The decision by India’s predominant building developer to base its investment vehicle in the Isle of Man, is testament to the strategic geographical position the Island occupies in the international plans of one of the most important new players in the global market.
Hiranandani is a fine example of an Indian family firm with a long and distinguished history that has flourished in the face of global competition. The group’s rapidly expanding investment company, Hirco Plc, was established in the Isle of Man in 2006.
Hiranandani is India’s largest developer of prestigious mixed-use townships for the country’s increasingly affluent middle class. Sister operations have significant international interests – including the world’s tallest residential tower under construction in Dubai.
Hirco raised £362.6 million net in its initial public offering on AIM, the London Stock Exchange’s alternative investment market, in late 2006 becoming the largest ever real estate investment IPO. By 30 September 2007, the net asset value of the company had risen to £469.7 million.
Within just ten months of its IPO, Hirco had invested approximately £350.8 million in new mixed-use township developments in Chennai and Panvel, India, representing about 97 per cent of the funds raised in the IPO.
The company’s CEO, Priya Hiranandani, has had several lead roles in the family’s group of businesses, including founder and CEO or Zenta, a business process outsourcing company. She is also a former recipient of the Indo-American Society for Young Entrepreneurs award.
Over the past 25 years, Hiranandani – founded by its chairman, Niranjan Hiranandani - has created 30 million square feet of mixed-use townships in India. Isle of Man based Hirco is now building on this formidable track record and leading the way in creating exciting, sustainable and quality new communities that offer India’s growing middle class a modern lifestyle at an affordable price.
Over the next two decades, India’s middle class is expected to grow rapidly – from 50 million to 583 million people – creating the world’s fifth-largest consumer market. Average household incomes are predicted to triple in this period. India’s huge middle class will be concentrated in urban areas and the Government believes building large integrated townships from scratch is the only solution that provides the scale for meeting both housing and infrastructure needs.
India’s economic boom over the last two decades has created strong demand for both residential and commercial properties. Its property market was estimated at US$54 billion at the end of 2007 and is expected to grow to over US$142 billion by 2012. This burgeoning Asian market is hugely important to Britain – as was demonstrated during the recent visit of UK prime Minister, Gordon Brown, and a party of leading British businessmen.
The Isle of Man…by choice
While Hiranandani’s building developments are contained in India, the business has extensive participating interests internationally stretching from Dubai in the Middle East to New York in the United States. And one of the Isle of Man’s biggest attractions as an operating base for Hirco is its geographical location within the British Isles.
Speaking from Hiranandani’s US office in Philadelphia, the company’s Communications Director, Joshi Aniruddha, recalled a happy – if choppy – visit to the Isle of Man during his schooldays:
‘I was at boarding school in Sussex and each summer the school chose a different place for a camping holiday. It was 1971 and I vividly remember the ferry trip over to the Island from Liverpool. The Irish Sea was a bit rough that day but a great time was had by all - I have very fond memories of the Island and its pristine landscape.
‘From a company perspective, we like the business friendly atmosphere and all that this implies, but one of the most important considerations for us is the Island’s location. Our international business is contained within an important stretch – sweeping westwards from India to America’s east coast. Time-wise, conducting business from the Isle of Man gives us a good overlap with India and Dubai in the morning and with the eastern part of the US in the afternoon. The Island’s location is ideal for us and means we can have a very productive base.
‘In addition, of course, the Isle of Man is close to the City of London and to European capitals. It is therefore a very central location and allows us a very wide reach geographically.
Professional endorsement
‘We also like the fact the Isle of Man is not parochial and is very international in its outlook. All international firms are represented and I can honestly say that the Island’s professional banking, accounting and other professional services compare with the very best in the City of London.
‘Access to the City is very important to us. It is a very internationally flavoured location and gives us the means of sourcing capital, technology and talent from all over the world – including the US, Australia and South Africa.’
Dynamic environment
As the jurisdiction with the greatest number of non-UK companies registered on AIM, the Isle of Man is playing a key role in aiding such blue chip operations gain access to the world’s main money markets – to the extent that the Island was recently described as a ‘core asset of the City’ by London’s Lord Mayor.
Banking and insurance are two of the key sectors being targeted, together with retail, construction and others operating at the value-added, quality end of the market. The fact that Isle of Man financial services compete on value as well as price in an open market is an obvious attraction for Indian companies expanding into Western Europe and beyond.
Local expertise
While initially considering an Isle of Man HQ from an international tax planning perspective, companies such as Hirco soon realise the Island offers a great deal more than a highly advantageous zero corporate tax regime, pointed out local businessman, Nigel McGowan, a non-executive director of the company.
‘The Isle of Man can now offer the highest all-round corporate package for an operation like Hirco. In recent years we have seen more high profile, discerning companies choosing the Isle of Man as a base, both for employing staff here or working via professional service providers.
‘One thing that is clear is that the Island’s professional firms now have a recognised reputation for quality and can integrate with City professionals to deliver the client’s objectives.’
Right place to live
Island born Nigel McGowan qualified as a chartered accountant in 1991 with Deloitte & Touche in London. He holds executive and non-executive directorships with a number of companies, including private property companies with investments in residential and commercial property in the Isle of Man.
‘There is often a lot of talk these days about quality of life and work-life balance,’ he added, ‘and they were certainly key issues for me in terms of making a decision to return to the Isle of Man after a number of years living and working in London.
‘It’s fair to say that the Island offers a unique environment in which to achieve a balance. It’s small enough for work to be easily accessible while offering people a flexible approach in terms of organising work and home life – for instance, ‘’commuting’’ times are negligible compared to the City. At the same time, the Island is large enough to provide a variety of quality outdoor pursuits and privacy away from the work environment as needs be.’
How the Island benefits
The Island’s ability to handle such high calibre international business as that conducted by Hirco Plc is further contributing to the Isle of Man’s rising profile in the City of London as a centre of excellence for blue chip global business.
This means long established local firms of lawyers and accountants are developing the means to conduct ever more complex, multi-jurisdictional business. These firms are now operating alongside the representatives of established City names and building formidable reputations in their own right.
This significant shift in gear is also resulting in a more substantial role for Isle of Man directors who are being increasingly called upon to provide significant input, even in a non-executive capacity. Mr McGowan visited India recently to attend a board meeting and to see progress at Hirco’s latest developments in Chennai and Mumbai.
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