You are here: Rediff Home » India » Business » Special » Features
Search: The Web
  Discuss this Article   |      Email this Article   |      Print this Article

GMR: From commuting on a cycle to building global airports
Anirban Chowdhury
 · My Portfolio  · Live market report  · MF Selector  · Broker tips
Get Business updates:What's this?
July 13, 2007

Close to three decades ago, when people saw Grandhi Mallikarjuna Rao cycling 25 kilometres everyday around his village in Andhra Pradesh collecting money for the farm poduce he had supplied, they never thought he would one day own the first Indian company to develop an international airport.

On 10 July 2007, GMR Infrastructure [Get Quote] bagged the contract for an international airport - the Sabiha Gokcen International Airport in Istanbul. Along with its Hyderabad airport partner, Malaysia Airports Holding Berhad, and Limak, a construction company in Turkey, the group will build an international terminal in the Euro 400 million development project.

GMR's stocks jumped nearly 7 per cent, touching a 52-week high after the deal. But this global foray is only an extension of GMR's dominance in India, where it is the only developer handling two airport development projects.

There is the greenfield Hyderabad international airport, which will open by March 2008 and handle around 12 million passengers. It will also be fit to handle an Airbus A380, a vision Rao had seen years ago.

Grandhi Mallikarjuna RaoTwo, the Rs 8,000 crore (Rs 80 billion) development of the Delhi airport, which, a year after GMR took over, is acknowledged as the fastest developing airport in the country. The airport will be able to handle around 37 million passengers after the first phase in 2010.

GMR is setting up "aerotropolises" around both airports for premium and business hotels, convention centres, golf courses, and so on. GMR has already invited bids for building hotels on nearly 40 acres of land around Delhi airport. An MRO (maintenance, repair and overhaul) facility with Lufthansa Tech at the Hyderabad airport is also on the cards.

For Rao, it has been a long journey - from handling a jute mill to doing global infrastructure projects. The turning point, self-admittedly, came in 1985 when Rao became a director in Vysya Bank.

"It was in the banking sector that I learnt the lessons of financial discipline and also how projects are structured," says the media shy chairman of GMR who has assets worth Rs 15,000 crore (Rs 150 billion) in airports, power and roads.

When Rao took over the reins of the bank in 1994, its non-performing assets had touched 15.6 per cent. Rao brought in ING as a partner and scaled down the NPAs to 4.5 per cent. He finally sold a 50 per cent stake in the bank and part of the Rs 380 crore (Rs 3.8 billion) from the sale went into the Hyderabad airport project.

Not many people know that Rao's entry into infrastructure was an accident. Rao was all set to invest in a brewery when Chandrababu Naidu tipped him off about the prohibition of liquor distilleries he would announce after coming to power.

Around that time the power sector was opened for privatisation and Rao focused all his energies on the Chennai power project, for which he got the licence. After three power projects in Tamil Nadu, Karnataka and Andhra Pradesh, the company has recently been aggressive about hydro projects with three power plants in Uttarakhand, Orissa and Arunachal Pradesh to be operational by 2010-11.

Rao forayed into airport infrastructure when he realised the uncertainty in the power sector. He was also among the first to be bullish about aviation - way back in 1999 when the Andhra government had just invited bids for the Hyderabad airport.

After Hyderabad was bagged, there were claims that the government would not create a monopoly by giving a second airport (Delhi/Mumbai) to the same developer. But notwithstanding protests from competitors about an unlawful bidding process, GMR got the Delhi airport project.

"Around Rs 34 crore (Rs 340 million) was spent for the bidding. It was a golden opportunity and Rao did not want to miss it," says a company insider and close associate of Rao.

Global benchmarks in sight, Rao even has international models for his family. There is a detailed family constitution detailing Rao's succession, qualifications of family members to enter the family business (they must be management graduates), their remuneration and perks, among other details.

"We decided on a legal framework so that the family stayed together and disputes were solved within it," he said in an interview to Business Standard a few years ago.

Powered by

More Specials
 Email this Article      Print this Article

© 2007 India Limited. All Rights Reserved. Disclaimer | Feedback