Hinduja Group scouts for partners for renewable energy, defence businesses

Group co-chairman Gopichand P. Hinduja says the group is committed to India for a long term despite ups and downs

A file photo of group co-chairman Gopichand P. Hinduja.
A file photo of group co-chairman Gopichand P. Hinduja.

Mumbai: The $25-billion Hinduja Group is scouting for partners for manufacturing defence equipment and entering the renewable energy space in India, according to group co-chairman Gopichand P. Hinduja. The group has also shortlisted four distressed power projects to buy out and will make an announcement shortly, he said.

On 2 September, Mint had reported that Hinduja Group had committed $10 billion to invest in infrastructure in India, with a focus on distressed power and road projects. This is the third big attempt by the group to invest in India, after unsuccessful attempts in 1991 and 2010.

In an interaction in Mumbai, London-based Hinduja said the group is committed to India for a long term despite ups and downs.

“The current government has right intent and we are ready to participate in the Make In India programme. We have increased our total investment towards India by 25%,” he said.

Apart from flagship Ashok Leyland, the Hinduja group currently has presence in India’s banking space through IndusInd Bank and cable television with Indusind Media and Communications Ltd.

In July 2014, the group listed Gulf Oil Lubricants India Ltd, the demerged lubricants business of Gulf Oil Corp. as a separate entity on India’s stock exchanges.The group employs around 70,000 in 37 countries.

Industrial captains are upbeat on the improved business sentiment after Prime Minister Narendra Modi formed a government with a comfortable majority and revived investment interest in India, which has been languishing for the past two years.

Renewable energy

Hinduja said the group will enter alternate energy space by forming a new joint venture company in with 49% stake held by a partner. The group is in discussions with two potential partners for the same and the venture would be headed by Shom Hinduja, 23, son of Ashok P. Hinduja, chairman of Hinduja Group India.

“We are looking at the solar energy space and we will start with 1,000 MW capacity. We have already identified land in Andhra Pradesh, Rajasthan and Gujarat,” Hinduja said, citing renewable energy business is a viable business proposition.

India, the world’s third-largest emitter of greenhouse gases, has secured pledges from 213 companies for setting up a renewable energy capacity of 266 gigawatts (GW) over the next five years, potentially cutting its overwhelming dependence on fossil fuels and strengthening the country’s position at global climate change negotiations, Mint reported on Monday.

While India has so far resisted international pressure to commit to capping emissions, Prime Minister Narendra Modi has pledged to increase the country’s renewable energy capacity in a bid to reduce the use of fossil fuels. During US President Barack Obama’s trip to India last month, Modi had agreed to work together with other countries to reduce emissions, signalling that India may join an international deal on global warming. The government is expecting an investment of $200 billion in green energy projects.

The upcoming UN climate conference in Paris in December is expected to finalize a global agreement to cut greenhouse gas emissions.

The Hinduja Group had committed $6 billion for India while P.V. Narasimha Rao headed a Congress government. During the second term of the United Progressive Alliance (UPA) led by Manmohan Singh, the Hinduja Group again committed $30 billion.

Defence business

The group has also plans to finalise partners for its defence equipment manufacturing business.

“One of the largest European defence aircraft manufacturers is talking to us. We have the capacity and we want to do big in defence,” Hinduja said.

He did not disclose the name of the European company.

R. Seshasayee, executive vice chairman, Hinduja Group India said Ashok Leyland wants to participate in the business of building subsystems of civilian and defence aircraft, including seating and assembly of parts.

He said western manufacturers are still catering to the South East Asian market and Hinduja group could potentially supply to those markets by forging tie-ups with manufacturers abroad.

However, he said the equity cap of 49% for foreign manufacturers is hampering the formation of tie-ups, he said.

India is expecting total defence budget allocation between financial years 2014 to 2022 to be $620 billion, of which 50% would be on capital expenditure, according to a report released by industry association the Federation of Indian Chambers of Commerce and Industry (Ficci) and financial services firm Centrum Capital Ltd early February 2015. The annual opportunity for Indian companies—both public sector underakings and private companies—is expected to reach $41 billion by financial year 2022 and $168 billion of cumulative opportunity between fiscal 2014-2022 driven by domestic and external demand, the report said.

Distressed assets

Hinduja Group has also shortlisted 19 distressed infrastructure projects for potential buyouts.

“These are power projects. We are expected to announce these deals shortly,” Hinduja said.

He said as a group philosophy, it has no plans to invest in greenfield projects, citing past experiences.

He was referring to the regulatory hurdles of a thermal power project planned by the Hinduja Group in Visaskhapatnam—Hinduja National Power Corp. Ltd—which was one of the eight fast-track projects awarded by the government in early 1990s.

The Hinduja Group revived the project in 2009 by securing fresh approvals.

Hinduja said the thermal power project is set to commission its first 520 MW unit of the 1,040 MW project by July 2015.

“The project was delayed by 17 years. I don’t have the patience to wait for 17 years,” Hinduja said.

He added the group is open to acquiring companies that offer synergy to its 10 areas of business: oil and gas, power, realty, banking, healthcare, automotive, education, infrastructure, information technology and media.

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