Essel Group seeking funds for smart-city development plans2 min read . Updated: 13 Apr 2015, 01:20 AM IST
The group will consider sale of equity through private equity investments or IPO in the next 24 months
Essel Group, which has business interests in media, entertainment, packaging, infrastructure and technology, among others, is in talks with private equity firms and financial institutions to raise funds to develop smart cities across India.
The group is looking for equity and structured finance for its two infrastructure holding companies that will execute the projects, a top company executive said.
The money will be raised by Essel Infraprojects Ltd and Essel Utilities Distribution Co.—the two holding companies leading the infrastructure and integrated utilities business at Essel Group. The company has already committed more than ₹ 50,000 crore for smart city and infrastructure projects.
Essel Group is bidding to build at least two smart city projects in India, Ashok K. Agarwal, director and chief executive officer at Essel Infraprojects, said in an interview.
“We have reorganized the business and created two holding companies with three key business verticals," Agarwal said. “The promoters have already invested ₹ 3,500 crore in terms of equity. We are in the process of tying up debt and equity for the next projects."
He said Essel Group would be considering sale of equity through private equity investments or an initial public offering in the next 24 months.
Essel Infraprojects has strategic business units comprising core infrastructure projects (roads, rail and airports) and green solutions (solar and wind power projects).
Essel Utilities Distribution has a third strategic business unit that offers power and water distribution services, municipal solid waste management, city Wi-Fi distribution, gas distribution and cable and broadband distribution.
Neeraj Sharma, a partner at consulting firm Walker Chandiok and Co. Llp, said there is no one company that can create all the capabilites required for a smart city, which envisages a holistic ecosystem with services as diverse as transport and waste management.
“The government will soon come out with a clear definition of smart city. This would give better clarity for the companies bidding for smart cities. However, a company would require to tie up with more companies to put together a plan of an urban conglomerate," Sharma said.
Agarwal agreed that Essel Group needs to tie up with many companies.
“We are looking at an integrated play. We are going to be an integrated implementation agency for a smart city on behalf of the government. We are tying up with master urban planners and technology partners. Essel Group has expertise in city gas distribution, road construction, theme parks, etc.," he said.
The National Democratic Alliance (NDA) government had last year declared its intent to create 100 smart cities with better technology, superior management and modern governance.
The project is likely to be rolled out this month after extensive consultations with stakeholders.
In December, Microsoft India partnered with the Surat Municipal Corporation to transform Surat into a smart city.
In January, Essel Group submitted a so-called letter of intent to the government of West Bengal to develop two smart cities and a series of infrastructural and urban development projects for the state, worth ₹ 10,000 crore. It had already committed to invest ₹ 7,500 crore towards developing five major cities in Madhya Pradesh into smart cities and is evaluating development projects in infrastructure utilities worth ₹ 50,000 crore.
So far, Essel Group has invested ₹ 5,000 crore on similar projects in Madhya Pradesh.