Uncertainties drive infra, power cos to foreign lands

Written by MG Arun | Viraj Nair | Mumbai | Updated: Oct 16 2012, 05:55am hrs
On account of mounting uncertainties in acquiring land, getting projects cleared and financed and dwindling assurance on fuel supply, the infrastructure and power companies are scouring the global landscape for business projects more than ever.

Indias largest engineering and construction company, Larsen & Toubro has already established offices in Russia, France, the UK and the US beyond the traditional Indian and West Asian markets. GMR Infrastructure is scouting for projects in South America, South East Asia and Africa.

Tata Power is scouring four new regions outside home Africa, West Asia, South East Asia, including Indonesia, Burma and Vietnam, and America as it aggressively chases projects to meet 2020 target.

We may not be able to add much capacity here, owing to lack of clarity on fuel, or issues related to land and environmental clearances, said Tata Power managing director Anil Sardana in an interview with FE.

The company has established teams in all these four regions, in addition to its team in India & Saarc, to hunt for projects and investment opportunities. They may take different shapes, like a JV or in partnership with someone who holds a licence. It might be a 100% investment by Tata Power or in the form of PPP with the government (like in India, Zambia), said Sardana. The vehicles to invest and progress will be different, but to build and possess the projects will be the objective.

L&T, which aims to double its sales to R1 lakh crore by 2017, has opened offices in Moscow, Kuala Lumpur, Indonesia, Milan, Paris, London, Houston and Turkey, as part of its internationalisation drive, and will soon open offices in Perth and Brazil.

If you want to grow, you need to have speed; India alone will not help, AM Naik, L&Ts chairman, had said in an earlier interview to FE. We need to tap new territories, look at newer ways of doing business, find the appropriate leadership and get more local people. L&T is aiming to get 25% of revenues form overseas in five years.

Slowdown in infrastructure growth and investments has been a major concern over the last few years, thanks to the high cost of financing projects, high material costs, uncertainty in coal production and supply, and government inaction that led to clearances getting stuck.

The government has embarked on what many call the second phase of reforms by allowing FDI in mutli-brand retail, opening up the pension and insurance sectors, and hiking diesel prices, but experts feel the malaise is too deep to get unwound so fast. The whole sentiment has gone weak and everything has slowed down. The government has to take steps to drive growth. That I think is still not clear, said Raju Bhinge, CEO, Tata Strategic Management Group, that advises companies on setting up operations in India.

GMR Infra, meanwhile, is eyeing emerging markets for growing its airports business. We are looking at opportunities for expanding our airport business in the international market. We will be focusing on emerging markets, including South East Asia, South America and several African countries. We have not identified any particular project as of now, GMRs chief financial officer A Subbarao told news agencies in August.

Bharat Heavy Electricals (BHEL), too, had said in August that some of its key markets like Africa, West Asia and South East Asia havent slowed, and it has got R8,000-crore overseas orders.

By this process (of creating separate global teams), we have derisked ourselves and have created five, clear regions. Africa is leading the race now, said Sardana, adding that the company has benchmarked against global firms like US-based AES and UKs International Power, who have all gone across the globe and executed projects.

Nandu Menon, an African-born Indian and a former McKinsey executive, oversees Tata Powers business deals in Africa, where it has a 50:50 joint venture with South Africas Exxaro Resources, named Cennergi, to develop power projects in the continent.