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Anand Piramal on why the group is betting big on real estate, eCom

By Dev Chatterjee
September 07, 2015 09:06 IST
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Anand Piramal says he wants to change the game in the realty sector and especially remove the trust deficit between customers and developers. 

 

The venue selected by Anand Piramal, the 30-year old son of Ajay and Swati Piramal and the scion of the Piramal Group, was mainly due to its view.

Ziya, the Indian food restaurant at the New Oberoi in Mumbai, has a breathtaking view of the Arabian Sea and Malabar Hill — the residence of India’s billionaires like the Piramals.

“This is a quiet place for lunch and it offers a great view of the city… This is something we will try to replicate in our own multi-storey project on Marine Drive,” says Piramal as we sit down in the near-empty restaurant.

We both order shikanji — a spiced lemonade drink perfect for a balmy afternoon in a rainless Mumbai.

I start by asking Piramal about the Rs 3,000-crore or Rs 30 billion investment received by Piramal Realty from global financial power houses, Warburg Pincus and Goldman Sachs amid a real estate collapse in Mumbai.

The money was invested in Piramal Realty — which, in turn, is investing in developing four large properties in Byculla, Kurla, Thane and Mulund in Mumbai.

“India will soon be the second-largest economy in the world and we would double the size of our economy in nine years — if we continue to grow at this pace. The demand for real estate will continue to rise. Both Warburg and Goldman Sachs saw a reliable partner in us and decided to invest in equity…

This is the biggest FDI in the real estate sector in recent years in spite of the current volatility in the global markets,” says a soft-spoken Piramal, who completed his BA from University of Pennsylvania and studied business management from Harvard University in 2009.

With waiters hovering around, we order pumpkin lentil soup and at the same time also order for the main course as we do not want any interruptions later. A vegetarian, Piramal orders paneer makhani, black dal with mushroom naan, while I, a frugal eater, order makai dhingri — a corn and green peas dish — and a bread basket.

With the order out of the way, I ask Piramal about the recent volatility in the Indian markets and its lagged impact on the real estate sector.

Piramals are the largest investors in the Indian real estate sector after HDFC, with investments worth $3 billion already.

The investments are made via its real estate funds as well in developing new properties.

Piramal says the real estate price fall is temporary and it’s a matter of time before demand picks up again.

This demand will fuel the company to join the league of $1-billion real estate companies in India.

As of now, it’s the tough real estate regulations, which are holding back the company from reaching its goal, he says.

“There are 199 approvals needed to start any project in Mumbai. These approvals take at least one to three years before a project takes off.

As the cost of capital keeps going up after buying land, it makes real estate very expensive in the metropolis and even unaffordable for many.

But the last two Development Control Regulations have made it easier and the real estate sector will benefit due to these relaxations,” says Piramal.

Just to prove his point, he gives the example of Burj Khalifa in Dubai — the tallest tower in the world, which was built in five years, while in India, on an average, a real estate project takes at least eight years to complete.

Piramal says he wants to change the game in the realty sector and especially remove the trust deficit between customers and developers.

The Piramals want to bring in global standards in the sector, which is marred by low quality of construction and delay in delivery to customers.

For this, the Piramals invited HDFC Chairman Deepak Parekh, Harvard Business School Dean Nitin Nohria, former CEO of Emaar group Robert Booth and Subbu Narayanswamy, director and head of Real Estate in Asia, McKinsey & Co, on its board.

“The idea is to get the best of the world so as to create world class assets in India... When I travel abroad I realise how Indian buildings are so dilapidated and lack soul. We will try to change that,” he says.

The family believes in empowering its people and that’s the reason why Piramal says across all its businesses, the group hired the best professionals from around the world.

“Nohria personally interviewed the top management of the realty company from candidates from all over the world.

The family prefers to empower the professionals so as to get the best results,” said Piramal.

The Piramals made global headlines in 2010 when the family sold its well-established pharmaceutical business to global pharma giant Abbott for a staggering $3.72 billion.

The win-win acquisition gave American pharma giant Abbott a sizeable market share in India while the Piramals used the billions to invest in other sunrise sectors such as real estate, financial services, health care and in Vodafone’s India unit — which it exited later at a hefty profit.

The fact that Abbott is prospering in India while the sale of rival pharma company (read Ranbaxy) ran into a controversy shows the trust enjoyed by the group among its peers, says Piramal.

“When we received the feelers from Abbott, we realised that it was a good offer, which is beneficial for all shareholders of the company. As we believe in trusteeship on behalf of the rest of the shareholders, we decided to exit the company.

Since our exit, sales of the pharma company have continued to grow and shows Abbott has signed on a good deal,” Piramal says as he asks me to taste the beetroot sauce — a specialty of Ziya, which turned out to be quite tasty despite its bright violet colour.

In the last five years, the Piramals invested a billion dollars in Shriram Transport, grew their health care and real estate businesses and bought and then exited at a huge profit from Vodafone India Limited.

“Most of our investments are made after long due diligence and on the principle of trust… The idea is to emerge as a nimble gorilla and invest in companies offering good returns on our investments,” says Piramal as we finish our lunch. Shriram Transport is the world leader in truck financing and the company’s value system is the same as that of the Piramals. Both the companies are conservative and prefer a low profile. The match is perfect.

I ask Piramal how it was growing up with a businessman father and doctor mother. Piramal says both his parents say their respective jobs are important for society: while his mother saves lives, his father creates jobs.

“From the beginning we were taught The Bhagavad Gita by our parents and the value of detachment. I want to create businesses, which do well as well as do good for society.

My parents are great believers of sangat, which basically means we have to be in the company of good people to grow in life.”

So what’s the best business advice he has received, I ask Piramal.

“Mr (Mukesh) Ambani told me to achieve all my goals before I turn 30.

He told me this when I was 25. I am 30 now and I still have many goals left. I wish I had got his advice earlier,” says Piramal as we both order chamomile tea and skip sugary desserts for health reasons.

I ask Piramal whether their group missed the e-commerce bus — the sector is receiving billions of dollars in valuation from investors across the world, including the Tata group, which invested $100 million in Uber.

Piramal says he is “intellectually curious” about the e-commerce business model and uses Uber on a regular basis.

Piramal also joined a trip organised by McKinsey for family business owners to Flipkart to understand the model. The e-commerce business model is creating jobs and increasing the wages of, say, a Uber driver.

“Let’s say we are curious about this e-commerce business and as and when we receive a good offer, we will look at it,” says Piramal. As I bid him goodbye, I wonder whether yet another big-ticket acquisition is brewing for the Piramals.

Image: Anand Piramal

Photograph: Courtesy. Anand Piramal/Facebook

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