Hi-Tec City: Glass, chrome and code

This writer first saw the future of Hyderabad in a bookstore that, by the time this magazine hits the news stands, will no longer be. "Roadwork," said the man behind the counter when asked why the store, the largest (and finest) repository of used books of every genre (pulp romances to serious non-fiction) in the city and probably amongst the best of its ilk in the country was closing down. "This building is being demolished to make way for a road."

Roadwork and demolitions have become a way of life in Hyderabad. Buildings abutting some arterial thoroughfares have medium-sized numbers painted on in red; 15ft, say some, 16ft, say others; the numbers indicate the magnitude by which the roads are to be widened. Often enough, that means buildings have to come down. Like the building in which the bookstore is (was) housed, they do. This is Hyderabad, not Shanghai. This is India, not China. "Try this out anywhere (else) in India," says T.V. Mohandas Pai, CFO, Infosys. "It is not easy." "It is all about visible action on the ground," says Kiran Karnik, President, nasscom, India's National Association of Software and Service Companies.

Hyderabad's reinvention is evident in the urban renewal and infrastructure enhancement the city is witnessing, and in its residents' attitude to consumption, and partying.
ON-THE-MOVE: Roadwork and demolitions to facilitate them are a way of life	NEW WINGS: The new international airport is work in progress
MALL GAME: Hyderabad's renaissance has been accompanied by a consumption boom	TUNING IN: The city that works hard, plays harder, even on weekday nights

Infosys recently announced its intention to build its largest campus in the country, spread across 550 acres (at a cost of Rs 1,250 crore) in Hyderabad. In an interview with this magazine (see In Four Years, This Will Be The Number One State), Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy says that five of the country's largest textile companies will soon have manufacturing facilities in the city; he adds that Andhra will soon announce a very large investment in the automobile sector, but refuses to specify whether this will be in Hyderabad.

SemIndia, a consortium promoted by non-resident Indians working towards establishing a $3 billion (Rs 13,500 crore) semiconductor manufacturing facility in India has announced that Hyderabad is its preferred location (The consortium signed a Memorandum of Understanding with the state government in February this year).

In the nine months between April 2005 and January 2006, 127 software firms have set up shop in Hyderabad. And all this in a city that has emerged the capital of India's life-sciences industry and which Utkarsh Palnitkar, Indusrty Leader, Health Sciences at Ernst & Young India calls "the hub of the biopharmaceuticals industry." There's something happening in Hyderabad.

Same Old, Same Old

The thing is, Hyderabad has been here before. In 1998, when then Chief Minister Nara Chandrababu Naidu catalysed the creation of Hi-Tec city, Hyderabad was spoken of as Cyberabad, the next big (after Bangalore) destination for it companies. Not content with that, the man also facilitated the creation of Genome Valley, a Silicon Valley inspired borough that would, he reckoned, serve as the base for India's biotech industry.

While more than a few it companies and several hi-tech biotech start-ups did make the city their home, however, Hyderabad didn't exactly become the next big thing. Between 2000 and the middle of 2004 Bangalore went through an urban mini-renaissance, Chennai got its act together and successfully promoted one of its suburbs Siruseri as the ideal destination for it firms, and Pune's proximity to Mumbai, India's commercial capital, paid rich dividends at a time when the economy and the stock market were on a roll.

HOW HYDERABAD COMPARES Hyderabad faces tough competition from Chennai, Bangalore and Pune

HYDERABAD POPULATION: 5.5 million RULING PARTY: Congress CHIEF MINISTER: Y.S. Rajasekhara Reddy The momentum is clearly with the city that has emerged the capital of the Indian life sciences industry: several infrastructure projects are works in progress, the landmark Fabcity project is to be housed here, as will Infosys' largest campus, and the government seems to have struck the ideal rural-urban balance. BANGALORE POPULATION: 7 million RULING PARTY: JD(S)-BJP CHIEF MINISTER: H.D. Kumaraswamy Two years of neglect hasn't done anything for Bangalore's claim that it is a city of the future. Strangely enough, they haven't hurt the city too badly with the cluster effect (and salubrious climate) still continuing to draw companies. And the new Chief Minister has promised to set things right. PUNE POPULATION: 3.8 million RULING PARTY: Congress-NCP CHIEF MINISTER: Vilasrao Deshmukh Pune is as close as close can be to India's commercial capital Mumbai. It also boasts more centres of higher learning than any other city. Not surprisingly, its steady progress as a preferred destination for new-age firms-it is already the capital of India's auto industry-has accelerated in recent times. CHENNAI POPULATION: 6.4 million RULING PARTY: AIADMK CHIEF MINISTER: J. Jayalalithaa Its suburb Siruseri promises to be the most happening IT-borough in all Asia, Nokia has invested in a manufacturing facility and a telecom park (in a special economic zone), and it boasts a vibrant traditional base of auto companies (including Korean car major Hyundai and Ford).

In the 2004 elections, Naidu's Telugu Desam Party lost to the Congress; the former's mantra of urban-renewal hadn't made him popular with Andhra's agricultural community.

The new government, headed by Rajasekhara Reddy was expected to go all out to assuage the concerns of the rural and agricultural populace and it has done just that: the state's 2006-2007 budget has set aside Rs 10,000 crore for irrigation projects; this amount is 61 per cent of the planned outlay of Rs 19,551.9 crore for the year. Finance Minister K. Rosaiah points out that the allocation to irrigation is a 51 per cent increase over last year's and claims that no other state in the country pays as much attention to the sector.

Hyderabad has become the epicentre of India's pharmaceutical and biotech industry; the city plays host to some 500 pharma firms.

TOMORROW'S WORLD: ICICI Knowledge Park at Genome Valley

NEW ORDER: A worker at Divis, one of India's newest and hottest pharmaceutical companies

FRONTRUNNER: K. Anji Reddy, Chairman, Dr Reddy's Laboratories

The popular consensus, after Reddy came to power, was that Andhra Pradesh would focus on the agricultural and rural sectors to the exclusion of all else (this, after all, was what the new government that came to power in Karnataka in 2004 did for almost two years, one reason for Bangalore's ills).

That hasn't happened. The new government has committed investments of over Rs 10,000 crore towards upgrading Hyderabad's urban infrastructure. It hasn't shunned business and businessmen the way Karnataka's government did after the 2004 elections. For instance, in August 2005, in a meeting with Reddy Infosys Chairman and Chief Mentor N.R. Narayana Murthy pointed out that English not being a medium of instruction in the government schools was one reason for the widening gap between the haves and the have nots; in late January 2006, Reddy announced that English, not Telugu, would be the medium of instruction in all government schools.

"There seems to be a political will to build Hyderabad into a great city," says Kiran Mazumdar-Shaw, Chairman and Managing Director, Biocon. "The first thing that strikes you when you visit the city is that the infrastructure is good and the government appears committed to building infrastructure." "The state government has been very proactive and has treated us well," adds Infosys' Pai, in the context of the company's decision to build its largest campus in the city.

The Tipping Point

Every renaissance needs a tipping point. The one for Hyderabad's reinvention would have to be SemIndia's decision to locate its chip fabrication facility in the city. With a proposed investment of $3 billion (Rs 13,500 crore) over several stages-the first stage involves an investment of $75 million (Rs 337.5 crore)-the SemIndia fab, as it is populary known, is working with the state government to set up the 1,200-acre Fabcity that will not only house the fab project but also multiple fab units and hundreds of suppliers that the campus hopes to attract over time. At peak flow, the SemIndia project will produce 30,000 wafers a month, or 40 million chips a year.

"Sometime in September 2005, I was getting ready to make my first presentation about our industry and was quite impressed with the fact that most officials were already familiar with much of what I wanted to say,'' says Vinod Agarwal, President and CEO, SemIndia. Later, he adds, he was impressed by the fact that Hyderabad was a clean city (compared to several others in India) and thought that this would be a good place to live and work. As he pointed out in February when he signed the MoU with the state, "Nowhere has anybody signed an MoU within a week of announcing the project location.''

Part of Hyderabad's renaissance has also come at Bangalore's expense; the latter's infrastructure crumbled between 2004 and 2006, and this, coupled with the apathy of the local government, caused several companies to look to other cities such as Chennai, Gurgaon, Noida, Pune, and Hyderabad (a new government is now in place in Karnataka and the new Chief Minister H.D. Kumaraswamy has made all the right noises thus far).

THE CHALLENGES OF DEVELOPMENT What Hyderabad needs and what it is doing towards that.

IT's best: Hi-Tec city plays host to IT's best-known names like TCS (left) International Airport: Under construction. Will be operational by early 2008. Equipped to handle 22 flight movements an hour and 7 million passengers a year. Better and More Roads: Roadwork is in progress. By 2008, the city will have an outer ring road, an eight-lane expressway that is some 160 km long (total cost: Rs 3,000 crore); four new flyovers are also being constructed (the city is seeking funding for 24 more flyovers and 2 railway overpasses from the Jawaharlal Nehru National Urban Renewal Mission). Decongesting the City: At planning stage. The city has planned 22 townships along the new outer ring road. Parking: Norms have been revised to encourage builders to provide more parking; tenders will be floated in the next couple of months for parking complexes in six to seven locations. Urban Transport: Hyderabad has 2 million vehicles and registers 7 million vehicle movements a day. The share of public transport in this is 40 per cent. The government wants to increase this to 55 per cent in the next four years by which time the first phase (60 km) of the metro rail project will be complete. Water: The state may crow about the fact that it got the Fabcity project because it agreed to meet SemIndia's demand for 20 million gallons a day, but poor infrastructure and distribution means most residents don't get as much water as they'd like. The state is investing around Rs 2,000 crore through various projects (including one that will pipe water from the river Krishna to the city) and is also tapping the national urban renewal mission for funds. Power: The city has no problems meeting the current peak demand of 20 million units per day. While there is some concern that no new thermal power generation plants are expected to go on stream before 2008-09, this is offset to some extent by gas finds in the Krishna Godavari basin. The key will be pipelines, including one in which the state is a partner, making gas available to power projects such as GVK Power's Jegurupadu Phase II as soon as possible.

And part of it has also come from initiatives taken by previous governments that have made Hyderabad the de facto capital of the Indian life sciences industry (at last count the state had some 2,500 pharma and 75 biotech companies with bulk of the activity being in and around Hyderabad). Reddy's government has carried this focus forward by proposing a special economic zone for pharmaceuticals at Vizag, Andhra Pradesh's second most important city.

Hyderabad already boasts the ICICI Knowledge Park, where several R&D hotshops are located, and the S.P. Biotech Park, a campus dedicated to the manufacture of biotechnology products that is conveniently located next to the knowledge park. "All this could provide Hyderabad a distinct advantage over other geographic locations," says Ernst & Young's Palnitkar.

Here To Stay?

The buzz about Hyderabad becoming one of the most happening investment destinations in the country is also reflected in a consumption boom in the city. "We call it the Chandigarh of South India," says Kishore Biyani, Managing Director, Pantaloon Retail; his company has already invested Rs 250 crore in Hyderabad and will do an additional Rs 500 crore over the next two years. Already, 18 per cent of the company's revenues come from the city.

"In Four Years, This Will Be The Number One State"

The Andhra Pradesh assembly is in session, the Union Finance Minister is in town, but Chief Minister Y.S. Rajasekhara Reddy manages to fit Business Today into a 15-minute slot. Excerpts: Why should an investor come to Hyderabad? Bangalore is still it for IT. Pune is close to Mumbai. Chennai has a thriving base of IT and auto companies.... Just minutes before you walked in we have learnt that a major investment in the automobile sector is coming to the state. I cannot reveal anything more than this at the moment. Other than trying to be proactive and quick in our responses we have tried to look into industry needs and the most crucial among them are those related to infrastructure. In the next 3 to 4 years, this will be the number one state in the country. Apart from IT, what are the other sectors on your radar? I have just told you about the major investment in the auto sector. In the next one year, 10 to 15 important textile players are going to set up shop here. At least five of them would be in Hyderabad and about five to 10 in Vizag. We now want to focus on food processing as well. What do you see as lessons from Bangalore's experience? Bangalore is clogged. We should run ahead. We started the work on the international airport three years later than Bangalore but will complete it at least a month or two ahead of them. We are planning keeping in mind needs 15 to 20 years from now.

Hyderabad's dozen-odd pubs do brisk business, with special nights dedicated to retro music, salsa, and women the current rage; it's hard to find standing space at night-spots such as Ahala at the Taj Krishna or Dublin at the ITC Kakatiya Sheraton, even on week nights; and the city's tony shopping district Somajiguda is replete with the outlets of popular Indian designers. Pantaloon's Hyderabad Central mall offers 250,000 sq. ft. of shopping space; another mall, GVK One, which will be ready by the end of 2006 will offer 650,000 sq.ft. Dining out options include everything from sushi to Belgian waffles to meat cooked in khau-SWE, a Burmese-style gravy.

All these are important because Hyderabad still figures behind Bangalore and Pune in the list of preferred places to work for it pros, according to most executives in the industry. "Hyderabad still needs to improve in terms of quality of life and become more cosmopolitan," says Infosys' Pai, "but this is an evolutionary process and it is happening." Pubs, nightclubs and malls are only part of the equation; water, power, housing, sewerage, traffic management, law and order, and quality of schools and colleges are as important.

Legacy reasons may mean that Hyderabad never catches up with Bangalore, but given the state government's pro-rural, and pro-agricultural stance, the city's recent progress is unlikely to attract the kind of backlash Bangalore's did. That could make its economic growth, much more rapid, and much more consistent.