New Delhi/ Bangalore: Mumbai-based Housing Development and Infrastructure Ltd (HDIL), which started as a housing finance firm and made its mark clearing the city’s slums and redeveloping the land, has set its sights on exploring oil and gas in the country—making it the first domestic real estate firm to enter into the high-risk, high-return business of finding hydrocarbons.
“Though oil and gas is completely disconnected from our core business and what we are doing now, I can say that it will help in providing better services to customers, who we serve in our projects,” said Sarang Wadhawan, managing director of HDIL.
HDIL managing director Sarang Wadhawan said the firm was growing aggressively and looking to diversify into other areas. He declined to say how much the company would invest in its new venture
He declined to say how much the company would invest in its new venture. “It is too early to say anything more.’’ The firm, Wadhawan added, was growing aggressively and exploring other areas to diversify as well.
India’s third largest developer by market value has earlier mostly diversified into realty-related sectors such as developing special economic zones (SEZs), multiplexes and ports.
It now follows rivals who are looking for more earning streams as property values start to cool.
According to two equity analysts who say the firm shared details, HDIL has formed a 100% subsidiary to explore oil and gas. The company plans to partner a global firm for technical expertise. The analysts didn’t want to be named because the information hasn’t been made public yet.
A senior HDIL official said “HDIL Energy” is a special purpose vehicle that will bid for projects in oil and gas. The official can’t be named because he isn’t authorized to speak to the media. He didn’t give bid details.
According to the analysts, HDIL plans to bid for 10 oil blocks at the seventh round of auction under India’s new exploration and licensing policy (Nelp) that the government started to speed up oil exploration in the country to secure domestic supplies of oil and cut back on imports. Earlier this month, the government extended the deadline for placing bids for the current round to 30 June.
Under Nelp, which became effective in February 1999, licences are awarded only through competitive bidding and state-run oil companies compete with Indian private sector firms and foreign ones to get exploration licences.
Six rounds of auctions have so far been held under the Nelp. In the seventh round, 57 blocks are on offer, out of which 29 are on land, 19 in deep water and nine in shallow water. Companies can bid for one or more blocks either on their own or in consortiums.
HDIL’s plans are still in early stages, and it is not clear which blocks it would be bidding for. “It is a diversification into an area where people (developers) feel there are good prospects,” said an analyst with a domestic financial services company, who did not wish to be identified. “The slump in the real estate market is expected to continue for two years. So, developers who have the ability to raise capital and have project execution capabilities are looking to diversify into other business avenues.”
Developers such as HDIL, DLF Ltd and Indiabulls Real Estate Ltd are very ambitious, the analyst said. “If you look at these developers, they have made transitions to various businesses without demonstrating their ability in the infrastructure projects they have’’ said they will enter into.
HDIL is also building a coal-fired power plant at a 2,300-acre, multi-product SEZ in a Mumbai suburb, and would also build a port there. The company is still sorting out land issues with local fishermen for the proposed port.
The Mumbai developer also plans to get into power trading soon, said a company official, who did not wish to be named because he is not authorized to speak to the media. HDIL owns nearly 2,300 acres in Mumbai, Hyderabad and Kochi. It acquires large tracts of land, develops the infrastructure there and sells it to other developers for construction purposes.
The company recently won a Mumbai airport slum rehabilitation project. HDIL expects to earn Rs15,000-18,000 crore from the project in which it is supposed to clear the slum-encroached land, hand it over to Mumbai International Airport Pvt. Ltd—the joint venture between the GVK-SA consortium and Airports Authority of India—for development and relocate the affected people.