Mittal Infratech Pvt. Ltd

Feasibility study of a IT SEZ in

PANIPAT (2008-2009)

• Project Location and Linkages

• Panipat introduction

• PAIPAT – as an IT location

• IT real estate in India

• Market: India, the cost advantage

• Planned facilities

• Financial estimates

• Findings

• Suggestions

• Conclusion

Presentation structure (cont..)

To make SEZ's an engine for economic growth ->

Supported by quality infrastructure ->An attractive fiscal

package-> Minimum possible government regulations.

Current growth rate 7.2% in economy.

World class education and infrastructure have spurred development.

Increase in importance of IT sector nationally and internationally.

Indian government providing support and infrastructure to IT sector.

Special new policy introduced in SEZ’s for IT sectors in year 2006.

Growth pertaining international standards.

These units are technically treated as foreign territories.

Free from import duties.

Import and export n self certification basis.

100 % FDI allowed for IT sector SEZ’s.

Tax benefit under income tax, custom, service tax , excise and vat for 15 years.

Other relaxations as stamp duty ,local levis.

Divided into processing and non processing zone.

Ideal location for non processing units.

The non processing zones can be developed as per any desired planning.

Proposed SEZ with 27 acres of land at GT Karnal Road, National highway 1, Haryana. Proposed SEZ has and location advantage.

High accessibility from Panipat to Delhi and NCR regions. Upcoming KMPX express highway reducing drive time to only 45 minutes from Indra Gandhi International airport to Panipat.

The upcoming bullet train joining Delhi and Panipat would reduce journey as short as 20 minutes. Availability of skilled manpower from near by areas as many technical institutions opened recently in near by areas. Operational and living cost 35% low as it’s a small city.

NCR and Delhi overcrowded.

High pressure on existing resources.

Problem of water and electricity.

Problem of accommodation at reasonable prices.

Problem of traffic and availability of parking space.

Problem of availability of land.

IT/ITES SEZ in India

• Electronics and IT is the fastest growing segment of Indian industry both in terms of production and exports.

• Electronics industry completely de-licensed with the exception of

aerospace and defense electronics

• Attracting interest not only as a vast market but also as potential production base by international companies.

• In recent times, ‘software development and IT enabled services’ have emerged as a niche opportunity for India in the global context.

• The Government is taking steps to make India, a Global IT Superpower and a front-runner in the age of Information Revolution.

• The Government announced promotion of IT as one of the five top priorities of the country and constituted a National Task Force on IT and Software Development.

Reasons for setting up IT SEZ in

Panipat • First mover advantage

• Proximity from Delhi and Kundli-Manesar-Palwal highway

• Ample workforce due to ample number of schools and institutes

• Low cost of living and operation

• Availability of skilled manpower

• Ideal location for non-processing activities

• Shopping areas, business centers, housing/service apartments, banquets, motels--- easy to market

• Benefit of regular income due to lease model

• All benefits to developers as well as units

• Continuas dispute free land already acquired and notified

This project can go a long way for the

benefit of the people of the State of

Haryana. A few benefits are as under :

• Generation of employment during construction and thereafter for more than 50,000 persons with best of HR policies

• Attraction for foreign investments.

• Development of supporting units and support services

• Easy marketability due to various taxation and other benefits

• Pollution free industrialization

• Technological Development for the benefit of surrounding areas

• Overall development and facelift of the area

Project Background

Total FAR allowed as per building bye-laws is 2.5 times for IT

Total of about 2.9 million sq. ft. area can be created in the proposed SEZ

IT/ITeS units in the processing area

In the non processing area to cater to the needs of the people working in the SEZ and others:

residential units for middle and lower income groups, shopping arcade/mall, hospital, luxury guest house/five star serviced apartments Objective- To establish a state of the art infrastructure for all kind of

users who qualify and register as SEZ units

Facilities for training of personnel-> including IT personnel

The processing zone-> 50% of total land area->homogeneously designed -> lessees/users of SEZ units will have the flexibility to do the interiors as per their requirements

IT Park Admin Block

Hospital

Residential Apartments

Hotel, Club, Pool, Commercial Activities

•Area size 26.82 Acres (10.89 ha)

•Frontage on NH1- 150 meters

•Located 80 kilometers from New Delhi •located on the six lane expressway, NH1 •Well connected to IGI airport, New Delhi through proposed Gurgaon-Manesar-kundli expressway •Stop for proposed bullet train from New Delhi reducing travel time to 20 minutes •1 km from Panipat fly-over on NH1 •By air: The nearest airport is at New Delhi. •By Rail: The nearest railway station is at Panipat and New Delhi. •By Road: Panipat is connected by road from Delhi, Chandigarh, Amritsar and Kurukshetra.

Project Location/Linkages and Highlights

•District headquarters of Panipat: situated on G.T. road N.H.1-> 92 Km North of

Delhi

•Panipat borders Karnal in north, Jind in west and Sonipat in the south and Uttar

pradesh in the east

•The total geographical area : 1250 sq.km.

• Administratively the district is controlled by Rohtak division

•Total population:9,67,449 as per 2001 census-> growth rate of 38.58% (1991-2001)

•Population density -> 763 persons/sq.km-> literacy rate 57.83%

•Panipat is a famous handloom center and is one of the fast developing cities in the

state of Haryana

•Panipat is knows as a historic place and few tourist attractions in the city include the

tomb of Ibrahim Lodhi, the Kabuli Bagh Mosque built by Babur, the Safdarjung

Gate, Dargah of Bu Ali Shah Qalandar and Jain temples at Holi Mohalla

Panipat Introduction

PANIPAT – as an IT location

• Panipat borders Delhi on the west and the proposed location is just 80 km away from the Indira Gandhi International Airport. It is known as the city of Handlooms all over the world and has many more feathers in its cap. It boasts of some of the big Industrial units of India Like :

->National Fertilizers Ltd ->Tau Devi Lal Thermal Power Plant

->Panipat IOCL Refinery ->Panipat Cooperative Sugar Mills

• Panipat holds a big share in Textile Industry in Domestic and Export market and has over 30,000 industrial units.

• Panipat also has over 100 Rice Sheller units that produce quality rice for domestic and Export market.

• The town has infrastructure such as Rail, Road and ICDs (Inland Container Depots) best suited to Industry and Export of their product.

• Panipat can emerge as the new hub of IT and ITES and other new-age businesses in the Region. It is well linked by road, rail and air. It’s close proximity to Delhi means that the work force can easily travel from their base in Delhi or they have the choice to settle down in the well developed Panipat, Sonepat Region.

IT real estate in India

• According to NASSCOM, the ITES/BPO industry in India is experiencing its third wave of growth.

• In the first phase, the industry was dominated by captive centers of large multinationals such as GE, American Express and Swiss Air, who set up operations in India.

• In the second phase, the growth attracted numerous entrepreneurs (in many cases, employees of multinationals who quit their jobs to set up their own ITES ventures).

• The third phase is geographically dispersed with new locations emerging on the horizon.

• The trend has been largely driven by four factors:

The need for business continuity planning,

Improvement in key infrastructure areas

The desire by state governments to attract investments

The need for ITES companies to lower operating costs

• IT/ITES activity is gradually expanding to cover tier-II cities and areas near main cities.

• Apart from Bangalore, a majority of IT/ITES activity in India is concentrated in seven cities/clusters in India

• Delhi-NCR has the largest cluster of IT companies in the country after Bangalore and it has also been the fastest growing market in the last three years.

• Delhi NCR is the leading market for ITES in the country with the largest concentration (over 20%) of all BPOs and KPOs in the country.

• Mumbai and Hyderabad follow closely, but the comparatively superior infrastructure and quality of developments in Delhi NCR has ensured dominance and will continue to ensure its phenomenal growth.

Market: India, the cost advantage

• Availability of raw material

• Lower manufacturing/service cost -> advantage in the world markets.

• India’s service exports hinge on cost advantage

availability of technical and skilled manpower.

• MNCs are looking at India with interest for service and manufacturing outsourcing.

• India possesses the world’s largest pool of English speaking technical manpower

• The two sectors which are more likely to use an SEZ in Panipat are:

1) Software Industry

2) The ITes and BPO Industry

Software Industry

• The software industry->fastest growing sector in India

• India considered one of the most preferable countries for development of computer software and services.

• This sector shown average growth rate of around 70% for the last over eight years.

• A Study conducted by Mckinsey estimates->

– By the year 2008, Indian Software and services Industry will touch $ 87 billion mark.

– Of this U$ 50 billion would be generated from exports while the remaining will constitute the domestic market.

• Software industry -> single largest net foreign exchange earner for India.

• The Industry employs over a million technical personnel with a large number being employed every year to meet the growing needs of the sector.

• Almost 62% of the software exports form India are directed towards USA

• Fortune 500 companies outsourcing their software requirements form India.

• Quality of Indian Software on par with the best in the world

• Manpower costs here are relatively low, making India, the obvious choice.

The ITes and BPO Industry

• The ITES-BPO industry -> new sector->barely five years old

• Despite its recent arrival the industry has shown amazing growth and future potential.

• Now not only confined to Multinational Companies

• According to NASSCOM, over 200 companies participating in the ITES-BPO segment and the numbers are growing every year.

• The market has gained additional players with the arrival of non-IT companies on ITES-BPO turf.

• A number of leading industrial groups in the country have set up ITES-BPO facilities with a view to participate in this emerging opportunity.

• The ITES-BPO market today is characterized by the presence of companies such as Dell, HP, EXL, WNS, Sitel, HSBC, the Standard Chartered Bank, Convergys, Wipro Spectramind, AOL, Daksh, MsourcE, among others.

• In terms of outsourced services too, the Indian market has witnessed a substantial evolution.

• By the year 2008, this segment is expected to employ over 1.1 million Indians,

• In terms of job creation, the ITES-BPO industry is growing at over 50 percent.

SEZ Units - Attractions

• A number of incentives are offered under

the Government of India policy to units in

SEZs, making such units an attractive

proposition. These attractions are a big

help in marketing of infrastructure in SEZs.

Planned Infrastructure/Utilities

• Electric Room with Step –down transformer and distribution

panels etc

• Back-up DG Sets

• Mechanical Room

• Boiler Room

• Air – Conditioning Plant

• Earth Station and other communication hub

• Computer Control Room

• Workshop

• Waste disposal Plant

• Water Storage Tank

• Pump Stations etc.,

• Car/Buses/Sector Parking

Some of the ancillary facilities

planned

• Convention Centre

• Business Centre

• Training Cente

• Hotel/ Restaurant/Canteen

• Bank/ATM

• Medical Services

• Library

• Health Club/Gym

• De-stressing

Findings

• Panipat offers good connectivity through road, rail and air

• Panipat has strong economy with good industrial linkages

• Panipat offers good talent pool as required by IT companies

• Inspite of having thermal power station, Panipat city faces problems from voltage fluctuations and frequent power cuts

• Power backup facilities are desired in commercial complexes in Panipat

• According to D&B survey report on IT industries, only 44% of IT companies were effected by recession but having negligible effect on their expansion plans in next 3 years

• 31% of IT companies feel shortage of office premises

• IT SEZ’s are preffered office space for several IT companies for new office location and expansion

• Top ancillary facilities proffered by IT companies are generally part of processing zones of IT SEZ’s and companies are willing to pay 5-10% premium over prevailing lease rentals in area for ancillary services

Marketing Strategy

Suggestions • Panipat, in view of its location and the infrastructure can be promoted as one

of the most popular destination for IT and ITeS industry. The Company can plan to capitalise on this by developing a SEZ which will have the best and the latest facilities offered anywhere else in the country along with an environment most conducive for this business.

• The Company can engage a specialized agency to market the SEZ globally, highlighting the salient features of the proposed SEZ as well as the incentives offered to SEZ units in general

• Awareness of the project can be created through subtle means. Interest in the zone can be generated through news item, press coverage and formal launches in various cities using multi – media interactive presentations and computer generated walk–throughs.

• Awareness can also be created through industry associations and through industry programs, presentations, seminars etc.

• Large international corporations and potential users can be directly approached and the website of the zone can be provided for online leasing of space at the zone.

Conclusion • In view of the growing exports of the country, success of the SEZ

scheme and the popularity, proximity and connectivity of Panipat to Delhi, marketing of the project is not seen as a difficulty.

• There is no SEZ in the area and there is sufficient demand potential for space for IT and ITeS.

• Promoters have first mover advantage and can easily market the project by keeping key marketing factors for the project as its state-of-the-art infrastructure and completely self sufficient developed structure.

• The promoters have vast experience and understanding of the international market as they have been associated with Export and Import of various commodities for a number of years.

• Apart from a highly experienced and professional team, the Promoters have, with in the family, highly qualified technocrats and professionals who can ensure the successful implementation of the SEZ project.