Mumbai: One of India’s oldest business groups, the Rs15,000-crore RPG Enterprises, is set to get more active and expand in multiple business sectors. In an interview, the company’s generally media-shy chairman, Harsh Goenka, spoke on its expansion plans. The RPG group will invest Rs10,000 crore in the power business, Goenka said, adding that the firm was looking to acquire a power transmission company. Edited excerpts:
Retail woes: RPG chairman Harsh Goenka says the group has closed around 150 Spencer’s stores and is focusing on large-format stores. Dipak Hazra / Hindustan Times
Why hasn’t the group gone in for any big-ticket acquisitions?
We did look at a lot of acquisitions but the valuations, the price-earnings multiples just didn’t make sense. Of course, I cannot say that we could foresee what was going to happen but I think we are happy. However, we have ambitious expansion plans. We are looking at putting up just now a 250MW plant in Budge Budge (West Bengal). We shall be commencing production in September. We are putting up another 600MW plant in Haldia (West Bengal) for which most of the approvals are through. We have also taken over (a project)...in Chandrapur in Maharashtra to put up a thermal-based 600MW plant... Then we’re looking at power plants in Jharkhand and Bihar.
The problems, of course, are basically, how do you get the land and how do you get the coal linkage for that? The only place where we have deferred our plans somewhat is, we were putting up a plant for carbon black in Vietnam; we deferred it by six months or so to see how the world demand takes place, but our other expansion plans —we are going full steam ahead.
So in the power sector alone, what is your capital expenditure that you’ve looked at for the next year or two or three years?
I think over Rs10,000 crore of investment just in the area of power.
So you’re very clear that power is a big game for you?
Absolutely; power generation, distribution and also transmission.
What about retail? How is Spencer’s doing?
We still have to get our act totally together on Spencer’s. We are doing a couple of things. The first was positioning of Spencer’s. We have decided that we are not a discount-driven model. What we are trying to do is say we will give you value product offerings with good service and a good environment. We are working in terms of reducing our rentals. We managed to bring down rentals by about 20% or so for the metropolitan cities and almost 30% for the B-grade towns. We have closed down about 150 units. It was extremely painful.
Absolutely. We have closed down those many stores because they were not profitable or the landlords were not bringing down the rents. So, we have been somewhat ruthless in trying to reorganize our retail business.
Or also a clear category?
Our major expansion is going to be in the larger format. We have decided—we can be stand-alone or we can be part of a mall.
Are you looking at a big-ticket FDI (foreign direct investment) partnership as well?
We will over the next one year dilute, say, 10-20% equity to somebody who can bring in value to the business.
And money, of course.
I am saying your criteria is not going to be just money, you could go to any private equity player.
Yes, it could be a private equity player as well. We have not decided.
Somebody who has experience in retail?
Both. We are looking for both, actually. None of the large players (companies) will come in with 10-20%. So, it would be stupid for me to think that way. If you talk to a Wal-Mart (Stores Inc.) or Carrefour (SA), typically they talk about a majority equity.
So you are not looking at that?
No, we are not looking at that.
So you will probably look at a private equity player who will bring in 10-20%?
Do you expect to close this within a year?
Are you already in talks?
We haven’t. Investment bankers are always talking to us. But we will take some concrete steps towards this.