Success Story: EON Free Zone

It would be hard to do a special issue on SEZs in Pune and not cover Panchshil Realty’s
EON Free Zone as a success story. The first IT SEZ in the country to go functional, EON
has made it time and again to the front pages- and for all the right reasons. In an
interview with Mr. Atul Chordia, Managing Director, Panchshil Realty, we explore how
the idea behind EON became a reality and what the future plans are.

There are 10 notified SEZs in Pune. Of these, 9 are in the IT-ITES sector. And yet, EON
Free Zone is different, not only because this is the first notified IT- ITES SEZ in the
country to go on-line but also because it was conceived, planned and shaped when not too
many people were sitting up and starting processes to take advantage of the newly
announced SEZ policy. Panchshil’s EON Free Zone is an absolute reflection of the high-
profile, qualitative IT growth witnessed in the city and promises to leave its mark on the
IT-scape of the city for a long time.

The first impression as one goes to the actual site is that of a massive, almost ethereal
structure coming up amidst a host of heavy machines squatting in the area. As one walks
up to the actual construction, the magnitude and beauty of the clover leaf design
overwhelms the casual visitor. There are huge parking spaces, free spaces and of course,
work spaces planned in an immaculate fashion. With the very latest technology used in
design and execution, this is a construction that is clearly ahead of its times. One is only
left imagining as to how breath-taking the entire set-up will look once it is fully
constructed and working. “If you have flown recently, you will notice the building during
the take-off. And, it looks phenomenal”, says Mr. Chandrabhal Ben, Marketing Manager,
Panchshil Realty, very fondly about this project so close to the team’s heart.

I was curious to see the incubation facilities at the SEZ. EON Free Zone hosts an
incubation center for start-ups, with a capacity to cater to a total number of 1000 seats.
What they did after roping in their first two anchor clients VSNL International and Eaton
Technologies was to offer 200 and 400 seats to both the companies in these incubation
centers so that initial operations could at least start off in the area. Once the actual facility
leased out by the companies would be ready, the companies would move into the actual
set-ups. I walked into the shed-like set-ups to be immediately met with the internal
security personnel of VSNL Global Services. With some help from Panchshil’s team, we
got permission to visit the operational IT center inside. The scene was like any other
efficient IT center. People working on desktops, talking dime to dozen into their head-
phones, a small team seated around a round table in their “training” room…“This set-up
will eventually move into the actual work space area that is being created for VSNL
Global Services. Giving them seats in the incubation center has helped to get the client
companies get used to the site”, said Chandrabhal.

Back at Panchshil Realty’s office at Bund Garden Road, we met with Mr. Atul Chordia,
Managing Director. As our questions flew fast and furious, Mr. Chordia had well-thought
of answers to all our queries. Some excerpts from the interview follow.
Q: Which are the main factors in the new SEZ Act that have made so many
developers jump into the fray for SEZs?

A: Well, there are two main feel good factors about SEZs for today’s developers: First,
the fact that there is very less red tapism that one has to face, wherein one would
normally spend 60% of their time and energy. So, a single window interface with the
Govt. after the area is notified as an SEZ is a big plus. And I vouch for the fact that the
team at the Commerce Ministry hardly took any time to clear the proposals. We found the
set-up to be friendly and very professional. Secondly and of course, very importantly, the
tax incentives make SEZs look really attractive to us.

Q: Despite being an SEZ from a real estate player, EON does not have a non-
processing zone with residential premises, leisure parks, and entertainment avenues
being provided in the SEZ . Your comments?

A: The idea of creating non-processing areas within SEZs had two angles; one was of
course the fact that developers were contemplating township kind of concepts and the
second was that it would be a faster cost-recovery process.

The money pumped into EON i.e. Rs. 200 crores so far, will be made good only on basis
of the rentals that we charge from the clients. So far, EON has created 10 lakh sq.ft of IT
work space and we have managed to market around 60% of the same. Once we start
hitting 80% levels, we get into Phase II. After the project is done, we land up making
around 30% on the total costs. So we do not feel that the only way to recover costs is
through residential and non-processing zones. If such an activity has to be undertaken, we
will do so outside our SEZ premises. It does not make sense to create residences inside
the SEZ. Secondly, the SEZs that are currently being discussed and debated are all the
ones where such facilities are planned. So, planning only a processing area driven,
activities based SEZ was the cleanest way to execute the project. And we were right.

Q: What are the main reasons for your successfully taking the project off the
ground?
A: The project got off quickly and successfully for a lot of reasons. First, we moved
quickly, when others were yet to understand what an SEZ means. Two, we are working
on 45 acres of land leased from MIDC, Kharadi. So there was no question of us acquiring
any land for this purpose. Third, we simply do not want to create a non-processing zone
even when we have the area for it. Now that the other players see us putting a million
sq.ft. of work space, they are anyway creating residential infrastructure on the outskirts of
the Kharadi MIDC. What is the need to create non-processing zones internally and get
into a controversy?

Q: You are creating space for at least 50,000 IT workers which is a fourth of the
employed IT personnel in Pune currently at a single site! Eight other IT SEZs are
already notified. Do you think there is demand for so much space in Pune?
A: We would not have got into this, had we not seen the demand. And well, since the
players moving in later see what we are creating, they will also re-assess the situation
before they too jump into this. Everything said and done, things can go wrong but we
have really studied the demand in detail and we know what we are doing.

There is a confirmed demand for around 4.8 million sq.ft from IT-ITES companies in the
recent run. We have put up only 1 million sq.ft within this year; it will of course be taken.

Q: What are the current lease rates faced by your clients?

The base rent today at EON is Rs. 35 to Rs. 38 per sq.ft and with the other maintenance
charges etc. the client faces a charge in the range of Rs. 42 to Rs. 45 per sq.ft.

To be inserted in a box
EON FREE ZONE
4 Million sq. ft. IT & IT-ES ‘SEZ’
MIDC Kharadi Knowledge Park, Pune
Maharashtra
(EON Kharadi Infrastructure Private Limited)

Campus Spread : 45 Acres

Size : 4,000,000 sq. ft.
Type : IT & IT-es specific ‘SEZ’
Devlp. Parcel : 4 Clusters of Workspace and Serviced Apartments
Proposed Floors : Lower Ground + Ground + 5 - 7 Levels
Floor Plate : 30,000 sq. ft. – 35,000 Sq. Ft.
Developer : Panchshil Realty
Equity Participation (FDI) : IREO Fund
Proposed Investment : Rs. 800 Cr. (Approx.)
Current Investment : Rs. 200 Cr. (Approx.)

Estimated Direct Employment Generation

: 50,000 (Approx.)
: 100,000 (In Direct Employment)
Current Employment
: 4500 (On site Construction Labour)
: 150-200 (Executives, Architects, Engineers and Various
Technical Consultants
Clients : VSNL Global Services, EATON Technologies, Honeywell
Automation
MPHASIS – An EDS Company, MOSUM Technologies
Incubation Facility
: 2 Kirby Structures with a total capacity of 1000 seats (Live
and Operational)