Standing tall: Gunapati Venkata Krishna Reddy of GVK (left) and Grandhi Mallikarjuna Rao of GMR

Chances are that most people would not have heard of the GMR Group till a few months ago (though conscientious BT readers might remember that this magazine covered the low-key group in April 2004). Chances are also that most people still do not know that the group boasts top and bottom lines of Rs 1,500 crore and Rs 162 crore, respectively. And it's almost certain that they don't know it will be implementing projects worth Rs 8,000 crore over the next five years. But, what they will almost definitely know is that the GMR-Fraport consortium has won the bid to modernise the Delhi airport, pipping such megacorps like Reliance-ASA, DS Constructions, Sterlite and Macquire to the post.

Interestingly, it was late Andhra Pradesh Chief Minister N.T. Rama Rao's decision to impose prohibition in his state that prompted the GMR Group-founded by the 55-year-old Grandhi Mallikarjuna Rao, better known by his initials, GMR-to enter the infrastructure sector. In 1994, he had raised Rs 50 crore to set up a brewery. But, prohibition was imposed soon thereafter. Says G.B.S. Raju, Director (Finance), and elder son of the patriarch: "My father turned this setback into an opportunity. Instead of crying over what might have been, he used the money to foray into the then newly opened up power sector."

In 1995, the group bagged the Basin Bridge Power Project in Tamil Nadu. Rao says he entered the power sector for two reasons. "The first was the severe power shortage in south India; I could see that the rapid industrialisation that was taking place there would create a massive demand for power. The second reason was marketing: there was only a single customer-the state electricity board (SEB)," he says. After a pause, he qualifies this statement: "Most SEBs weren't particularly healthy financially, but power producers were relatively safe so long as they had watertight agreements and escrow accounts." The 200 mw Basin Bridge Power Project, set up at a cost of Rs 935 crore, is unique in many ways. It is the world's largest diesel-fired power plant under one roof and has a 15-year power purchase agreement with the Tamil Nadu SEB. The GMR Group's second power project was the 220 mw project in Tanir Bhavi, near Mangalore in Karnataka. The Rs 850-crore project was implemented ahead of schedule within cost and is one of the world's largest barge-mounted power plants.

Kiran Kumar Grandhi: The younger son of GMR heads the Rs 1,760-crore greenfield airport project in Hyderabad

Says B.V.N. Rao, Head of Energy and Roads, GMR Group: "When CMS Energy and PSEG, two us companies which had invested in the Chennai and Mangalore power projects, respectively, wanted to withdraw in 2003 (as a part of their policy of divesting their Asian assets), GMR could have arm-twisted them into agreeing to a fire sale. But he paid them the full value of their investments. Do you think they will ever forget this? It is such long-term relationships which are critical to our success."

Power is a priority sector for GMR. The Rs 1,125-crore, 388.5 mw Vemagiri Power Project in Andhra Pradesh will be commercialised in the first week of April, taking the group's generating capacity to 800 mw. Meanwhile, the group has set up an internal committee to examine the possibility of entering the nuclear power sector. "We like to do our homework in advance and invest resources much ahead of the competition. That gives us an advantage in the marketplace once a sector is thrown open to the private sector," says P.B. Vanchi, Sector Head, Business Development for Power. "Our goal is to eventually emerge as a complete player-with a footprint spanning generation, distribution and trading-in the power sector," adds G.M. Rao.

The group also has a sizeable presence in the roads sector. It operates two National Highway projects on the Tambaram-Tindivanam and the Tuni-Anakapalli stretches in Tamil Nadu and Andhra Pradesh, respectively. Besides, the GMR Group has bagged four new toll-based road projects in Tamil Nadu, Andhra Pradesh, Haryana and Punjab which will require investments of about Rs 1,500 crore over the next five years. B.V.N. Rao, who is also a member of Group Executive Council, the apex governing body of the GMR Group, says: "The road business is lucrative if one is able to accurately forecast the growth in traffic. We have done a good job of that."

G.B.S. Raju: Holding the purse strings

But the sector that really gave the GMR Group its current high profile is airports, or more specifically, the project to modernise the Delhi airport. But long before this, in 2000 to be precise, the group bagged the contract to build the Rs 1,760-crore greenfield airport at Hyderabad. "Twenty per cent of the work has been completed and we are racing against time to complete balance work within the next 24 months," says Kiran Kumar Grandhi, the younger son of G.M. Rao who heads the project. The first flight is expected to take off from the airport in March 2008. Its capacity: 7 million passengers and 100,000 tonnes of cargo per annum. Malaysia Airports Holding, which operates Kuala Lumpur and other airports in Malaysia, holds an 11 per cent stake in the project.

Srinivas Bommidala, son-in-law of GMR, who heads the internal group that will handle the Delhi airport project, is understandably reticent about it "as the matter is still sub judice". But, he does reiterate his resolve to "complete it before the 2010 Commonwealth Games once it gets going".

Interestingly, the GMR Group does not usually implement its projects itself. Instead, it outsources the actual construction to others. So, what is the core competence of the group? "We are not a typical construction company," admits G.M. Rao. "Our core competence lies in our relentless focus on the infrastructure sector, managing relationships and executing projects under budget and within time."

K.V. Kamath, Managing Director and CEO of ICICI Bank, who has extended substantial loans to the group, says: "The GMR Group has consistently displayed an ability to proactively identify emerging opportunities, put together well-structured business plans and execute them flawlessly. These strengths mark them out for success in the high growth infrastructure landscape." That's high praise, coming that too from a man not known for dishing out compliments like confetti.

Sanjay Reddy: "I am the one who drives new opportunities

G.M. Rao-an engineer who started his professional life in 1974 as a minor bureaucrat in Andhra Pradesh's public works department, before resigning to join his family's jute trading business-has now practically exited the jute trade and is looking to sell his ferro alloy business as well. Will he also exit the agri-business? "It is a part of our social commitment. Besides, from a long-term perspective, sugar is a good business to be in," says K. Balasubramanian, Sector Head for Manufacturing, which runs both the ferro alloy and sugar businesses.

Meanwhile, there are some challenges that the group has to sort out immediately. The founder's two sons and son-in-law run substantial portions of its operations; so, it is seen as family run and conservative. This might come in the way of the group attracting and retaining talent. "That is not true," counters the founder. "No family member has an automatic right to enter the business. One can be just a shareholder, while professionals run the organisation on a day-to-day basis. The family has drawn up an internal policy guideline which we all adhere to. In future, no one can automatically enter the business unless he has the required competencies," he declares emphatically. G.M. Rao also points out that a number of senior professionals have joined the group in the recent past. "The family is completely out of stable businesses like agri, power and roads. It is involved only in airports," he says.

GVK

Does the name Gunapati Venkata Krishna Reddy ring a bell? Probably not. How about the acronym GVK (hint: it's emblazoned on tennis star Sania Mirza's sweatshirt.)? The bells are ringing now, aren't they? Yes, that's the man. "My only regret is not being born 20 years earlier. We would have grown with the economy then," says the lanky, 68-year-old us national. Is he joking? His eponymous group is expected to close 2005-06 with a turnover of Rs 750 crore, an asset base of Rs 5,000 crore, a profit after tax of close to Rs 90 crore and-this is really his claim to national fame-has bagged the Rs 5,000-crore contract to modernise the Mumbai airport, beating off competition from a host of national and international rivals.

Mumbai airport: A jewel in GVK's crown, perhaps

"The infrastructure sector accounts for more than half the group's turnover. The rest comes from particle boards, hotels and bio-sciences," says A. Issac George, CFO, GVK Power & Infrastructure, the group flagship, who joined the then Rs 100-crore group in 1995 and helped it grow to its current size. On the anvil are forays into oil, gas and logistics. "I am the one who drives new opportunities," says Reddy's 41-year-old son G.V. Sanjay Reddy, who is married to Aparna 'Pinky' Reddy, daughter of T. Subbarami Reddy, Minister of State for Mines. "We've also been shortlisted for the Hyderabad metro rail project," the US-educated engineer-MBA adds.

The group is dreaming big today, from what seems like a reasonably strong base. But, it wasn't always like this. Says Sanjay: "The third quarter of 1990 was a major turning point for GVK. That's when we bid for the Rs 817-crore Jegurupadu Phase I power project. Winning that project changed the entire face and focus of GVK." Prior to that, the largest project handled by the group was a Rs 30-crore hotel in 1987. "It taught us to think big and undertake complex projects," he adds.

GVK Power and Infrastructure Ltd, the holding company of the group that went public recently, holds 53.96 per cent stake in GVK Industries, which has two power plants. The first, the 216 mw Jegurupadu Phase I in Andhra Pradesh, was the first Independent Power Plant (IPP) in the country. Its 220 mw second phase has just been completed and is ready for operations (it's awaiting fuel supply); it will be commissioned shortly. That apart, GVK Power holds a 47.47 per cent stake in the 464 mw Gautami Power Plant in Peddapuram near Kakinada in Andhra Pradesh, which is expected to be commissioned by September this year. Once all the three plants become operational, the group will have a total capacity of 900 mw.

Hotel Taj Krishna: Yet another GVK success story

G.V.K. Reddy, a keen tennis player who began his entrepreneurial career as a small contractor in the 1950s, took his first step into the big league in 1974 when he set up Novopan, a company that makes plain and malamine particle boards, in technical collaboration with Farhni Institute of Switzerland. Manufacturing (which includes two other companies) today contributes about Rs 130 crore turnover. He followed this up with a foray into the hospitality sector. His partner in the hotels business is the Taj Group. Taj gvk, a joint venture between the two groups, currently has a room inventory of 683; this is expected to touch 1,023 by 2007-08 and 1,387 by the following year. Taj gvk ended 2004-05 with a turnover of Rs 116 crore and a post-tax profit of Rs 22 crore. Its main properties: Taj Krishna and Taj Residency in Hyderabad and the upcoming 215-room Taj Chennai. The JV recently launched a Taj hotel in Chandigarh and is planning another in Bangalore for which it is in the process of acquiring land.

These apart, the GVK Group is also slowly building up critical mass in the biotechnology sector. GVK Biosciences, which started out as a bio-informatics and training outfit in April 2002, has since moved into drug discovery and development, medicinal chemistry, process chemistry, clinical trails, clinical data management, BA (bio-availability)/be (bio-equivalence) studies and pharma it and ITEs services. Its main growth areas: clinical research, biology, process R&D, pharma, it and ites. And it's USP: D.S. Brar, former CEO of Ranbaxy Laboratories, is its chairman. "GVK Biosciences will be a reasonably large company by 2010," says Sanjay. It posted a top-line of Rs 75 crore in 2004-05. This is likely to double for the just-ended financial year. The target: revenues of Rs 500 crore in five years and Rs 1,000 crore in 10. GVK Biosciences figured in BT's 2005 listings of 20 companies to watch in 2006.

But there's room for concern as well. A majority of group companies are privately held and run by members of the promoter family. Sanjay dismisses these concerns as unwarranted. "We are still in an early phase of our existence and, therefore, need to be driven by passion and entrepreneurial ability which family members provide," he says. However, he adds that the group has put in place processes to build teams that can take it to the next level.

The high point in GVK Group's existence is the Mumbai airport project. No one, though, is willing to talk about it since the matter is sub judice. But the buzz is that the government is determined to see the entire process through by end-April and hand over the airport's operations to GVK soon thereafter.

Says Sanjay: "I think the next 10 years are the key for us. Our goal is to emerge as an infrastructure powerhouse across all areas." The group has, in the past, shown an uncanny knack for picking winners. It sponsored Sania Mirza when the world was still unaware of her. It has now decided to back five potential tennis stars, the youngest of whom is eight years old. If things go according to his script, his group will have emerged as a powerhouse by the time the world discovers another tennis star.