Marg Constructions Ltd, the Chennai-based infrastructure company, has offered 1.9 lakh equity shares in the company to Deutsche Bank, AG, Singapore, at Rs 120 each, which is at a premium of Rs 110 per share on a preferential basis. Shortly before the EGM was convened to approve the allotment, G.R.K. Reddy spoke to M.C. Vaijayanthi on issues ranging from Marg's projects to urban planning. Excerpts from the interview:

Tell us about Marg Constructions and the projects you have undertaken.
Marg Constructions is a 10-year old company and we are mainly into infrastructure projects. We have completed three software parks in Chennai, on Old Mahabalipuram Road. We are doing one mall of 5 lakh sq. ft and one economic zone midway between Chennai and Pondicherry on 640 acres of land. Apart from that we are working on Karaikkal Port and one serviced apartment near Siruseri, Chennai. Land acquisitions for all the projects in hand have been completed and the projects are under implementation.
Under a joint venture with the HUDCO, we are bidding for two fishing harbours on the Tamil Nadu coast. Apart from this the JV will also help us in public-private partnership projects.
What are the other areas the Marg-HUDCO JV is aiming at?
We are planning to participate in urban renewal mission (JNNRUM) projects. We want to get empanelled and get into projects like multi-level car parking. They have identified 66 cities. Out of that we would like to participate very actively in the HUDCO joint venture.
The Hyderabad Urban Development Authority has invited expression of interest for two 600-acre townships. The tender is open and we are applying for this under the JV.
What opportunities do you envisage under JNNURM?
Today, whatever cities they have identified like Coimbatore, Madurai and Chennai in Tamil Nadu, Pondicherry, and Visakhapatnam, Vijayawada and Hyderabad in Andhra Pradesh, these are emerging as very fast growing centres for job creation. But infrastructure is lacking in terms of water, sanitation, parking etc. They require planned development as well as viability; basically, you know the viability aspect is from the point of maintaining it. They are taking certain commitments from the corporations in terms of maintenance service levels. The whole concept of faster implementation and maintaining it properly is the viability concept. Now every state has appointed a nodal agency and they are appointing consultants. It is very interesting. That is a very big opportunity for cities to plan and grow in a proper manner.
The working class is really growing fast. If you look at Chennai in the last three years, 75,000 jobs have been created and most of the people are coming from the districts. So if these 66 cities, apart from the metros, are able to plan well, they can be very good growth centres around which the districts can also develop.
Has the urban planning got any better with JNNURM?
The thought process under JNNURM is definitely better. They have taken the help of specialists. If you take Chennai, they are talking of outer ring roads, creating a large corridor along the ring road, creating exit roads, parking space etc. We are also benchmarking to standards considering whatever has gone wrong with our cities in the last couple of years. In the last 10 years growth has happened all of a sudden with new opportunities emerging. But today we are looking at growth targets for the next 10 years and planning for that.
At what cost is this new urban infrastructure coming up and are people in a position to pay for it?
Efficiency is the key to new infrastructure development in the cities. The paying capacity and the income levels have already gone up. People are looking at quality of life and efficiency of services. Three years ago tolls were a mindset. Today, it has been accepted to some extent. Earlier people never used to buy water. Today, for drinking purposes everybody is buying water. For quality facilities, they don't mind paying. I don't see a resistance to charges when facilities are provided in a proper manner and maintained.
What is the outlook for development of software parks?
Software parks are nothing but factories. Typically, software parks are occupied by software companies in maintenance and development and other IT enabled services. Then you have call centres and you have tech support companies. And today, as per data available, 12 lakh people are working in this industry. Going forward, if these companies that have created a brand image expand, we are looking at more jobs coming to India.
Every year the top 10 companies alone are adding 20,000 people each and then you add the other companies and then the IT enabled services. If you go by what happened in the last two years, statistics have always been proved wrong. Growth has been more than what was predicted.
Have you been able to cope up with the demand?
We are really growing comfortably. Today, it is the market that is pushing us, every builder, every developer is busy; all the space is being booked. People are able to develop lands into projects faster. Mutual funds and other real estate funds are knocking at the doors of the developers. So many tenders are coming up in the public-private partnership route. We are being pushed by the industry.
Will the space constraint in big cities take opportunities to tier-II cities?
Tier-II cities are going to grow. We need to move the factories closer to the raw material. So the main centres may be the metros today because of the bandwidth; once that grows the tier-II cities can be linked to Hyderabad, Chennai, that is the only way to go. Already 75,000 people are added to Chennai. Even if 30 per cent of them want to buy houses, each 1,000 sq. ft, you need 30 million sq. ft of residential space. Supply is less. Corporate infrastructure, the professionals working with them, the mindset of the industry, needs to be totally changed. Today, DLF is coming up as a leader. They have benchmarked the industry into a different league. Now with that benchmarking everybody needs to look at where they are against it. The entire community of construction is no more a real estate business, it is an infrastructure creation.
Apart from the JV with HUDCO what other tie-ups do you have?
We have signed a township project with Deutsche Bank. They are taking 18 per cent stake in our company. It is a foreign direct investment. We are also planning an FCCB issue.
What are the issues in taking the PPP route?
It is new, it is evolving. Now it is a competition between state to state, district to district. Because everyone wants to solve the problem of infrastructure, they feel good governance is providing basic infrastructure and good lifestyle despite the level of income. That needs additional support of corporates in urbanised support and then financial support and then implementation and execution support. These things come under the regulatory framework. This is an opportunity we are having after a long time. This is the future.
Is there any fund constraint in the industry following the new provisioning norms by the RBI?
Good proposals are getting funds, be it from mutual funds or through FDI. One needs to look at other options available. Today, everybody looks at projects keeping cash flows from the banks. Now one needs to look at projects when that cash flow is not there. So look at presales or pre-launch or look at alternatives. So long there is market demand for a project and it is rightly placed, funding normally happens. That is why people are coming to the stock markets; 50-60 players are going to be in the market.