Background
The promoter Ravi Kiran Aggarwal initiated the real-estate activities in 1989 with the satellite township of Navi Mumbai. The entrepreneurial spirit in the organization can be traced to 1973 when Kiran Aggarwal established a steel trading firm, which was followed by a venture in packaged foods. The year 2000 was a special year in the history of Orbit, as it witnessed the genesis of Orbit Cybertech Ltd, later rechristened Orbit Corporation Ltd (OCL), in 2006. OCL aimed at tapping redevelopment opportunities in the island city of Mumbai, specifically in the premium locales of South Mumbai.
At present, Orbit is led by its chairman, Kiran Aggarwal, and MD and CEO, Pujit Aggarwal, who share a combined experience of more than two decades in the real-estate development industry. Under their dynamic leadership, Orbit Corporation has evolved as an enterprise worthy of emulation as regards corporate governance, financial disclosures and global best practices are concerned, and now ranks among Mumbai’s top luxury home developers.
Promoters About Brief
Kiran Aggarwal, executive chairman, an alumnus of BITS Pilani and an MBA from Delhi University, has a rich experience in India’s steel industry. It was a masterstroke of his insight that Orbit started operations by developing properties only in South and South Central Mumbai, thereby lending it a distinctive advantage over similar developers. Under Kiran Aggarwal’s dynamic leadership, Orbit Corporation has now created a niche in the redevelopment sector.
Pujit Aggarwal, managing director and CEO, is an alumnus of Harvard Business School. His lateral thinking and decision-making skills coupled with 16 years of hands-on experience give him an unmatched edge among his peers. Apart from his role as the Managing Director and CEO of Orbit Corporation, Pujit Aggarwal is also the general secretary and spokesperson for Property Redevelopers Association (PRA), a registered non-profit organization for educating tenants on the complicated procedures of redevelopment.
Vision
Orbit’s vision is ‘to be the most sought after organization of the 21st century’.
Mission
The company’s mission is to imbue all our operations with the motto of fair business practices, family values and high growth–high profitability.
To be sought after by:
customers for trust and deliverance
our team for creditworthiness
authorities for transparency
environment for conscientiousness
society for socio-economic transformation
stakeholders for value enrichment
Strategy
Company strategy for business development revolves around the following: to be the most sought after provider of Realty Solutions in the niche segments of Mumbai
Metropolitan Region (MMR) by leveraging our core competence, knowledge and expertise fulfilling housing dreams of Mumbaiites, by using proprietary products, services, design and technology—thereby ensuring a high value quotient for Orbit Properties
making home-buying not only supremely satisfying, but also a truly unique international experience thus enriching the value of stakeholders
The company’s four distinct pillars are quality, technology, innovation and people. These are not just a set of beliefs and mottos, but they are also tangible metrics that are used by the company to measure their patrons’ expectations and exceed one’s own.
History of the Company
1989: Promoter group initiated real-estate activities .
2000: Orbit group was incorporated.
2007: Listed on the National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd in April.
2010: Leading real-estate developer in the MMR, with significant operations in the island city of Mumbai.
Primary focus on redevelopment, cluster development and gated townships.
Focus on niche high-value segments, specializing in high-end residential and ‘built to suit’ commercial properties.
State-of-the-art buildings designed by internationally acclaimed architects.
Pujit Aggarwal, managing director and CEO, Orbit Corporation, has been featured in the INSPIRING 50 Entrepreneurs 2011 list in the DARE—Because Entrepreneurs Do. His lateral thinking and decision-making skills, along with 16 years of hands-on experience, give him an enormous edge among his peers. Apart from his role at Orbit Corporation, Aggarwal is the general secretary and spokesperson for Property Redevelopers Association, a registered non-profit organization that educates tenants on the complicated procedures of redevelopment.
Orbit Corporation is known for its choice of strategic locations, its understanding of housing requirements and speedy execution of projects using state-of-the-art construction practices. Location, design and quality are the core differentiators of Orbit Corporation projects. Orbit is among the top 10 listed real-estate firms in India with a market capitalization of approximately 16,000 million ($355 million).
Since its inception in 2000, Orbit Corporation has completed projects with a total saleable area of 253,772 square feet. The company has 12 projects under development, aggregating to approximately 1.84 million square feet of saleable area. In addition, it has a strong pipeline of around 5.4 million square feet of residential projects, including a gated community project in Mandwa, Maharashtra.
Today, OCL has to its credit three prestigious awards: CNBC Awaaz CRISIL-CREDAI Real Estate Award for ‘Best Residential Property’, Accommodation Times Award for ‘Premium Residential Property of the Year’ and Realty Plus Excellence 2010 Award for ‘Developer of the Year—Residential’.
Subsequently, as per media reporting, Orbit Corporation, Mumbai, an Indian-based real-estate developer, aims at listing its shares on the New York Stock Exchange (NYSE) as it seeks capital
for expansion, said managing director and CEO Pujit Aggarwal. The ` 6.79 billion ($145 million) market cap company is looking to raise about $1 billion through the overseas listing, said Aggarwal. Orbit, which is already listed on the BSE and NSE in India, could list on the NYSE in two to three years. The company would appoint financial and legal advisors six months before the proposed issue, said Aggarwal. Listing on the NYSE would give the company a considerable presence in the global market and would reach various strata of investors globally, he said.
The company, which had sales of about ` 5 billion in the year ending March 2010, is targeting ` 45 billion in top line in the next four to five years, said Aggarwal. Most of the projects are under execution, and a few of them would be completed over the next five years. The company’s cash flow will increase substantially once projects move towards completion, claimed Aggarwal. The company is currently growing at 40 per cent CAGR, he added. Orbit’s one completed project had a 20 per cent premium on costs, whereas it is targeting 30 to 40 per cent profitability for its projects under development.
Competition Market
The Union Budget 2011–12 has liberalized the existing scheme of interest subvention of 1 per cent on housing loans by extending it to housing loans upto ` 15 lakhs, where the cost of the house does not exceed ` 25 lakhs from the present limits of ` 10 lakhs and ` 20 lakhs, respectively. The government has also brought home loans upto ` 25 lakhs under priority lending, from about ` 20 lakhs hitherto. These two measures will help improve demand.
The developers enjoyed tax incentive U/s 35AD of the Income Tax Act. This section provides for 100 per cent deduction in capital expenditure (other than land, goodwill and financial instruments) for developing and building a housing project under the scheme for slum redevelopment/ rehabilitation framed by the central/state government. This benefit has now been extended to an affordable housing scheme of central/state governments. This measure will bring down the tax incidence on approved affordable projects, boost their viability and lead to greater participation in such projects by the private sector. Players in the affordable housing sector such as Unitech, Indiabulls Real Estate and Ansal Properties will stand by all the measures just mentioned.
The real-estate players were expecting an extension of sunset clause U/s 80IB. This provides for deduction in respect of projects approved by local authorities between 1 April 2008 and 31 March 2013, subject to various conditions. One such condition was that the project has to be completed within five years from the end of the financial year in which the housing project is approved by a local authority. The players were expecting an extension of time period for the completion of the project to six years, and an extension of date of approval of the project by local bodies beyond 31 March 2013. Neither of these demands has been accepted, as of now, in the Union Budget. Further, SEZ (Special Economic Zone) developer has been brought under the purview of MAT, which affects real-estate players in the business of development of multiproduct SEZ as well as Information Technology (IT) SEZ (ITSEZ). Similarly, non-extension of STPI exemption also added to the woes of commercial real estate. Fearing non-extension of STPI (Software Technology Park of India) benefits, the IT companies were moving to ITSEZ. Now with the tax benefits on both STPI and SEZ whittled down, this has affected the realty players in general and their commercial real-estate business in particular.
Competitors
A brief financial status of leading competitors in the reality development industry is given below. Sales, net profit and total assets relate to the year ended March 2010, whereas share prices are the latest as in May 2011.
1. Discuss the leadership team that is behind Orbit’s success and growth.
2. Was the year 2007 the right time for OCL to go for public issue? Explain and justify your answer.
3. Given the financials just mentioned, was it a prudent decision on the part of investors to invest in Orbit, if they wanted to invest in the reality sector?
4. Discuss and explain in detail the shareholder value before and after the issuance of public issue.
5. Will OCL be able to list its shares in NYSE in the next three years? Justify.
6. Can this company be placed in the successful category of going in for an IPO for achieving growth objectives? Justify.