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Feature / Cover Stories MAGAZINE | JAN 22, 2011

SHAPOORJI

The Phantom Player

It’s got a hand in most infrastructure projects . But little is known about Shapoorji Pallonji other than its links with Tata Sons.
KANDULA SUBRAMANIAM

H ere’s a quiz ques tion. Who holds the largest individual s take in Tata Sons? Want a clue? His las t name is not Tata. Corporate India folklore refers to him as the
‘phantom of Bom bay House’, but the extremely media s hy Pallonji Shapoorji Mis try, the chairman of the Shapoorji Pallonji group, controls a turnover of over $ 5 billion.

When construction and other infrastructure companies are lining up to get lis ted on the s tock exchanges, Shapoorji Pallonji—the country’s oldest as well as the mos t reputed
construction company with net sales of Rs 3,089 crore in March 2009—still prefers to stay far away from the markets

. Ironically, the only two companies under the Shapoorji Pallonji group that are listed—Forbes & Company and Gokak
Textiles—have nothing to do with the construction and real estate business that Shapoorji Pallonji is famous for.
Once the firm
With the group holding 18.5% stake in Tata Sons—the largest individual s take in Tata Sons—many believe that Pallonji Mistry, who recently starts owning
became an Irish citizen, is expected to have a say in who is going to head the Tata group after Ratan Tata s teps down in 2012. Pallonji is also capital intensive
probably relieved to be out of the Niira Radia line of reflected infamy now. Surprisingly, the public relations of the Pallonji companies are not core projects, it
under Radia’s Vaishnavi Com munications, which handles the Tata accounts. The founder and the company are so media s hy that even the may consider
public relations officer of the company would not talk to Outlook Business. entering the
market.
Iconic Buildings

Shapoorji Pallonji first started as Littlewood Pallonji, founded by Pallonji’s father, Shapoorji Mis try. It was this com pany that built the famous
reservoir in Malabar Hills that has m et Mumbai’s needs for water for over 100 years .

Over the years , the nam e Shapoorji Pallonji & Co has becom e synonymous with s ome of the country’s most iconic constructions, including the Taj Intercontinental Hotel, the
Reserve Bank of India building and the HSBC building all in Mum bai and some famous sports stadia such as the Braboune stadium in Mumbai and the Jawaharlal Nehru
stadium in Delhi.

Though the company has been constructing large projects , it is yet to be the owner of a large infrastructure project. In other words, while it is into project execution in the form of
EPC (engineering, procurement and construction) works , it is yet to own such projects. While companies such as Tata Power got into project execution after it won large
projects, in the case of Shapoorji Pallonji, the reverse is yet to happen. Sources say though that this could change soon. It is understood that the Shapoorji Group recently
offered a very attractive tariff of Rs 2.8/unit for a large power project in Gujarat.

Owners’ Headache

In that regard, an analyst fam iliar with the construction business says that the need to raise large amounts of capital for construction companies arises when these companies
become owners or concessionaires of projects. This m oney is needed to fund the equity component of the project. But if the com pany is engaged only in construction, then the
paym ents are made to the construction company by the concessionaire or the owner of the project. Once companies such as Shapoorji Pallonji start owning or taking m ajor
equity positions in large capital intens ive infrastructure projects, they m ay consider entering the m arket.

In fact, in a recent and rare interview to the m edia, Shapoor Mistry, MD of Shapoor Pallonji, s aid the company was not “avers e to the m arket” but that there was really no
requirem ent at this s tage for it to enter the m arket. According to him, while the group companies currently “had very good rates” (of growth), the company was also looking at
some “large infrastructure projects.” But it was too early to talk about them .

While Shapoorji Pallonji’s m ain bus iness is cons truction, the group als o owns Afcons Infrastructure—one of the largest players in the infrastructure construction s pace—which
it acquired in 2000. Afcons stands apart from other group companies of Shapoorji Pallonji such as SP Fabricators, which is into providing engineered facades, cladding,
architectural coatings for building, and Sterling and Wilson, which is into providing m echanical engineering and plumbing s ervices.

Afcons has already built close to 3,000 km of national highways and has even taken up contracts for constructing s ome of the country’s nuclear power plants.

In fact, the company is currently executing the Chenab Railway Bridge for the Konkan Railway Corporation. When constructed, this bridge at 360 meters is expected to be the
talles t in the world. Between 2005-06 and 2009-10, Afcons on its own has seen a 28% growth in total income, which crossed Rs 2,300 crore in 2009-10. With an order book
that crossed Rs 5,700 crore in March 2010, Shapoorji Pallonji even planned to list the company in 2007. However, s ources in the company said this decision had been put on
the backburner after the markets began to tank.

While company officials are currently tightlipped on whether they were reviving their plans for the IPO, what they did say was “wait and watch”. The m ystery continues.

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