Private Industrial Park

I: Your client is a private industrial park developer in South India. A typical park is around 400-500 acres in size, and offers services such as power, Infrastructure, sewage treatment, roads, etc. to its inhabitants, like an SEZ does. The client’s current revenue is 100cr & wants it to become 1000cr over the next 5 years. Suggest the way forward for the client.

C: Okay. So our client, who is an SEZ developer, wants us to chart a strategy to help them grow from 100cr to 1000cr revenue in 5 years. Does our client have 1 SEZ or multiple parks?

I: Our client has 3 parks.

C: Are the parks of the same industry or do they cater to different industries? Also, where are the parks based out of?

I: That’s a good question. The client has 3 parks which cater to different industries – Aerospace, Toys & Plastic, and Electronics manufacturing, all based out of south India.

C: Understood. I’d like to understand a bit more about the current operational status of these 3 parks. Are all 3 parks operational or are they in the partial development stage?

I: The aerospace park is currently developed and is in use extensively. Toys and Plastic park is almost developed and would be ready within another year while the Electronics park is still in the conceptualization stage.

C: Okay. So just to reiterate, aerospace park is operational and the remaining two parks are still in development/conceptualization stages. Therefore, we can first look at existing business and how it can be leveraged further. Afterwards, we can look at the new business opportunities and what could be the opportunity cost of new investments.

I: That seems like a good way to go about it. First look at the existing business park and then we can move to the new business opportunities.

C: For the aerospace park, we need to identify whether we have already utilized the entire park to the fullest, i.e., whether there are any empty spaces yet to be put up for the rent/sale. If not, we can look at who our clientele are how we can increase average revenue per customer by either increasing the current rent or providing further value-added services.

I: Currently, 70% of the rental spaces are occupied and 30% are empty. Spaces include empty land plots as well as ready-to-use infrastructure. Current players include major airplane manufacturing and servicing companies.

C: Interesting. Here, the approach can be two-pronged: Firstly, to utilize the 30% land, acquire new customers or sell more land existing customers. Secondly, to offer more VAS to the customers in the existing 70% such as industry 4.0 facilities, renewable energy sources, etc.

I: That’s interesting. Let’s talk about what you would suggest in terms of new business opportunities.

C: Since toys and plastic manufacturing park is about to be ready, we can focus on it first. The client needs to conduct market research and identify the key players, their current setups, how our park and associated amenities can help clients lower their production costs, get possible tax benefits on production linked incentive schemes from government. Since bigger players would already have their own manufacturing setups, targeting smaller players would be a better strategy as it would help them leverage economies of scale & lower production costs.

I: Sounds good. What else would you suggest for electronics park? Do you have any other ideas through which you would like to achieve the client’s revenue goal?

C: For electronics park, instead of limiting ourselves to any southern state, we can also look at other states which have more lucrative production incentive/SEZ schemes and are closer to current electronic manufacturing hubs in India. Identification of players who would be willing to buy into the park would also be crucial.

It is also important to consider the opportunity cost of diversification into other high growth industries such as e-commerce, ITES, video streaming services, etc. It can be done through a joint venture, merger/acquisition, or through organic establishment. Due-diligence of the industry landscape in India for high growth industries would help in identifying the industries which our client can venture into.

I: That will be sufficient. We can end the case here.