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Tuesday, May 24, 2011

Vascon forays into industrial and logistics park space with Rs 1,000 crore project

Vascon Engineers Ltd has formed a limited liability company (LLC) to launch its foray into the development of industrial and logistics parks business. The Pune-based BSE-listed engineering, procurement and construction (EPC) company has joined hands with Renaissance Micro Infrastructure & Realty P Ltd for the construction of this project. Spread over 250 acres, the development will come up village Vashere, Bhiwandi extended suburbs of Thane district.

R Vasudevan, managing director, Vascon Engineers Ltd, said, this is the first time we have got into developing a project of this nature through V R LLC. “The model being followed here is based on the high volume and low cost approach. With a total area of 16 million sq. ft. this Rs 1,000 crore project will be completed in the next five years. In terms of realisation, on a Rs 250 crore a year basis, we are expecting a profit after tax (PAT) of 7-8% annually,” he said.

Vasudevan is also of the opinion that this development will pave way for similar opportunities across the country given the dire need of industrial and logistics space in India. “The focus is on adding bandwidth to the portfolio and projects like this have great potential in the company. Besides, this being a low-cost model can very well be replicated in different locations across the country,” he said.

In another development, Vascon has sold its first hospitality project in Goa operating under the banner Vista do Rio. The 41-room apartment hotels was being operated and managed by Vascon. Elucidating the reasons, Vasudevan said, despite being located strategically the property wasn’t operating to its optimum level and hence the decision to sell. “It has been bought out by a Shimla-based hotelier for Rs 15 crore. The sale proceeds will be used to fund our real estate developments in the country.

On the real estate front, Vascon is looking to launch eight residential development projects in this financial year. These projects will add 4 million sq ft to the company’s overall development (total area under construction) of 6.6 million sq. ft. Of the 4msf, around 1.5msf is likely to get completed in this fiscal.

Analysts tracking Vascon are of the opinion that the scheduled launches by the company will keep the real estate activity / momentum on and complement their EPC business. “Considering their outlay for the current fiscal, we feel the company should be able to maintain 20-25% overall growth in the top line,” said Dipesh Sohani, research analyst with MF Global.

However, there are some concerns expressed as well especially on the real estate business. “The real estate sector in general is facing significant challenges. Companies are faltering on execution and projects are getting delayed. This apart increasing interest rates are impacting residential sales significantly. So we’ll have to see how the management is able to deal with these challenges going forward,” said an analyst requesting not to be quoted citing media policy.

Vasudevan however, is confident that their projects will not face execution problems. “Most of our projects are in markets where there is very genuine demand for residential housing. Besides, these units are priced very attractively in the Rs 3,200 to Rs 3,900 bracket. The projects will also be tweaked as per the market response during the development stages thereby minimising any potential impact,” he said.

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