Hyderabad: Lagadapati Madhusudhan Rao chairman of the Hyderabad-based Lanco Group, is a man in a hurry. His group might have lost out on the Sasan mega power project, but Rao, who figured in Forbes latest list of ‘40 Richest Indians’ with a wealth of $1.9 billion (Rs7,524 crore) , wants his group to generate 15,000MW and earn revenues of Rs30,000 crore by 2015. Lanco Infratech Ltd the Rs1,648 crore infrastructure development company, which is the group’s flagship, is currently into power generation, power trading, and real estate and infrastructure development.
Lanco is now exploring opportunities in power generation overseas and in the development of seaports and airports. The group, which has been executing various projects through different special purpose vehicles (SPVs), is considering option of allowing each SPV to raise funds from market and get listed independently.
In an interview with Mint, Rao spelt out his plans. Edited excerpts
How has your power division performed? How much capacity have you created?
In the last six months, we did not add much capacity. Marginal additions include Anpara C project in Uttar Pradesh where we were allowed to increase the capacity from 1,000MW to 1,200MW and adding 70-80MW in UP in hydro power. We were allocated coal blocks in Orissa in the dip side of Rampia on a sharing basis with five other companies. We were given about 1,000MW equivalent coal allocation. In Orissa, we got coal linkage for 660MW power project a few months back.
What about increasing capacity at your existing projects? How much of this have you been able to do?
We are doubling the capacity of Amarkantak (in Chhattisgarh) project from 600MW to 1,200MW . This involves an investment of around Rs2,600 crore. We are expecting the financial closure by March 2008 and (plan to) commission the project in 36 months from then, by around April 2011.
We are also more than doubling the capacity of Kondapalli (in Andhra Pradesh) project from 370MW to 770MW. We are planning to implement this gas-based project under fast-track mode. This would be taken up as a merchant plant and it should be commissioned somewhere around April 2009. This requires 2 million cu. m of gas and we do not foresee any problem by the time the project takes off.
What are the other power generation opportunities you are pursuing?
There are a lot of bids coming up in the next few months in Haryana, Madhya Pradesh, Uttar Pradesh and Maharashtra ranging from (plants with a generation capacity of) 1,000MW to 2,000MW.
Excluding the Jharkand ultra mega power project, cumulative capacities of close to 10,000MW would come up for bids in the next six to eight months. We have already bid for the Tilaya ultra mega power project in Uttar Pradesh.
What about overseas opportunities in power generation?
We are seriously exploring opportunities internationally for our power business. We have qualified for one project in Indonesia, which is coming up for bidding sometime in December. This is relatively a small project of around 200MW. The process is similar to what we have in India. We have to participate in the RFQs (request for quotations) and the lowest bidder will get the project. Having proven our strengths today in the Indian power sector we think we can replicate them in other countries as well.
We are evaluating similar opportunities in other countries and we will be able to finalize our overseas power plans in the next few months. We would be considering opportunities in gas, wind, solar, coal, hydro power sectors.
What about green power?
We are seriously exploring this sector. There are a lot of incentives being given by several countries for green power and renewable energy. There are...carbon credits as well. We are already one of the largest recipients of carbon credits through power projects. We are studying the markets of Europe and the US for the wind power segments.
What kind of targets do you have in terms of generation capacity?
We have set a target of having a total operating capacity of close to 15,000MW by 2015. We are confident of achieving this. This should result in revenues of around Rs30,000 crore a year. Power will the largest contributor to our top line. Close to 50% of revenues should come from power division but the profitability would be more from the construction and realty divisions. While the power division would ensure steady stream of revenues and profits, the construction and realty divisions would entail a good upside in profits.
How far have you progressed in your plans to enter the development of seaports and airports?
We would like to gain experience in port development first through the berth allotted at Mangalore port. We have to develop, operate and maintain the berth. This can handle 6-7 million tonnes of cargo. We are developing this on our own and would like to use this experience for other opportunities in port development that will emerge. We have already tied up with the UAE-based Gulftainer Co. Ltd to gain from its experience in ports development. We are also keen to participate in airports development projects.
How do you plan to fund all these investments? Will Lanco Infratech, the holding company for several special purpose vehicles, raise funds or will each of the SPVs raise funds?
We will follow the conventional debt equity ratio of 75-80% of debt and the balance of 20-25% of equity. The debt: equity (ratio) for each of the SPVs would vary based on the nature of the projects they take up.
Lanco Infratech may not raise funds from the markets. Each of the SPVs may raise the funds required. Power, realty and infrastructure are the three key areas that we are currently into with several SPVs.
These SPVs are currently closely-held under Lanco Infratech. Based on the need for funds and the (state of the) markets going forward, we will take a strategic decision to consider allowing these SPVs to raise funds and get listed. However, we are not clear on the time frame to get these SPVs listed.