It is always better to spread your wings

Updated: Apr 1 2008, 05:20am hrs
At the helm of Lanco Infratech, Madhusudhan Rao appears set to chart a fresh course for his company, which was set up in 1993 with an initial focus on construction. With 23 subsidiaries across 12 states and a market capitalisation of $4 billion, this Lanco Group company today rides chairman Raos acumen for meeting ambitious business targets in areas as diverse as wind power, finance and development. In an exclusive interview with FEs Kavitha Venkatraman, Rao talks about what Lanco wants to accomplish with its new projects. Excerpts:

What are your plans for the power business

Lanco Infratech has recently entered the wind power business, both as manufacturer and developer of projects. It is, by and large, the largest vertical of the company. Nearly 500 mw of power projects are already operational and about 7,500 mw of projects are under various stages of implementation. The company is qualified to handle power projects of at least 10,000 mw. We will bid for this over the next six to seven months across India. Besides, as part of a business development initiative, 5,000-mw thermal and hydel projects are under various stages of implementation.

We are going to bid for projects in Uttar Pradesh. These projects will be of about 3,000 mw. Besides, we are qualified to bid for projects in Punjab and Karnataka and an ultra-mega power project in Jharkhand. We are also adding 400 mw to our Lanco Kondapalli Power Project. Construction has begun and the idea is to generate power by 2009. The project will be implemented through balance sheet funding.

Our vision is to have power projects of 15,000 mw up and running by 2015. We are confident of achieving this goal. If five years are considered gestation period for any power project, we will need another 6,000 mw of projects in the next three years. We are positive of achieving that, looking at the number of projects we are qualified for.

In recent years, the company has been laying a lot of emphasis on property development. What are your current projects and how much space are you planning to develop

In realty, our target is to complete the development of 40 million sq ft of space by 2011-2012. Today, we have a presence across various areas of realty like residential, retail, commercial, entertainment and hospitality. Our largest project under construction is Lanco Hills in Hyderabad. The mega project will have over 30 million sq ft of space encompassing IT parks, offices, residences, malls and multiplexes, 4- and 5-star hotels, serviced apartments, recreational areas and club houses. Our second-largest initiative is a 10-million sq ft residential project coming up in Chennai.

We are also on the lookout for retail projects in Bangalore, Vijayawada, Visakhapatnam, Chennai, Cochin and Gurgaon. We will opt for an integrated approach or an independent approach to retail projects, depending on demand in the areas concerned. For instance, if a city needs an integrated project with residential, commercial and other entertainment space, we will develop a project on those lines. But, if it needs only a mall, we are open to that idea as well. We might develop these projects on our own or through partnerships.

How is the construction business doing

Construction was our original business, but at some point, we went slow in the segment to be more of a developer. Today, we realised the need to strengthen our construction business. Our current focus in the construction business is on four verticals: buildings, industrial projects, transmission & distribution, and roads. This division is growing aggressively and there is a huge in-house requirement for manpower. So, to support that, the company adds at least 100 people a month.

Taking into account the boom that we are predicting in the construction industry, and to keep a control on the projects we have undertaken, we are again investing in our construction business. We are giving a boost to the business by adopting a path completely different from other construction companies. We are investing in high technology to reduce manpower requirement and ensure timely delivery of projects.

In 2008-09, we expect a huge jump in our construction revenue, from Rs 1,500 crore to Rs 4,000 crore. We will become one of the top five construction companies in the country.

You were planning to tie up with an international airport operator to bid for aviation projects. Has this been finalised

We already have a partner to handle small airport projects. But for large airports, we are still scouting for a suitable partner. It will take some time. Infrastructure, in general, is a very slow-moving business. There are opportunities in India, but for immediate bidding, there are very few. So, right now, our strategy is to have a partner in place, understand the business and try and focus on the limited opportunities that are coming up.

Are you looking at any new business opportunities

We are getting into wind turbine manufacturing. The company is trying to set up a 1,000-mw project in Puducherry. We already have a technology partnership with a German company. We are expecting the commercial launch of our wind turbine by September 2009. Some part of the power generated by the project will be used for captive consumption and the rest will be for international markets as there is a huge shortage of wind turbines overseas.

Our strategy for the wind turbine business is based on the global market shortage. It is always better to spread your wings. So, we are looking at developing wind farms in India, Europe and the US. We have already started operation in the US to develop land assets. For Europe, we have appointed a consultant, who will identify land for us for a wind power project. The company will invest Rs 200 crore in setting up a blade manufacturing facility at Puducherry. Over the next two years, we are looking at a further commitment of Rs 500 crore.

Many private equity (PE) players have invested heavily in infrastructure companies of late. Are you in talks with any PE funds

Several have approached us for specific projects. Some want to get into our SPVs, while some others want to invest in our verticals. Discussions are on. We are not clear as to how to structure the group to tap these opportunities. Since Lanco Infratech is a highly diversified entity, it is difficult for those who want to invest in our business to understand the profile. For example, those who have a strong presence in power and do not understand infrastructure, it would be difficult to gauge the value of Lancos power business independently. One suggestion for us is to create separate verticals for each business of the company. We are thinking about it, but have not taken a decision. We do not want to miss the opportunities that are available. So, we will adopt whatever method suits business growth. It will be definitely for the benefit of shareholders.