After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.
Sujay Kalele remembers the scepticism when he made his first presentation to the Kolte-Patil board in early 2011. Shortly after taking over as chief executive in January 2011, Kalele had been tasked with setting the agenda for the next three years. He’d worked out the numbers and made a fair assessment of where the company would be. He felt there was very little room to go wrong. Still, when the 31-year-old presented the numbers, the reaction was one of disbelief.
Kolte-Patil, the Pune-based firm which has been in business for two decades, had seen its revenue halve to Rs 107 crore in the year ended March 2009. Kalele projected that by March 2013 they’d reach Rs 800 crore in sales. A stunned silence followed. People in the room wondered whether he was being a tad too optimistic. Remember, the memories of the Lehman Brothers bankruptcy and the drying up of demand for new office space was still fresh in their mind.
But as Kalele explains, “I knew that these were the projects we had to launch. Permissions were there. It was now up to us to execute and construct. Revenue would follow.” Sure enough, the company ended March 2013 with Rs 764 crore in sales and an impressive post-tax margin of 17 percent.
“Their delivery track record is impressive. They’ve taken timely steps and reached far,” says Shobhit Aggarwal, managing director, capital markets, at real estate services firm Jones Lang LaSalle.
It is from here that the company has set up an ambitious plan to grow and be counted among the top league of real estate developers in India. Sure, it doesn’t have the swagger of some of its Mumbai counterparts or the dependability that some Bangalore-based names are known for. But as the last three years have shown, timely delivery and right pricing is more important to building a sustainable business than large land banks. It’s a story that is just beginning to be taken note of by the markets. In the last year, the company’s stock has trebled from Rs 30 to Rs 90. It is also the first real estate company to announce a 45 percent payout of profit as dividend.
Recently, Kolte-Patil, which also has a presence in Bangalore, entered the Mumbai market with two society redevelopment projects. Here too its aim was simple: Margin expansion. The aim for the next three years is to double revenue to Rs 1,500 crore and have a presence in more markets. Not bad for a company which, just a decade ago, was doing just Rs 10 crore worth of business.
The Early Years
In 1989, when Rajesh Patil entered the business started by his father, he could have hardly imagined the many twists and turns it would take over the years. At that time the company would operate from Jalgaon in Maharashtra with a very simple business model: Buy land and build one-storey row houses. Cash flow from construction would pay for the land and once the project was complete, they’d move on to the next development.
Patil, finding the scale too small for his liking (plus, he says, as a civil engineer, the type of work was not challenging), moved the business to Pune, which held larger potential. Here he managed to work jointly with land owners and would move from project to project. This was in the early 1990s, and he says his family insisted that he wouldn’t over-leverage for land purchases or get into bed with politicians. As the company grew, Patil also realised that systems and processes were what would get them ahead.
Patil’s big break came in 2003 when real estate markets in India were poised for an upswing. The company’s saleable area (in Pune and Bangalore) increased to a million sq ft and his firm also got into IT Parks. During this heady phase for the realty sector, the company grew rapidly—there was an IPO in 2007—only to see sales fall by half in 2008. After this, Patil says the second phase began, which was one of consolidation and getting systems and processes in place. “We must admit we took our eyes off the ball,” says Patil.