Rustomjee: A rising Mumbai developer hits the stock market


November 14, 2022

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Before the end of November 2022, the real estate company would list on India’s stock exchanges at a market value of Rs. 5,600 crore

Over a decade ago three builders were slugging it out for a large parcel of land close to the business hub of Bandra Kurla Complex in Mumbai.

Article by Vishal Bhargava | MoneyControl


The land had many small old buildings where apartment owners organized themselves and engaged with builders for redevelopment.

Small old buildings were to go and tall new buildings were to come up. Two of the three builders were heavyweights. Presentations and bids were to be made. One heavyweight remarked to the owners: “You are asking me, the best developer in Mumbai, to make a presentation to you?”

The other heavyweight found the expectations of apartment owners to be inflated and folded. The third builder was a middle-aged Parsi man with a modest development record. He cajoled, charmed, acted nimbly and won a land parcel that would later be worth its weight in gold as Mumbai’s economic geography moved northwards.

The name of the developer was Rustomjee and that entrepreneur was Boman Irani.

A worthy trade-off


Since then, the handsome man has aged rapidly. But it appears to have been a worthy trade-off given the business growth. Beforerust the end of November 2022, that real estate company would be listed on India’s stock exchanges at a market value of Rs. 5,600 crore.

A large part of that valuation can be attributed to the skill Rustomjee has demonstrated in positioning itself as a reliable and even-handed partner.

The original journey began in 1996-97. A project named Residency was to be launched. Boman Irani’s, mother, however refused to show up for the launch.

She wanted a symbolic involvement of her late husband in the project. After the initial resistance, the young Parsi entrepreneur lost. The mother’s wish prevailed. The project was renamed Rustomjee Residency after his father Rustom. Rustomjee was born.

Punching above its weight

The journey continued with respectable projects but nothing earth-shattering. The builder, however, punched above its weight in the consumer mind-space because Boman (and especially his brother Percy) understood the value of branding ahead of their competitors.

Thus, the elevated image of the company in public consciousness was inversely proportional to its negligible business size.

The one man who would change the world for players like Rustomjee was former Municipal Commissioner Subodh Kumar. In a short tenure in 2012, he disrupted the industry with revised norms that later provided disciplined and clinical players an edge.

Rustomjee was then to be the right person at the right place at the right time. While the crooks and manipulators had been put on the backfoot through regulations, the legacy builders were still in the mindset of dealing from a pedestal with all other stakeholders.

Dealing as an equal

Rustomjee dealing as an equal with other stakeholders was a refreshing change. That became the company’s Unique Selling Proposition (USP) in cornering the redevelopment game (from SRA, or Slum Rehabilitation Authority, to society redevelopment) where persuading several players was a critical component.

That’s the part where relationship building and nurturing matters, which Boman Irani appears to have mastered – most with strong results and a few with weak results. A stakeholder who has dealt with the Rustomjee promoter says: “Boman is a compulsive charmer.”

Through my limited interactions, it is hard to endorse that claim but I view him as a man who wants to succeed but not dominate the market. Hence it is unlikely Rustomjee will attain the massive scale of Lodha Group.

Where Rustomjee and Lodha are similar is in their relative detachment to business and relative attachment to branding — that makes them keep an eye on the bigger picture.

Core market

At the product level he displays a preference for township projects. And while his projects lack the beauty of Hiranandani Developers, they do have the ability to create well knit-communities.

These attributes have helped in becoming a potent brand in the core market: Western suburbs. That’s the location where it has built prime projects of their location. In the two locations outside Mumbai, it has been challenged. Rustomjee Global City at Virar of 200 acres initially ran into a rough wall supposedly due to a clash with a local heavyweight.

Similarly, there is the Rustomjee Urbania project in Thane of over 100 acres. There’s no easy way to say this, in my view, it has to rank among the five most visually unappealing projects by any branded builder in the region. The optics could have been compensated by the product, but the overwhelming density makes it impossible to attract a pricing premium.

Yet, despite these blips, there is no doubt in my mind that Rustomjee is the one player to watch out for in Mumbai real estate over the next five years.

Super-prime sites

Unlike most peers, there is no major track record of stalled projects that are likely to scare future customers. Its latest choice of locations for projects at super-prime places like Pali Hill, Bandstand mean that a landmark project is round the corner. It is trying for locations outside the Western suburbs as well. It will not be easy but the areas he is trying for are locations where the market lacks an established local heavyweight brand and land parcel sizes exist for community redevelopment projects.

The biggest challenge, like with everything else in real estate, will be execution. This is a company that has grown rapidly in scale and mind-space in the last decade. Does it have the talent or management structure to manage that growth?

Personally, I am glad to see the listing of the company. The listed space of the current real estate arena has been dominated by PR narrative-setters where every analyst is debating the extent to which management commentary has to be discounted.

As an unlisted player Boman Irani has so far remained uncorrupted from that circus with an impulse to be candid on business. If he retains that impulse, then despite not being the biggest player, he may have the biggest voice.

Rustomjee Group’s Keystone Realtors IPO price at Rs 514-541