INDIA (DOMESTIC FIRMS): An Introduction to Corporate/Commercial: Hyderabad

INDIA: CORPORATE/COMMERCIAL: HYDERABAD 

Hyderabad is the capital city of Telangana, the youngest state in India, formed in 2014 after the split of Andhra Pradesh. It is on its way to being at the forefront of globalisation and technology, aided by a rich resource pool and growth-friendly policies. Hyderabad’s growth story is best described in the words of the legendary strategist Sun Tzu, that “Great results can be achieved with small forces.” It is a story of how strategic measures in selected domains have helped render the city as one to be reckoned with.

Business in Hyderabad 

The city is an established industry leader in sectors such as (i) information technology, with Google establishing its largest campus after USA, in Hyderabad, Microsoft announcing that it would invest Rs15,000 crores over the next 15 years in Hyderabad to set up its largest data centre, Amazon launching its largest campus, and its largest fulfilment centre, and gearing up to invest about USD2.8 billion to set up a new AWS Cloud region; (ii) pharma and healthcare, home to some of India’s leading pharma companies, and key players in API production. Home-grown technology companies have also found marquis investors with the likes of HR tech start-ups like Keka raising USD57 million from WestBridge Capital, and Darwinbox raising USD72 million from Sequoia Capital India, lending them unicorn status. The start-ups of Hyderabad are truly reaching for the stars, with Dhruva Space launching two nano-satellites and aiming to launch a larger one thereafter.

The real estate sector has also been instrumental in the city’s success. For instance, the position of Hyderabad, as one of the top commercial markets in India, was boosted with the joint development of two million square feet of IT/ ITES office space and 0.9 million square feet of residential space by Genpact, one of the largest in India.

A report on Investments in Real Estate (for the first quarter of 2022) from Knight Frank explains that Hyderabad is one of the major Indian cities to secure private equity investment in data centres in the last six years, one of the rapidly growing sectors in India, and has proven to be an attractive option for strategic and financial investors.

Regulatory measures 

To keep up with this rapid growth pace, the Government of Telangana (“Government”) has taken some noteworthy measures to align with and assist in the growth of these sectors, including:

1. establishing T-Hub, the largest innovation hub globally to create a conducive environment for start-ups, corporations, governments, academia, and investors, and everyone in between;
2. enacting the Industrial Single Window Clearance Act 2002 to allow businesses to quickly process the required approvals/licences, etc;
3. creating the Industrial Policy Framework, to establish an environment conducive for both existing and new industries. As per the policy, incentives on land and conversion costs, investment subsidies, reimbursement of costs towards stamp duty, power and infrastructure development reimbursement, tax subsidies, is to be provided;
4. construction of Data Analytics Park in the technology business centre of Hyderabad, boasting of world-class facilities for the creation of a highly efficient interlinked mesh of IT/ITES industry components;
5. launching the ‘Image Policy, 2016” whereunder Telangana Animation and Gaming city is poised to be a world-class facility for businesses in the animation, visual effects, gaming and comics industry;
6. creating an ‘Innovation Policy’ to develop physical infrastructure, sustainable funding models, proactive engagement with industry, and encouraging start-ups in the rural and social enterprise space by providing additional incentives;
7. the SpaceTech framework, to establish Telangana as the primary hub for all space-related activities;
8. enacting the second Information Communication Technology Policy, focusing on citizen empowerment, innovation and entrepreneurship, and the vital role technology plays in a post-pandemic world. As part of this initiative, the Government will provide incentives to IT/ITes companies ranging from allotment of government land, subsidy on interest rates and lease rentals, rebates on land costs and assistance with recruitment among other things;
9. establishing the International Arbitration and Mediation Centre (“IAMC”), a world-class conflict resolution centre, to promote various types of alternative dispute redressal. The Government issued an order designating IAMC as the arbitral/mediation institution in all Government contracts above INR 3 Crores, subject to certain conditions;
10. establishing ‘Hyderabad Pharma City’, set to be the world’s largest integrated pharma cluster, ‘Genome Valley’, India’s first organised cluster for life sciences R&D and clean manufacturing activities, hosting Novartis, GlaxoSmithKline, DuPont, United States Pharmacopeia, etc, and ‘Medical Devices Park’;
11. creating an environment for prospective solar power developers to harness a solar power through the ‘Telangana Solar Power Policy”; and
12. commencement of the proposed project of a Mega Thermal Power Plant with a capacity of 4000 megawatts.

Telangana has also excelled in creating the best business environment, as per NITI Ayog’s 2nd edition of Export Preparedness Index (EPI)-2021, and has continued to give due importance to governance concerns and acquired the second place in the Economic Governance Sector in the Good Governance Index 2021.

The challenges 

The proverbial road to success is fraught with challenges; and Hyderabad is no stranger to that. It faces its share of tribulations, due to the pandemic and its aftermath, escalation in global inflation and uncertainty in the US technology market, which undeniably has a ripple effect on the sector locally, and the unending search for world class talent to meet growing needs in a highly competitive market.

Hyderabad has long been contending with Bengaluru for the title of ‘Silicon Valley of India’. However, since Hyderabad’s growth is largely woven around key sectors of pharma, technology, healthcare, and real estate, this very strength could distract from its advancement in other sectors.

Despite this, and the bifurcation of Andhra Pradesh, Hyderabad has strengthened its foothold in India in a brief time, and is competing with Mumbai, Delhi, and Bengaluru. Now, it needs to ensure the same advancement in all major sectors.

Last, with the elections around the corner, and the uncertainty of its outcome, we hope that the policy and regulatory mechanics, nonetheless, continue to move in the right direction.

Next steps 

As lawyers, we have a ringside view of the evolving commercial landscape in Hyderabad, and while its success in areas like pharma, healthcare, technology, and real estate have catapulted the city to domestic and international fame, the next step would be to establish itself as the preferred home for businesses across sectors.

The way matters stand now, Hyderabad as a market truly epitomises the spirit of the famous line “if you build it, they will come.” The foundation for this to become a reality has already been firmly set and, now with the building blocks in place, the finishing touches are all that is needed.

Authors:  

Shailendra Komatreddy, Managing Partner  

Kaushalya Guduru, Partner  

Mythri Jonnala, Senior Associate