The changing industrial landscape of Hyderabad

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.

The Engineering Era

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.

AP government had set up a scooter unit in collaboration with Piaggio. They came up with Vespa PL170, when Bajaj had a long waiting list. Once, Bajaj increased its capacity, this company could not survive.

HMT and its subsidiary Praga tools was another large PSU. Although, HMT 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 breeding ground for all the pharma units in Hyderabad, which came later.

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 commanded 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 include ITC Bhadrachalam Paperboards and ITC Agri-business division.

The Steel Era

In the 1980s, Nagarjuna group created waves. It set up quite a few companies in diverse industries. Nagarjuna Steels was the most high-profile one. 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 and lakhs of depositors, lost 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 considered a good one.

Pennar group, came up alongside Nagarjuna, 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.  

The Pharma wave

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

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 also losing favour and was recently removed from the Nifty Junior index.

Diversions

The AP entrepreneurs have a herd mentality in entering businesses. Some businesses which these entrepreneurs set-up include Aquaculture, Mini-cement plants, Granite, Ceramic Tiles, Financial Services etc. Most of these businesses, have 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 good-will for Hyderabadi and AP entrepreneurs.

The Enron of Hyderabad

If there is one big-blackmark in recent Hyderabad history, it will the failure of Global Trust Bank (GTB). Although, it was taken over by Oriental Bank of Commerce and thereby protecting the depositors’ interests, the collapse of this bank rankles an average Hyderabadi’s mind to this day. 

The IT era

Hyderabad experienced a major shift under the leadership of the then CM, Mr Chandrababu Naidu. His efforts in making Hyderabad the hub of IT industry and knowledge economy, resulted in the city being known as Cyberabad.

Satyam Computers, is the first citizen of 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, showing them dollar-dreams of  USA.Many of them have bitten the dust today.

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

The city is home to two reasonably big media companies, namely the Deccan Chronicle and Eenadu Group.

The Power and Infrastructure tide

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, the city 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 in and around the city. Several of the construction companies have also entered construction and operation of retail malls.

Hot companies of 2008

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. Whether they rise to become blue-chips in the future, only time will tell.

Conclusion

In 2008, Hyderabad landscape is dominated by service sector. IT and IT enabled services sector remains the largest employer and the driver of the city’s growth. Construction and real-estate companies building the city and also taking contracts across the country also occupy an important place. For pharma industry, Hyderabad continues to be an important hub, but with the industry itself facing pressures, the outlook is not bright. 

Hyderabad remains a big market and therefore a big trading centre. It has been unable to become a big production centre. Among the capitals of Southern states, Hyderabad lags behind Bengaluru and Chennai, only ahead of Trivandrum. The stunted vision and the get-rich-quick philosophy of the Hyderabadi businessmen is largely to be blamed for this state of affairs.