BackTatas to pump `48,000 crore into unlisted infra firms
Tata Group aiming to increase size of combined business of three firms by more than three times
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Mumbai: The Tata group plans to invest about ₹ 48,000 crore in three unlisted infrastructure companies over the next five years, aiming to increase the size of their combined business by more than three times.
Projects under the ambit of Tata Projects Ltd, Tata Housing Development Co. Ltd and Tata Realty and Infrastructure Ltd would be of the order of ₹ 70,000 crore by 2019, from an estimated ₹ 20,000 crore presently, the managing directors of the three companies said at a joint news conference on Wednesday.
The $100 billion conglomerate signalled its intent to expand its infrastructure business less than six months after Cyrus Mistry became chairman of the group, having earlier been managing director of the Shapoorji Pallonji group that also has interests in real estate and construction.
“It is probably a strategy to highlight the scale and size that these three companies have the potential to reach, which wouldn’t have been otherwise possible since they aren’t listed," said Arun Kejriwal, director of Kejriwal Research and Investment Services Pvt. Ltd.
The planned investments and business targets outlined by the three companies are also probably a signal to the market about infrastructure emerging as a key focus area for the Tata group under its new chairman, added Kejriwal, who said the joint press conference was unprecedented.
The targeted business size of ₹ 70,000 crore primarily comprises expected revenue of ₹ 38,000 crore from 26 residential projects being implemented by Tata Housing that are under various stages of development, and execution of EPC (engineering, procurement and construction) projects worth around ₹ 30,000 crore by Tata Projects.
It may also signify that one or more of these three firms will look to raise money from the markets as they expand their business, said Kejriwal.
Tata Realty, which develops commercial real estate, roads and other infrastructure, plans to invest ₹ 22,700 crore over the next five years.
Giving a business-wise break-up for the money to be spent, Tata Realty’s managing director and chief executive Sanjay G. Ubale said the unit will spend ₹ 7,500 crore to develop roads, ₹ 5,000 crore on airports, ₹ 3,000 crore on urban transport, ₹ 3,000 crore on industrial parks, ₹ 4,000 crore on commercial real estate and ₹ 200 crore on hotels and related facilities.
Tata Housing will spend ₹ 24,000-26,000 crore towards land and construction costs for the 55 million sq. ft it is developing, according to managing director and chief executive Brotin Banerjee.
Tata Projects will use around ₹ 1,500-1,800 crore to finance working capital requirements to execute various projects, said its managing director Vinayak Deshpande.
In the coming 9-12 months, Tata Housing will be looking to enter new businesses such as the construction of industrial townships and clubs and schools as part of urban townships, Banerjee said. The company is also on the verge of signing an agreement with the Urban Development Authority of Sri Lanka to redevelop and provide organised housing in an area within Colombo, which has become a “sprawl", Banerjee said.
The space that Tata Housing manages to free up by redeveloping the area in a planned manner can be commercially exploited. The project could be worth around ₹ 3,000 crore for Tata Housing, according to Banerjee. The company is also changing the mix of affordable housing to premium residences to 60:40, from the current 25:75.
Tata Housing will also tap the land bank owned by individual group firms that have spare land for developing residential real estate.
“Clearance of the new real estate bill and a declining interest rate regime should boost the demand for housing," Banerjee said.
Tata Realty’s new investments are directed towards projects such as a 4 million sq. ft information technology park it is building in Chennai at a cost of ₹ 3,700 crore and three road projects that it recently acquired from IVRCL Ltd for ₹ 2,200 crore.
The company is also building a greenfield airport in Jamshedpur in a joint venture with Tata Steel Ltd and will be interested in bidding for the proposed new airports in Goa and Navi Mumbai.
Ubale said that apart from operating the road projects acquired from IVRCL, Tata Realty would also like to bid for a couple of new road projects and execute them over the next two-and-a-half years.
The company’s road projects division TRIL Roads Pvt. Ltd will also look at listing itself in the next three years to raise money and offer an exit to the private equity investor in the business. TRIL Roads was a 65:35 joint venture between Tata Realty and private equity firm Actis Capital Llp. The latter exited the company recently and its stake was bought by Tata Opportunities Fund Lp, a captive private equity fund of the Tata group.
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