IT industry on growth path

The sector has played a vital role in putting India on the global map as Hyderabad alone contributes almost 11 per cent to the nationwide IT exports

By Author  |  Published: 16th Dec 2017  12:27 amUpdated: 16th Dec 2017  6:11 pm

Telangana’s IT sector was mainly driven by IT and ITeS companies set up in Hyderabad since the 1990s. The sector has played a vital role in putting India on the global map as almost 11 per cent of the nationwide IT exports are contributed by Hyderabad alone. After the formation of the State of Telangana, this sector has seen an upward surge after coming under the aegis of IT Minister K T Rama Rao. Under his Ministry, Telangana IT exports stood at Rs 85,470 crore in the year 2016-17 with a growth rate of 13.85 per cent.

Apart from India-born IT companies like Tech Mahindra, Infosys, Wipro, Cognizant, TCS, Hyderabad is also home to many multi-national companies like Google, CA Technologies, Amazon, Apple, IBM and others. “Our regime’s focus is to make Hyderabad the number one destination for IT sector,” Rama Rao has echoed time and again.

IT Heading North

In order to facilitate IT and ITeS organisations, the government has been aggressively setting up Export Oriented Units (EOU), Special Economic Zone (SEZ), and Software Technology Parks (STP). In terms of employment, the State added 24,506 professionals in the last one year taking the total direct workforce in the IT/ITeS sector to 4,31,891.

The government is planning to take these number to 8,00,000 direct employment and 20,00,000 indirect employment by 2020. According to experts, Hyderabad’s cosmopolitan culture and it being less prone to natural disasters make it a congenial place for IT companies set foot. Other than this, various subsidiaries and incentives from the government’s side have also made the industry pave new heights. Not only the IT or ITeS space, the incentives have given birth to new industries like aerospace, multimedia and gaming.

Due to this, many IT companies and MNCs have set up their centres in the city. For example, Amazon has five centres in Telangana including one of its largest in near Hyderabad.

ktr it sector

Similarly, Apple chose Hyderabad to set up its Map Development Centre and Salesforce set up its centre of excellence. Other companies like Uber, DBS, ValueLabs, flydubai and many more have made significant investment in the State in general and Hyderabad in particular.

Other than the companies, the government is also pushing for allied services in the sector. In order to provide broadband connectivity for all, Telangana government launched the ambitious T-fibre project which is set to complete by 2018. In addition, the State is also launched 1,000 public Wi-Fi hotspots in Hyderabad and plans to set up in 2,000 more locations.

-Sruti Venugopal

Policy making a difference on the ground

Telangana government is doing several things correctly. It has come out with comprehensive sectoral policies across sectors and more importantly in the IT space. An ecosystem has been created for multinational companies to set up their subsidiaries and startups to set up their operations. The government is proactively providing support to industry to set up shop by maintaining transparency in the procedures to establish operations, say industry experts.

The Industrial Policy Framework 2014 identified 14 thrust areas to be given high priority for investment in Telangana. The framework included incentives such as preferential land allocation, project support basis investment, proposed industrial parks and townships, fast-track approval mechanisms and tax sops/subsidies. The industrial policy and other initiatives have given a competitive edge to Telangana over other States. The Central government which evaluates States on several parameters has ranked Telangana No. 1 in terms of ease of doing business (EODB) by looking at the policy framework that the State has created. The positive momentum created is anticipated to get more investors into the State.

thrust areas IT sector graph quote

Industry experts recommend that the State should retain its top ranking by continuing to make efforts in improving the interactions of the companies with that of the government and regulatory officials. With more organisations setting up and expanding their existing operations, Hyderabad has witnessed a lot of construction activity in the IT corridor. Real estate supply in the coming five years is going to be equivalent to the supply that was seen in the last 20 years. Pegasystems India managing director and country head Suman Reddy Eadunuri, says, “We established our presence in Hyderabad a decade ago. We had been the flag-bearers for the city’s IT sector. Companies like us look for proactive policy framework, infrastructure and availability of talent.”

Experts point out that the growth in the State’s economy needs to be retained. As the neighbouring States are witnessing slow progress, Telangana can maintain its momentum. The State can stay invested in the new age technology segments such as Data Analytics, Artificial Intelligence, Internet of Things and Machine Learning.

From its traditional focus on pharmaceuticals, IT, manufacturing and infrastructure, the State is investing and should stay focused on the knowledge economy. Sectors such as big data, gaming, electric vehicles and aerospace should drive future growth of the State.State government’s efforts by announcing a T-Hub in Warangal will ensure the entrepreneurial and startup ecosystem will evolve in other parts of the State. Tax incentives for companies to migrate to other parts of the State will bring in the needed growth. China succeeded in implementing such a scheme wherein companies were given a three-year tax break.                   

TiE Hyderabad president Pradeep Mittal said, “Central government began ranking States on several parameters. Telangana is competing not just with neighbouring States but with other States. In addition to ease of doing business, infrastructure, startup ecosystem, institutions and research labs. The State should continue seeding this growth as there will be a lot of competition challenging its position on the top.”

-Y V Phani Raj

Bulk drugs industry gets a power boost

The bulk drug industry was spending nearly Rs 18 to generate a unit of power. That was when power outages were the order of the day. But in the last three years the industry has not seen power shortage that would halt their operations.  In the process, the captive power plants usage has been minimal.

“From spending Rs 18 a unit to a paying Rs 7 a unit now, there is a significant savings. The drug industry’s margins are protected to that extent in the last three years,” said Jayant Tagore, president of Bulk Drugs Manufacturing Association.

Jayant Tagore

Typically, companies’ spend about three per cent of their turnover for meeting the power expenses including captive power generation units. “The power shortages then had put the industry in a bind. But things have improved a lot- we have continuous supply of quality supply,” he said. The industry is also reaping the benefits of Telangana’s approach to ease of doing business. “Getting approvals including for renewals was a difficult task then. But, now all of them are through a single window. This step irons out all the hassles,” he said.

Enthused by the changes happening here, several senior level scientists working in overseas are looking to set up their own businesses in the city. “At least there could be 25 scientists who are coming back to Hyderabad to set up their own businesses. They will be part of the Pharma City. They will start small but hold promise to rise to the top ranks in a very short time,” said Tagore.  Telangana in the last three years must have seen about Rs 3,000 crore investments in the bulk drugs segment for upgrading the facilities, expanding or allied activities. BDMA members will need more than 6,000 acre in the  pharma city first phase.  

“Big players like the Mylans, Aurobindos or Dr Reddys’ spend between Rs 200-500 crore every year to expand. We have about 10 companies that have the capability to invest on the same lines.  Then there are many small and medium players, who will invest regularly,” he said.

Hyderabad has over 400 bulk drug manufacturers, spread over 12 industrial estates, with limited scope to expand. The city has 245 USFDA approved plants, the highest outside of US.  It is a key player for making anti-retrovirals, antibiotics, pain killers, anti-cancer drugs, diabetic drugs and others.

Total pharma turnover is Rs two lakh crore with exports and domestic markets accounting nearly equally at the national level. From this, more than one-fourth of the turnover (Rs 51,000 crore) comes from Telangana. Hyderabad is in third position behind Gujarat and Maharashtra in manufacturing.

“The future for pharma looks, particularly in Telangana due to availability of scientific institutions and manpower,” he said.  China’s Fosun has recently acquired a majority share in Hyderabad’s Gland Pharma in a deal that is valued more than $1 billion (over Rs 6,400 crore). “There might other players that want to come to India,” he said.

– B Krishna Mohan

Harnessing talent pool

The IT sector in Hyderabad has grown by leaps and bounds since the formation of the new State of Telangana. And the government under the aegis of the IT Minister K T Rama Rao plans to double the growth in next few years. For this purpose, the government in April 2016 launched the Telangana State ICT policy to harness the talent pool available and to make Telangana the IT destination of India. In its vision statement on ICT policy, the government said it plans to make Telangana the most preferred destination for any IT company, should be recognised as the leader in key emerging technologies and aims to intensively use IT tools to improve processes and deliver citizen services better.

In order to achieve the said vision, the 10 sectoral policies were also launched by the government subsequently which include the electronics policy, gaming and animation policy, rural technology centre policy, innovation policy, open data policy, data analytics policy, cyber security policy, data centre policy, IoT policy and e-Waste management policy.

Industry experts have heaped praises on the forward-thinking approach of the government to roll out policies on such niche and important sectors. According to experts, the ICT policies will attract investments for infrastructure, promote the industry in tier 2 and 3 cities, encourage innovation in disruptive technologies and enable the existing SMEs to grow.

“All the policies rolled out by the Telangana State has the promise to attract very high investments and has the potential to make it the number one investment destination in the country. It will also lead to large scope of employment generation and economic growth. In sheer numbers, it shouldn’t be a surprise if the investments in State surpass Rs 5 lakh crore at the current pace, and add employment crossing 2 million jobs while bolstering the State tax revenues and overall development,” said Sridhar Pinnapureddy, founder and CEO, CtrlS Datacentres. The government plans to set up two Electronic Manufacturing Clusters (EMCs) spread over 600 acres and 310 acres at eCity and Maheshwaram Science Park.

 – Sruti Venugopal

2 industrial clusters in the making

Two industrial clusters, which will be managed by women entrepreneurs, are in the making near Hyderabad. Both of these could attract more than Rs 500 crore investments and create a direct employment for 15,000 to 20,000 people even as the indirect jobs will be multi-fold.

One of them is coming up at Sultanpur in about 55 acre through the Ficci Ladies Organisation (FLO) while the second project is at Nandigama in about 83 acre at and will be managed by Association of Lead Entrepreneurs (ALEAP) .

Here, women have to be at the helm of administration of the enterprises. They should have a majority stake in the business. Engineering works are happening at both the clusters.

“This is a good effort from the Telangana Government to allot an industrial cluster exclusively for women entrepreneurs. About 200 entrepreneurs have already received the allotment letters for starting their units at the cluster,” said K Rama Devi, president, ALEAP.

The cluster, she said will also have incubation centre on the premises with some common facilities. It will create some plug-and- play facilities on a pay-per-use basis for those who cannot set up their own facility.

State Bank of India and Canara have come forward to extend the financial assistance, she said adding that the collateral-free loan, which is for about ten years with a rate of interest of 11 per cent, will cover the building, machinery and working capital. Industrial land is not covered and this is provided as the margin money by the entrepreneurs. The multi-product industrial cluster will have units from food, textiles, engineering, solar, packaging and others, she said adding that the cluster will provide an employment to about 10,000 at full capacity and about 50 per cent of the facility will be ready in six months, the president said.  

The industry body has earlier executed previously an all-women cluster at Gajularammaram in the city. Telangana is also extending a similar support to the other cluster at Sultanpur, according to Ficci FLO Hyderabad chapter chairperson Kamini Saraf.

The 55-acre allotted to FLO is being divided into half-acre units. Only life members of FLO will be eligible to be part of the cluster. “We have processed 16 applications so far and the allotments will happen soon,” said Saraf.

“We expect that each unit will see an investment of Rs two crore in addition to the Rs 50 lakh per acre land costs,” said Saraf adding that about 10 to 20 plots will be finalised by March.

– B Krishna Mohan