Bangalore's 'local boys': From middlemen to biggest real estate agent

Bangalore's 'local boys': From middlemen to biggest real estate agent

How Irfan Razack and his brothers parlayed a small-time haberdashery in Bangalore to become one of India's largest real estate companies.

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Venkatesha Babu
  • Dec 26, 2016,
  • Updated Jan 1, 2017 2:24 PM IST

Post demonetisation, the prognostications from experts have been coming in thick and fast. One uniform forecast seems to be - this move is likely to lead to a 20-30 per cent fall in real estate prices. So, one would expect the head of India's third-largest listed real-estate company to be worried. However, when Business Today met with the nattily dressed, 63-year-old Irfan Razack, CMD of Prestige Estates Projects, he was dismissive of even short-term, forget medium-term or long-term impact on the sector.

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For a long period of time, Prestige was a major player in Bangalore but virtually unknown elsewhere. Two things helped scale up the company - serendipity, and a carefully planned IPO. In the first decade of the 21st century, Bangalore emerged as the country's technology hub with local and multinational companies rushing in to set up operations. This meant influx of a large number of white-collared workers. Between 1991 and 2011, the city's population more than doubled.

All this activity meant that these tech companies needed good quality commercial office space and the workers in those companies needed homes/flats to stay. Also, with their high disposable incomes, these employees needed shopping malls to spend, which meant a retail opportunity. Prestige seized the opportunity with both hands. This was the serendipitous part. The company became a big fish in a growing market.

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However, what gave it real momentum was a bet it made in 2010 to raise money through an IPO. Prestige's CFO Venkat K. Narayana remembers that the markets weren't very buoyant at that time, but they decided to go ahead. The Rs 1,200 crore it raised from the market helped the company take substantial bets.

For instance, in the past three years, revenue and net profit have grown at a CAGR of 20 per cent and 9.4 per cent over this period. Prestige has entered not only several adjacent markets like Mangalore, Mysore, Kochi, Hyderabad and Chennai, but even distant ones like Ahmedabad and Pune. Brokerage house Axis Direct pointed out in September that "management has been prudent in launching projects only after securing all requisite approvals, complying with RERA regulations".

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Although it has widened its footprint and improved revenue mix (today it gets 80 per cent revenue from residential, 13.6 per cent from commercial, 4.5 per cent from retail, and the rest from hospitality), Prestige continues to bank on its core Bangalore market for growth.

A competitor with a more 'national' footprint who did not want to be identified says: "Prestige has also been lucky in the sense that the Southern markets in general and Bangalore realty market in particular has held up well. At least it is better than, say, a Mumbai or NCR market." Irfan Razack, though, admits that FY15 was exceptional, "but increasingly, we are also trying not to sell but lease our commercial assets so as to benefit from annual revenues". Securities trading house Motilal Oswal in a report pointed out that Prestige is likely to end up with annuity revenues of Rs 650 crore this year compared to Rs 520 crore in the previous year.

Even as the third generation of Razacks enters the business, the second generation intends to be in charge for the foreseeable future. Irfan's daughter Uzma is already a director in the company and Rezwan, the Joint Managing Director, also has his son working in the company. The promoters collectively own 70 per cent of the company's shares, and the family has spoken about moving all promoter shares to a holding company to ensure disconnect between ownership and management. For now, though, Irfan Razack is keen on continuing to build his legacy.

Post demonetisation, the prognostications from experts have been coming in thick and fast. One uniform forecast seems to be - this move is likely to lead to a 20-30 per cent fall in real estate prices. So, one would expect the head of India's third-largest listed real-estate company to be worried. However, when Business Today met with the nattily dressed, 63-year-old Irfan Razack, CMD of Prestige Estates Projects, he was dismissive of even short-term, forget medium-term or long-term impact on the sector.

Advertisement

For a long period of time, Prestige was a major player in Bangalore but virtually unknown elsewhere. Two things helped scale up the company - serendipity, and a carefully planned IPO. In the first decade of the 21st century, Bangalore emerged as the country's technology hub with local and multinational companies rushing in to set up operations. This meant influx of a large number of white-collared workers. Between 1991 and 2011, the city's population more than doubled.

All this activity meant that these tech companies needed good quality commercial office space and the workers in those companies needed homes/flats to stay. Also, with their high disposable incomes, these employees needed shopping malls to spend, which meant a retail opportunity. Prestige seized the opportunity with both hands. This was the serendipitous part. The company became a big fish in a growing market.

Advertisement

However, what gave it real momentum was a bet it made in 2010 to raise money through an IPO. Prestige's CFO Venkat K. Narayana remembers that the markets weren't very buoyant at that time, but they decided to go ahead. The Rs 1,200 crore it raised from the market helped the company take substantial bets.

For instance, in the past three years, revenue and net profit have grown at a CAGR of 20 per cent and 9.4 per cent over this period. Prestige has entered not only several adjacent markets like Mangalore, Mysore, Kochi, Hyderabad and Chennai, but even distant ones like Ahmedabad and Pune. Brokerage house Axis Direct pointed out in September that "management has been prudent in launching projects only after securing all requisite approvals, complying with RERA regulations".

Advertisement

Although it has widened its footprint and improved revenue mix (today it gets 80 per cent revenue from residential, 13.6 per cent from commercial, 4.5 per cent from retail, and the rest from hospitality), Prestige continues to bank on its core Bangalore market for growth.

A competitor with a more 'national' footprint who did not want to be identified says: "Prestige has also been lucky in the sense that the Southern markets in general and Bangalore realty market in particular has held up well. At least it is better than, say, a Mumbai or NCR market." Irfan Razack, though, admits that FY15 was exceptional, "but increasingly, we are also trying not to sell but lease our commercial assets so as to benefit from annual revenues". Securities trading house Motilal Oswal in a report pointed out that Prestige is likely to end up with annuity revenues of Rs 650 crore this year compared to Rs 520 crore in the previous year.

Even as the third generation of Razacks enters the business, the second generation intends to be in charge for the foreseeable future. Irfan's daughter Uzma is already a director in the company and Rezwan, the Joint Managing Director, also has his son working in the company. The promoters collectively own 70 per cent of the company's shares, and the family has spoken about moving all promoter shares to a holding company to ensure disconnect between ownership and management. For now, though, Irfan Razack is keen on continuing to build his legacy.

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