Mumbai: Lalit Jalan, 52, is busy overseeing the transformation of Reliance Infrastructure Ltd, in which he’s a full-time director, into a project management company with focus on engineering, procurement and construction (EPC) in the power sector.
The firm, he said, had to diversify into infrastructure projects such as roads, airports and power needs of special economic zones and townships to meet shareholder expectations of 20% annual returns.
The EPC business will now be a key driver to profits, with the focus more on India than overseas, said Jalan, who manages key portfolios in the Reliance Anil Dhirubhai Ambani Group’s (R-Adag) energy business, handling distribution, transmission and trading.
In 2008-09, Jalan expects the EPC operations to add Rs2,500 crore to the company’s overall turnover.
Edited Excerpts:
Your company is transforming itself into an infrastructure company primarily focused on project management.
Business makeover: Lalit Jalan at his office in Santacruz, Mumbai. Ashesh Shah / Mint
When we started planning to build 5-6 power plants in 2005 ... we found that the investment will cost more than Rs1 trillion and each of these projects had its own nuances. There was uncertainty on when will we get the land, the environmental clearances and fuel, among other things. We didn’t want this company to get bogged down by the weight of those plans, so we got these projects into a separate company, Reliance Power Ltd, that got listed this year.
I can only grow my power distribution business if the state governments are willing to privatize the distribution. So, I’m at the mercy of the state governments but my shareholders don’t believe and want me to grow at 20% every year. How do I grow?
We realized the same skill sets that we used to put up our power plants, the same project and construction experience and similar finance expertise, could be used in infrastructure as well. So around 2005, we started moving towards that and over the last three years, we have built a portfolio of nine projects at various levels of execution. Power is anyway the biggest of all infrastructure pieces and we are in all chains of it from generation to transmission to distribution.
In the EPC vertical, we are in roads, highways, flyovers. Urban transport, and airports are a big area of focus for us. Then we are looking at certain speciality real estate such as the commercial business district in Hyderabad.
In steel, we are in talks with a Chinese company. We are good in power but for any other area, we will need to acquire the skill set. The EPC areas we have identified are the metro and monorail, in which we already have two projects, and nuclear power plants, besides steel plants. This (fiscal) year, EPC should contribute Rs2,500 crore and double next year.
But you seem to have slowed in expanding your order book. You have not added any new projects in the past six months. Is this a conscious decision?