Hyderabad: Less than six weeks after consolidating closely-held units to create a larger balance sheet, GVK Power & Infrastructure, a Rs2,500 crore company leading a consortium that is modernizing the Mumbai airport, has set itself an ambitious target to increase revenues to over $1 billion (Rs4,423 crore) by 2010.
GVK aims to achieve the target by aggressively foraying into infrastructure projects in telecommunications, ports and special economic zones or SEZs, its chairman G.V. Krishna Reddy said.
“We have recently expressed interest to develop mini and medium ports in Gujarat. Going forward, we plan to aggressively expand in this space across the country,” Reddy told Mint in an exclusive interview.
Gujarat, with the longest coastline in the country, of around 1,000 kms, plans to develop 10 mini and medium-size ports and has invited bids from developers. GVK has responded with bids for all 10.
“We will zero in on some of them that promise long-term viability,” A. Issac George, GVK Group’s chief financial officer, said.
In telecom, GVK plans to set up physical infrastructure like towers for radio stations for fast-growing mobile service providers, Reddy said.
The ministry of communications and the Telecom Regulatory Authority of India plan to make it mandatory for phone companies to share the expenditure of setting up the towers, and are encouraging specialist companies that will be responsible for constructing and managing such towers.
Industry insiders estimate that about 70% of India’s one billion population is covered by cellular networks but in terms of physical coverage that is less than a third of the country.
GVK also has plans to enter into the business of developing SEZs. “We have recently bid for two SEZs—both in Tamil Nadu,” Reddy said.
The proposed SEZs, both 3,000 acres each, are at Hosur, an industrial town bordering Karnataka, and Peramallur near Cuddalore.
An analyst said GVK’s plans to expand through new businesses augured well for the company’s shares but expressed caution on funding the expansion.
“In view of the group's well-entrenched management with experience in infrastructure, the proposed forays into ports and telecom infrastructure, if successful, may create substantial shareholder value in the long term,” Nitin A. Khandkar, vice-president of research at Mumbai-based Keynote Capital, said.
GVK shares are listed on the stock markets.
However, Khandkar expressed caution over the huge capital requirements—estimated at over Rs2,200 crore—in ports, telecom and SEZs.
The debt-equity funding mix would be crucial for the company: equity dilution would determine the impact on earnings per share in the near term and debt would further increase interest outgo at a time when interest rates are hardening.
“The company will have to do a tightrope walk as far as the funding mix is concerned,” Khandkar said.