A Passage to India for B.C. Exports?

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On a warm April afternoon, Captain Mervyn Pinto gazes out at the rapidly evolving skyline of Vancouver from the bridge of Minaean International Corp.’s 13th-floor offices. Sunshine glistens on the glass towers of Georgia Street, while inside a cellphone vibrates on Pinto’s desk and an audio cue from the computer persistently reminds him of unread emails. He ignores the electronic noise, preoccupied by thoughts of expanding cityscapes worlds away from Lotusland.


As president and CEO of Minaean International, an upstart Vancouver-based company that builds structures of light-gauge steel targeted largely for the developing world, Pinto sees gold in the supercharged economy of India. His company has been nudging its way slowly toward big-time success in the Indian market, pitching its load-bearing steel-panel building system as both a quick salve for housing needs that emerge from natural and other humanitarian disasters and also as a safe and cost-effective alternative to conventional architecture. Underpinned by this business model, Minaean has seen annual revenues grow from US$500,000 in 2003, when the firm was just beginning to make inroads in India, to US$7 million by March 2009. But it’s not the scale of success Pinto has in mind – far from it in fact. 


“Look, we’re talking about a country that has known nothing but bricks-and-mortar construction for many centuries,” says Pinto, 60, an amiable native of Mangalore in the state of Karnataka, who says he spends about a quarter of each year in India. “It takes time, but it’s worth the effort.” In five years, he predicts, Minaean’s annual revenues could top $100 million. 


The reason for his optimism? India, with a population of almost 1.2 billion, has had one of the world’s fastest-growing economies in recent years, with 10 years of more than seven per cent annual GDP growth (peaking at 9.6 per cent in 2006). According to a 2007 report from Mc­Kinsey & Co., India’s middle class – which now sits at more than 300 million people – is expected to approach 600 million by 2025. And although India’s economy is not immune to the current global economic malaise, government economists are cheerily predicting continued growth of seven per cent for the current fiscal year and beyond. 


[pagebreak] Such rapid growth has the country bursting at the seams, leading India’s government to earmark more than US$550 billion for infrastructure spending in its current five-year economic plan. But even that staggering amount will do little to alleviate a housing shortfall that the government in New Delhi pegs at more than 24 million units. The country will need investment and building expertise. And so as India – a place where ox carts jockey for space on the street with Mercedes – attempts to build a modern economy, Pinto dreams about building a fortune for his Vancouver-based construction enterprise.


Mervyn Pinto’s career began not on a dust-filled construction site but in the frenetic ports of India where, at the fresh age of 25, he became the youngest captain in India’s merchant navy, commanding freighters as large as 50,000 tonnes around the world. In 1977 he captained the first ship to christen the docks of the Persian Gulf’s then-new port in Jebel Ali, Dubai (now the Gulf’s busiest). By 1991, working on behalf of the shipping company Norpol Marine (of which he was part owner), Pinto was in command of Gulf cleanup operations after Saddam Hussein’s retreating army had laid waste to the desert oil fields of Kuwait. Along the way he even dabbled in film, producing a movie called Mog ani Moipas, or Love and Affection, though he acknowledges that the effort didn’t exactly catapult him onto the red carpets of Bollywood. In 1994 Pinto moved to Vancouver, searching for a better quality of life and more opportunities for his wife, son and daughter. However, the globetrotting pace of international shipping proved hard on his family, and within a few years he was ready for change. 


Minaean was formed in 2000 as a fledgling research and development company focused on steel-based construction technology. A year later, while Minaean was developing its building system and Pinto was serving as events chairman for the Canada-India Business Council, he helped to host an Indian delegation that included players in the construction industry seeking partnerships and investment from Canadian interests. Pinto made valuable connections, and as he was bidding farewell to the delegation he sensed an entrepreneurial buzz in the air. “I already knew that the potential of the Indian construction market was huge, and the conference confirmed it,” Pinto says. 


Minaean’s technology was ready for road testing, and in 2001 it would get that test. On January 26, while Pinto was in India meeting business leaders and angling for contracts, a massive earthquake, measuring 7.9 on the Richter scale, rocked the state of Gujarat. It killed more than 20,000 people, injured 166,000 and destroyed some one million homes, most of them bricks-and-mortar abodes that crumpled under the force of the quake. As the state began mopping up, Pinto approached Indian officials with the idea of show­casing the benefits of Minaean’s technology: seismically robust, lightweight and relatively quick and straightforward to prefabricate. 


Minaean managed to score a small contract for a few buildings in one of the towns devastated by the Gujarat quake – in essence, demonstration homes where officials could view the unfamiliar construction technology in use. But almost immediately, Minaean encountered bureaucratic resistance; combined with skyrocketing steel prices, it made for a decidedly muted debut. 


Still, the deal served as a toehold in India and led to a strategic alliance with Tata Steel that would secure preferred prices for Minaean’s future projects on the subcontinent. Over the next few years, Minaean continued to grow and expand, and in 2003 Vancouver venture capitalist Hari Varshney came aboard to help take the company public (Minaean’s shares are now traded on the TSX Venture Exchange and on the Berlin and Frankfurt stock exchanges). Then, three years later, the company got its first big break. 

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Shell India had just been licensed for 2,000 new filling stations and was looking for a supplier that could produce quickly and on budget. “Shell challenged us to build a prototype at our cost. We established a factory and in 30 days we had a prototype,” Pinto says. “Once it was erected, they liked what they saw.” The result was a $5.5-million contract for 50 gas stations, to be built, delivered and installed on a critically tight deadline of 120 days. Export Development Canada came to the table with a financial security guarantee for the State Bank of India, which in turn supplied the collateral for a $2-million line of credit that enabled Minaean to crank up operations at two factories in Mumbai. 


That groundbreaking order has since been expanded to 200 gas stations, keeping 140 design and engineering staff busy in Mumbai and leading to orders for other applications suited to in-factory prefabrication, namely automated banking kiosks and bus stands; so far Minaean has produced 80 ATM banking kiosks under contract to multinationals Diebold Inc. and NCR Corp., as well as 340 bus shelters for the municipal governments of Mumbai and Bangalore. Now the company is bidding on contracts to build and install pedestrian overpasses and public washrooms.


Despite these achievements, Minaean remains a small fish in the small pond of B.C. firms selling goods and services to India. In 2008 B.C.’s exports to India were worth $170 million, double what they were in 1999. But considering the large number of Indo-Canadians living on the West Coast, it is, according to several observers, far short of what the trade relationship could be. Valli Chettiar, a native of Chennai in Tamil Nadu, is a Vancouver business lawyer and a former president of the Canada-India Business Council. She currently sits on the India advisory group for the province’s Asia Pacific Trade Council, which in 2007 published a report recommending B.C. open a trade and investment office in India. The province followed through on that recommendation this summer, opening a trade bureau in the high-tech hub of Bangalore in addition to a recently announced “investment and skills liaison” office in the Punjabi city of Chandigarh. 


Chettiar calls this a good first step but adds there’s plenty of room to grow. “We’re not doing enough to increase our numbers,” Chettiar says. “We’ve had trade missions, but those often amount to a lot of talking, signing MOUs but not much else. India wants and needs everything: infrastructure, energy and technology.” 


Still, as Chettiar acknowledges, India poses many challenges to budding foreign entrepreneurs and investors. The business cultures in India and Canada can be as incompatible as oil and water. In negotiations, a No or Yes doesn’t necessarily mean the same thing when operations hit the ground. “Negotiations are rarely as clear-cut as they are in Canada. They tend to be very fluid, and this can be a frustrating experience for some would-be investors,” she says. There’s also the Indian bureaucracy, which, as Pinto has discovered, can be cripplingly labyrinthine. When Shell became bogged down in the permitting process, Minaean was forced to delay delivery and installation of dozens of gas station buildings (and watch as inventory levels mushroomed). “Instead of one window, sometimes you have to go to 10 windows to get a single permit,” Pinto says resignedly. 


Pinto is hoping his intimate understanding of Indian business nuance and government bureaucracy will help Minaean cash in on another opportunity. Slumdog Millionaire seemingly overnight brought the lives of Mumbai’s millions of slum dwellers into the living rooms of middle-class moviegoers around the globe. The film’s popularity also brought a flurry of media attention onto Minaean’s up-until-then low-profile manoeuvrings to become part of an ambitious state government plan to rehabilitate Mumbai’s slums into modern neighbourhoods with proper housing and public facilities. The development scheme, pegged at more than $2 billion, will see the state government of Maharashtra sell off slum lands to private developers, with the caveat that low-income housing must be built to house existing residents. 


“Sure, Slumdog Millionaire got us a little attention, mostly because I happened to be in Mumbai when [Global TV reporter] Jas Johal called me about doing a story, and he flew over to meet me,” Pinto says with a laugh. But unlike the fast-moving action of that movie, Minaean’s involvement in rehabilitating a Mumbai slum known as Wadala (distinct from the sprawling Dharavi community immortalized in Slumdog) has so far been an exercise in extreme patience and careful social navigation. “The slum rehab is a long-term project for us,” says Pinto. 


Minaean faces an uphill battle winning the trust of the slum’s landless, a disenfranchised constituency that’s justifiably suspicious of any scheme that would see them turfed by unscrupulous real estate sharks (of which, Pinto admits, there are many circling the waters of Mumbai). That’s why, three years ago, Minaean signed an MOU with the Slum Rehabilitation Society, an NGO helping to win approval for the rehabilitation project from a majority of Wadala’s wary inhabitants (residents get to vote Yes or No on the project). If everything pans out for Minaean’s proposed 10-hectare development in Wadala – assuming the rehabilitation gets the green light and building permits are forthcoming – it could, according to Pinto, be worth US$85 million to the company.


The reality of this scheme is that Minaean investors will need stamina if they ever want to see the slum rehab project netting returns. And that’s a big if according to Maneesh Nanda, a Vancouver consultant with much experience helping Indian and Canadian businesses make the overseas transition. He sounds a cautionary note for companies such as Minaean, noting that the oft-quoted figure for India’s middle class, roughly 300 million, needs to be tempered by reality. These citizens may be middle class by Indian standards, says Nanda, but for the purposes of North American entrepreneurs, there’s likely a potential market of only 100 million consumers. 

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As for Minaean’s particular business case, Nanda has more faith in its focus on such projects as ATM kiosks, gas stations and public washrooms than he does on Pinto’s hopes to cash in on slum rehab efforts. “I don’t think their business will grow as much as they say it will. The nature and cost of the raw material [steel] is a challenge,” Nanda says. Slum rehabilitation is a very challenging business that depends on fickle government support, he says, but as policies improve over time, Minaean may be well placed to capitalize on the opportunity.


Perhaps to hedge its bet, Minaean has attempted to diversify in recent years. As India nurtures trade ties with countries in its more immediate sphere of economic influence, such as Qatar and Ghana, Pinto says Minaean will try to piggyback its technology into these emerging markets, which have similarly acute infrastructure needs. Minaean is also making inroads closer to home. The company has already completed a residential project in Eugene, Oregon, and a pair of residential/retail developments in nearby Portland, Oregon, a city well known for its progressive attitudes toward urban design. Two more mixed-use projects are now underway in Portland, employing Minaean’s steel frame technology, and with the recent construction of a three-storey commercial-and-residential low-rise on the corner of Broadway and Waterloo in Vancouver, the firm is celebrating an auspicious milestone: the debut of its light-gauge-steel building system in the Lower Mainland. 


Manley McLachlan, president of the B.C. Construction Association, says that although wood is indisputably B.C.’s favoured framing material, steel offers some significant advantages. For example, the fact that steel doesn’t mould means it could be an antidote to the leaky condo syndrome that has plagued many developments on the wet West Coast. “Clearly the government’s focus is supporting the wood industry, but I think it’s great that we’re seeing all kinds of new building systems come into play,” he says. 


But the day when steel supplants wood in B.C. construction is likely a long way off. So although Pinto is excited to witness Minaean’s technology taking its place on Vancouver’s cityscape, he’s realistic about where the company’s near-term growth prospects lie – and it’s not in countries where lumber is lord. “From the beginning, our business model has been focused on India. More than anything else, when you know the [Indian] market the way I do, it would be a huge waste of my entrepreneurship not to take advantage of it.”