Every time Oberoi Realty’s chairman and managing director Vikas Oberoi takes his Cirrus SR22 Tango aircraft for a spin, he systematically ticks every item on the checklist like a diligent pilot.
He circles the aircraft to ensure that there are no damages, the tires are fine, there is sufficient fuel in the tank and the rudders spin smoothly. Only when all these boxes are ticked does he get an all-clear to fly.
Oberoi brings the same discipline and dedication to his business. While many call him a cautious entrepreneur because he has steered clear of rapid expansion, centring his business in Mumbai, and unwilling to take debt, Oberoi likes being cautiously aggressive.
“My definition of a successful entrepreneur is not the one who sees an opportunity and takes risks. Instead, it is the one who sees an opportunity, assesses the risk involved, mitigates it and then goes ahead,” he says.
The Long-Distance Winner
It is this cautious, yet calculated, approach that has helped Oberoi keep his company thriving and in the black. His balance sheet proves his company’s spectacular performance. Oberoi Realty’s revenue from operations for H1 FY23 was Rs 1,601.7 crore with a net profit margin of 43.83%, which is a substantial increase from the revenue of Rs 1,038.5 crore and net profit margin of 32.66% in H1 FY22.
Of this, revenue from projects in HI FY23 stood at Rs 1,328.86 crore, a leap from Rs 882.18 crore in H1 FY22, while revenue from hospitality grew from Rs 27.36 crore in H1 FY22 to Rs 68.44 crore in H1 FY23.
The real estate company has 42 projects across Mumbai spanning 45.31 million square feet, which include Oberoi Mall, Oberoi International School, Westin Mumbai Garden City, Oberoi Splendor, Esquire by Oberoi Realty and Beachwood House.
Also, the company has been strengthening its land parcel. Recently, Oberoi Realty signed a joint development agreement for an 18.28-acre land parcel, valued at Rs 404 crore, in Thane with another developer Ashoka Nagari. In 2019, it bought another 60 acres in Thane for nearly Rs 890 crore. This apart, it acquired a 4.2-acre land parcel in Bhandup for Rs 115 crore.
This is a massive jump in the company’s portfolio from the two properties Vikas inherited from his father almost two decades ago. Over the years, he has steadily added land parcels but always kept his clientele at the centre of his decisions. He believes that customers have heightened expectations while buying property now. “Hence, we have catered to their evolved expectations through various facets, be it the product, design or strategy,” he adds.
This also means that he has to backward-integrate his thinking, which melds with his disciplined approach. “You cannot say that I will be cautious about money but buy land at a bad location; or that I will buy good land parcels but not focus on design. It has to be a combination of all these aspects for the company to survive and thrive,” he says.
This also explains why after launching Westin Mumbai Garden City in 2005, he is expanding his hospitality portfolio with the Ritz Carlton after 18 long years. While many get into the segment for vanity value, Oberoi maintains that hospitality is a strategic move to elevate the value of the development projects.
“When we built Westin Mumbai Garden City, it was because it could rerate the entire Goregaon Garden City development project, which it did,” he explains. “Now, we decided to open Ritz Carlton because the hotel would serve the Ritz Carlton residences. However, if someone gives me a four-acre land parcel and asks me to build a hotel, I will not do that because I do not think it is as rewarding on a standalone basis,” he reasons.
Business beyond Covid-19
The exigencies wrought on by Covid-19 had an adverse impact on the Indian real estate market in 2020 and 2021. However, this period was also a litmus test for developers. The conservative ones like Oberoi, who have been traditionally averse to taking on high debt, were able to navigate the business slowdown, while their aggressive and overleveraged peers gradually started exiting the market.
“Covid-19 did not destroy businesses; it tested them,” he emphasises. “What companies did for the past couple of decades was tested during the pandemic. Those with good business fundamentals were able to bounce back. Those that could not withstand the test fell apart and we got an incremental share of their business,” he says.
Oberoi believes that markets are cyclical and what goes up must come down. Drawing a comparison to his piloting experience, he says that a good pilot is the one who knows that he can land safely after taking off. Analogous to this metaphor, when he starts any real estate project, he ensures that he has a margin for delivery delays and capital for the entire workflow.
This laser-focused approach has helped the media-shy real estate tycoon build a resilient business entity, one that is not swayed by the headwinds of adversity or tailwinds of short-term opportunity, but which is in for the long haul.