The Changing Industrial Landscape of Hyderabad

15 08 2008

 

 

Hyderabad, the city of Nizam, is a historical city. It is home to various businesses and business-houses. Unfortunately, the city does not have a single business-house or company that has been a blue-chip for an extended period of time.

 

 

In the last 25-30 years, the industrial and business landscape has changed a great deal in the city. In the 1970s and ’80s, Hyderabad was home to a number of Public Sector Units (PSU), some state and several central PSUs.

 

Hyderabad Allwyn was a large state PSU. Allwyn refrigerators and furniture were quite popular all over the country. Allwyn, also had a watch unit in collaboration with Seiko. Later, Allwyn got into LCVs in collaboration with Nissan. Hyderabad Allwyn became sick and it no longer exists. The LCV unit has been sold to Mahindras.

 

Andhra Pradesh Government had set up a scooter unit in collaboration with Piaggio. They came up with Vespa PL170, when Bajaj Auto used to have long waiting lists. Once, Bajaj Auto increased its capacity, AP Scooters failed to survive.

 

HMT and its subsidiary Praga tools was another large PSU. Although, HMT still exists, it is a pale shadow of its former self. BHEL and HAL existed then, they exist even today. They may not be hot, but they are steady companies. IDPL was a PSU with a large bulk drug unit in Hyderabad. IDPL is often credited with the pioneer status and the nursery of all the pharma units in Hyderabad.

 

In the private sector, VST with its Charminar brand of cigarettes was a prominent company. VST’s brands no longer have the market shares they used to command in the past and has now become virtually a small unit of ITC/BAT. There are several ITC group companies and divisions which operate from Secunderabad. ITC Agrotech was a hot company in the 1990s, with its Sundrop brand of edible oils. ITC sold this division to ConAgra. Other ITC Group companies in Hyderabad include ITC Bhadrachalam Paperboards and ITC Agri-business division.

 

In the 1980s, the Nagarjuna Group created waves. It set up quite a few companies in diverse industries. Nagarjuna Steels was the most high-profile among them. Nagarjuna Fertilizers, Nagarjuna Finance, Nagarjuna Construction and Nagarjuna Signode being the other companies in the group. Nagarjuna Steels has folded up. Nagarjuna Signode has since become ITW Signode. Nagarjuna Finance became insolvent resulting in lakhs of depositors losing their savings, giving Nagarjuna a bad name. Nagarjuna Fertilizers and Nagarjuna Construction (NCC) have survived. NCC has availed the infrastructure boom and its stock is now considered a good one. The Pennar Group, came up alongside the Nagarjuna Group, copying their strategies and business plans. Most of their businesses are defunct today.

 

Bakelite Hylam and IDL (now Gulf Oil) were the other big industries of the 80s, which exist even today. Bakelite Hylam, a pioneer in laminates, became sick in 2004 and is slowly recovering under a BIFR package. Gulf Oil is a fringe player in the lubricants and explosives market.  

 

 

In the 80s, the pharmaceutical industry grew rapidly in Hyderabad. Cynics often attribute its rise to the theft of intellectual properties and processes from IDPL. Standard Organics and Dr. Reddys Laboratories were the big pharma companies that were set at that time. Standard Organics and its sister company SOL Pharmaceuticals, no longer exist. But Dr Reddy’s has become a large company through acquisitions. It was considered a blue-chip until recently. However, Dr Reddy’s stock was removed from the Nifty index  recently.

 

Aurobindo Pharma, Matrix Laboratories, Divi’s Laboratories are some of the other large public listed pharma companies from Hyderabad. Aurobindo Pharma, a widely tracked company among equity analysts, is losing favor among investors and was recently removed from the Nifty Junior index.

 

Hyderabadi entrepreneurs suffer from a dangerous herd mentality. Businesses like aquaculture, mini-cement plants, granite, ceramic tiles, financial services etc. have either folded up or on the verge of closure. Most of these companies raised money through IPOs and large number of small investors have lost their savings in these companies. This has caused a great deal of harm to the image of Hyderabadi entrepreneurs.

 

If there is one big blotch in recent industrial history of Hyderabad, it is the collapse of Global Trust Bank (GTB). Although, the bank got eventually taken over by Oriental Bank of Commerce, its miserable failure still rankles in the mind of many a  Hyderabadis.

 

Hyderabad experienced a major shift under the leadership of the then Chief Minister – Chandrababu Naidu. His efforts in making Hyderabad a center of IT industry and knowledge economy resulted in the city being known as Cyberabad.

 

Satyam Computers is the biggest name in the Hyderabad IT industry. The company has grown from strength to strength and is the biggest employer in the city. In keeping with the Hyderabadi herd-mentality several software companies came up, particularly during the dot-com, Y2K era. Most of these companies were body-shoppers, sending half-trained programmers with doctored CVs, seducing them dollar-dreams of USA. Most of them have shut their shops.

 

Unlike other industries, in IT, Hyderabad has a large number of MNCs operating here. Microsoft and Oracle with their large development centers are big employers. There are several MNC BPOs in the city such as Dell, Genpact, HSBC, Deloitte etc.

 

Hyderabad is home to two reasonably big media companies viz. Deccan Chronicle and Eenadu.

 

As IT industry’s gloss started fading, the Hyderabad entrepreneurs entered the booming power and infrastructure sector. Notable among the big players in power and infrastructure sector include Lanco Group, GVK, GMR Group, IVRCL and several smaller companies.

 

Real estate, an offshoot of the construction business, is also fairly big in the city. Post-2003, Hyderabad like the rest of India, saw a huge construction boom. Maytas ( a company belonging to the Rajus of Satyam), IVR Prime, NCC, Prajay and several small builders have built a sizeable business constructing  in and around the city. Several of the construction companies have also entered construction and operation of retail malls.

 

Cut to 2008, the industrial landscape of Hyderabad is now dotted by companies belonging to the service sector. IT and ITES sectors are the largest employers and the drivers of the city’s growth. For pharmaceutical industry, Hyderabad continues to be an important hub, but with the industry itself facing pressures, the outlook is not bright. A number of mid-size companies in a variety of industries are showing good promise. Some of these companies, in no particular order, include Bartronics, Alpha Geo, ICSA India, Rain Commodities and DQ Entertainment. Time will tell whether they can emerge as blue-chip companies.

 

Unarguably, Hyderabad is a big market and therefore a big trading centre. It has been unable to become a big industrial centre. Among the capitals of southern Indian states, Hyderabad lags behind Bengaluru and Chennai in this respect; it is only ahead of Thiruvananthapuram. The stunted vision and the get-rich-quick philosophy of the Hyderabadi businessmen are largely to be blamed for this state of affairs of Hyderabad.

 

– G. Mohan.

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One response

19 08 2008
Venkat Subramaniam

Interesting analysis of Hyderabad’s business history.
In my opinion, one of the reasons why Hyderabad lags behind the other southern states as an industrial centre is because of their general preoccupation with land and land deals. Any businessman who thinks in terms of deals only, loses the larger perspective of on-going business. For many NRI’s from Andhra Pradesh there is this dream of settling down in Hyderabad with a good life style. Hence, thier long term endeavours in Hyderabad are generally in the back-burner.

Chandrakant Sampat (Warren Buffett of India) has commented that the present economy in India is inflationary because it is an economy of waste. The Hyderabad of today epitomises this economy. In this aspect, if we were to compare Hyderabad to other Indian cities, then it comes closer to Gurgaon. It is very different from Pune and the other southern states where Indian business houses like Bharat Forge, Thermax, Telco, TVS, Ashok Leyland and Titan are thriving because of their long term vision.

Gurgaon is more like Hyderabad where MNC’s have set up their base and are more predominant as compared to the Indian business houses in these cities.

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