Hinduja Group commits $10 billion for India
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Mumbai: Gopichand P. Hinduja is hoping that the $25 billion Hinduja Group is third time lucky in investing in India in a big way after having failed to have done so in 1991 and 2010.
“This time we have committed $10 billion and we are currently screening five-six projects in infrastructure. We will be raising the funds through internal accruals and through partners. Many foreign partners have expressed their interest to co-invest in India,” Hinduja, co-chairman of the Hinduja Group, said in a phone interview from London. “We are largely looking at distressed power and road projects. We are only looking at brownfield projects that have already secured necessary clearances.”
The group has already asked two investment bankers to find suitable infrastructure projects to invest in, he said.
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.
“We are not averse to buying a pharmaceutical company or a brownfield port project that will complement our existing 10 businesses,” Hinduja said. He did not disclose the identified projects or details of potential partners.
To be sure, the Hindujas aren’t the only business group eyeing infrastructure assets. The Ajay Piramal-promoted Piramal Enterprises Ltd is also looking to invest in infrastructure, with focus on road assets. The group has earmarked Rs.5,000 crore to investment in operating infrastructure projects, a strategy Hinduja hopes to emulate.
Improved business sentiment after Prime Minister Narendra Modi formed a government with a comfortable majority has revived investment interest in India, and there’s hope that the country will see accelerated economic growth, which has been languishing for the past two years.
“This is the time for us. We had committed $6 billion during (Congress government led by Prime Minister) P.V. Narasimha Rao’s time. Though reforms came, nothing moved and we were stuck,” Hinduja recollected.
He said foreign investors withdrew because of delays in approvals during the second term of the United Progressive Alliance (UPA) led by Manmohan Singh when the Hinduja Group had committed $30 billion.
“The current government led by Narendra Modi is heading in right direction,” Hinduja said. “And his intentions are good.”
Delays in the award of environment, forest and other clearances have been blamed for economic growth slumping to below 5% for two consecutive years. Now, the Bharatiya Janata Party-led National Democratic Alliance (NDA) government is planning to set up two separate asset reconstruction companies (ARCs) to clean up bad debt in the power and road sectors to revive stalled projects.
According to government estimates, around 28,000MW of thermal power capacity in the country is stranded due to reasons such as the inability of state electricity boards to purchase power.
As many as 260 public-private partnership road projects worth Rs.60,000 crore have been stalled due to various reasons.
In addition to the two ARCs, the government is also considering setting up a power sector fund to bail out stressed projects.
The timing couldn’t be better for the Hindujas to invest in India, an expert said.
“This reflects their continued interest and faith in India as an investment destination. Given the euphoria created and the confidence shown in the new government by all, there is no reason for a failure,” said Kavil Ramachandran, a professor of family business and wealth management at Indian School of Business in Hyderabad. “This is perhaps the best time for bargain deals since several infrastructure companies are facing difficulties.”
The Hindujas have typically got a raw deal in India, acording to S. Manikutty, a professor at the Indian Institute of Management Ahmedabad, who has researched family-owned businesses in India.
“They have expressed their keenness to invest, but most (except Ashok Leyland Ltd), have come to naught. It is good that they are thinking of brownfield projects and I suppose they are feeling more encouraged under the Modi government,” Manikutty said.
Hinduja also suggested that the government should treat non-resident Indian (NRI) investors at par with resident investors.
“Actually, preference should be given to NRI investors as it improves the current account of the treasury. The government has set the ground attractive for foreign investors,” he said.
“Now it needs to ensure that sound policies are put in place to implement the investments in the right direction. Incentives to be given, to those investments in the sustainable projects that can give long term growth for the nation.”
While Hinduja was hopeful about the direction being given to the economy by the Modi government, he said that his group is playing it safe this time.
“Greenfield projects take five-six years to complete. Brownfield projects are better option. Under brownfield projects, we, at least know what are the problems,” he said. “After all, any industry needs return on investments.”