Mohan.

india Updated: Dec 13, 2007 21:04 IST
Vyas Mohan

From building irrigation canals in rural Andhra Pradesh in the late 1980s, Maytas Infrastructure has come a long way to establish itself as one of the biggest players in construction business.

“We started off making small irrigation canals in rural Andhra Pradesh. The state government’s emphasis on agriculture helped a lot in getting projects at that time. Slowly we moved on to buildings and structures,” says the company spokesperson. At present, the company has a contract to develop two airports in Karnataka.

The company issued its shares to the public in October this year at Rs 370 per share, something that has turned out to be a goldmine for investors. The share price has more than doubled (up by 240 per cent) in less than two months, since their listing on October 25. It closed on Thursday at Rs 889.40.

Though analysts admit that its stocks are expensive at curent levels, they say the company has a fundamentally sound business model and a robust project pipeline. “The stock was fairly valued during the IPO. The company has bagged a few orders as well after the IPO. However, the stock has run up a bit too much since listing and looks expensive at current levels,” said an analyst with a domestic brokerage who wished not to be named as he is set to meet the company's management soon.

The company has a total market capitalisation of Rs 5,222 crore, according to Bloomberg data. The promoters hold 36.6 per cent in the company and their wealth translates to Rs 1911.25 crore. As per the data available on the public domain, the company has orders worth Rs 4,000 crore, to be executed in the next 30 months.

Teja Raju (the son of Satyam Computer founder and chairman B. Ramalinga Raju), one of the promoters of Maytas who has been on board since 2001, has been instrumental in the company’s growth in the recent past. After completing his engineering and MS from the Carnegie Mellon University in the US, Raju went on to join Maytas Infrastructure, rather than joining his father’s well-established Satyam Computers. He is now the vice-chairman of Maytas.

Maytas has signed an agreement with the government of Karnataka to build two airports. The company will construct one airport each at Gulbarga and Shimoga. The two projects together have 600 acres of land, out of which more than half will be used for the airport’s operation. The remaining area will be developed by the company for building infrastructure for other purposes.

“While Shimoga is a beautiful small town with plenty of natural resources, Gulbarga is more of a trade city. According to the characters of both areas we plan to establish structures suitable for the hospitality industry or theme parks in Shimoga and may build a cargo hub in Gulbarga,” he said.

The company, in a consortia with Nagarjuna Constructions and VIE India Project Development and holding LLC, has bagged the project on a build operate and transfer (BoT) basis.

The company is also in the process of building an integrated residential township in Orissa for Vedanta Alumina. This will have a built-up area of over 14 lakh square feet.

The company executes its businesses under four heads, namely design and engineering, project development and financing, construction management, procurement and logistics, project management and technology deployment.