Low rentals bring BPOs to Vadodara

IT-ITeS exports from Vadodara touched $46 mn in '07 from $11 mn in '05.

The subprime crisis may have been a growth constraint for most of the IT and BPO companies in the country but it could prove to be a blessing in disguise for Gujarat. Having to cut down operation costs in the wake of the crisis, a number of companies are turning not only to Ahmedabad but also to Vadodara in a big way.

While the Ahmedabad-Gandhinagar cluster stands out as the premier IT-ITeS hub in the state with more than 360 companies including TCS, MphasiS, Aegis, Satyam and Patni, Vadodara could well be the next IT hub of the state.

The signs are already visible. As per the latest CII-KPMG report titled 'Gujarat Riding on Indian Off-shoring Boom', IT-ITeS exports from Vadodara have jumped from $11 million (approximately Rs 43 crore) in 2005 to $46 million (Rs 180 crore) in 2007 where both IT and ITeS exports have grown at almost the same pace. Moreover, the number of companies in the IT-ITeS segment has gone up from 77 in 2006 to 87 in 2007.

SEZs approval
The city has already received formal approval for three SEZs, which include Nipiam Infotech's IT-ITeS SEZ on 220 acre, Suzlon Infrastructure's 101 acre SEZ for hi-tech engineering products and GIDC's 14 acre SEZ for the biotech industry.

Vadodara also houses L&T e-engineering, one of the highest ITeS exporters from the state, which is planning further expansion. Officials from the company said they would soon set up a 'Knowledge City' on 112 acres near Vadodara, for which a considerable amount of investment is expected.

The Knowledge City would consist of 11 buildings to be constructed in the first phase and house offices of L&T's e-Engineering Solutions, L&T Chiyoda and others. Other facilities include convention centre, employees' hostel, residential colony, and food courts. prominent companies

Other prominent companies who have set up shop in the city include Fortune Infotech, dealing in audit and non-audit services, Global Consultants Inc, which is into reconciliation-based work, and IntelQ, an IT staffing and solution delivery as well as HR outsourcing and e-engineering company.

Though, the Ahmedabad-Gandhinagar cluster recorded IT-ITeS exports worth $82.1 million (approximately Rs 320 crore) in 2006-07, nearly double as compared with that of Vadodara, industry experts say real estate cost is a major advantage that Vadodara holds over other cities in the state.

Ahmedabad, on an average, offers 40 per cent lower rental rates as compared with tier I locations like Mumbai, Bangalore and the National Capital Region. Rentals on the Sarkhej-Gandhinagar highway, and Satellite areas where a couple of ITeS players are based, are Rs 25-30 per sft.

As compared with Ahmedabad, rentals in Vadodara are at least 10 per cent lower and 50 per cent cheaper than tier I locations. Lease rentals hover around Rs 20-25 per sft. Even Surat, whose IT exports touched just $1.2 million (approximately Rs 4.7 crore) in 2007, could prove to be a costlier proposition for companies. Lease rates in areas like Majur Gate and Ring road in Surat are in the range of Rs 30-40 per sft a month.

However, that hasn't stopped Caliber Point, the BPO subsidiary of Hexaware Technologies from considering Surat along with Ahmedabad as the target locations for a pharma SEZ it is considering to set up in the state.

"We are looking at setting up an SEZ in the pharma sector by the last quarter of 2008. We propose to invest around Rs 40 crore for the same," says Ashok Bildikar, president and executive director, Caliber Point.