June, 28 2005
U-turn Tata remixes retirement policy
Theres unlikely to be any change in the position of Ratan Tata, the supremo of Rs 75,000-crore Tata group. In a surprise move, the board of Tata Sons, the holding company of Tata group of companies, has decided to extend the tenure of its non-executive directors. This enables chairman Ratan Tata to continue up to 2012, when he turns 75.
The new policy is a reversal of Tatas previous retirement policy in the mid 1990s, which he used to topple the satraps including Tata Steels Russi Mody and Ajit B. Kerkar from Indian Hotels. Darbari Seth had to leave once he turned 70.
Tata Sons said it has adopted revised guidelines for the composition of the board of directors. The statement did not give out the date of the board meeting. The retirement age for non-executive directors has been reverted to 75 years, thus allowing the company to continue to benefit from the rich experience of these directors, who add great value to the strategy and direction of Tata Group companies, says the Tata Sons statement.
The retirement age was fixed at 70 nearly 10 years ago when Ratan Tata took control of the group.
Tata, 68, had earlier given up the day-to-day management while remaining the Chairman of all major group companies. Under Ratan Tatas previous policy, he would have been forced to retire by 2007. There has been considerable speculation about his successor with many names including Noel Tata (Ratan Tatas step-brother) doing the rounds.
The revised guidelines are being circulated to the boards of Tata companies for their consideration. These revisions are to the policy last adopted in 2000 and reflect the views of independent directors on the boards of major Tata companies and take account of recent developments in the regulatory environment relating to good corporate governance, the statement added.
The other revisions include creation of nomination committees for the selection of new directors based on certain criteria; specification of tenure for independent directors; the retirement age for executive/whole-time directors has been maintained at 65 years.
However, the option to continue beyond the age of 70 would be with Tata as per the guidelines approved by the board on retirement.
No wonder some of the former CEOs who were thrown out because of Tatas former retirement policy are bitter. The previous move by Ratan Tata was mainly to throw Russi Mody out of Tata Steel, says a former Tata group CEO. It was then used to tackle Kerkar and one of the main accusations against Kerkar was that he failed to select a managing director under the Tata retirement policy, said the former CEO on conditions of anonymity.
Ratans policy was in complete variance to J.R.D. Tata, who used to give complete control and freedom to his professional managers and even make them even chairmen of group companies, he recalled.
Corporate analysts, however, say Ratan Tatas policy did manage to inculcate the sense of urgency, cohesion and professionalism in the Tata group which was needed in the post-liberalisation era. Ratan bought the Tata group back from the brink. He has shown the leadership which the group required and will require in future, said a senior BSE broker who tracked the Tata companies for the last 40 years.
Flashback: Removing the satraps the men who were eased out following Ratan Tatas earlier retirment policy.
Russi Mody: First to be targetted by the Tatas, went out fighting from Tata Steel. A close confidante of JRD, Russi was later made part-time chairman of Air-India but without executive powers. Now lives a near retired life in Kolkata.
Ajit B. Kerkar: The man behind the Taj group of hotels was eased out of Indian Hotels board when he turned 65, was not given a chance to lead the company as Chairman. Now runs his own hotel company, but is mired in a controversy with Left over the sale of Centaur Juhu.
Darbari Seth: The late chairman of Tata Chemicals left without any fireworks. Had a promising run initially. but left disillusioned. Later, his son Manu also quit as managing director.
Buddha ore plea on PM plate
Chief minister Buddhadeb Bhattacharjee today sought the Prime Ministers intervention to ensure Bengal can draw on iron ore reserves in neighbouring states to put up steel plants.
At least one large investment proposed by the Jindals is unable to progress because of the refusal of Jharkhand and Orissa to allow companies to mine iron ore in their territory unless they set up plants there, too.
At a recent meeting of eastern states, the chief minister had made a strong pitch for a mechanism for sharing mineral resources but found no takers.
He made the same appeal today at a meeting of the National Development Council. Bhattacharjee drew Manmohan Singhs attention to the anomaly where there is a national policy for mining and using coal, which Bengal has, but no such mechanism exists for iron ore and bauxite. As a result, while Bengal shares coal with other states, it does not get access to iron ore.
He sought the formation of a minerals and metals council of the eastern states that would create the framework for collaboration.
Bhattacharjee argued strongly for turning the Calcutta airport into a hub for east-bound international passengers and cargo, especially to China, Japan, and Southeast Asia.
He said the international terminal building required an immediate upgrade, particularly for cargo-handling, which would not be possible without central assistance.
Bhattacharjee sought help to develop a deep draft seaport at the Sandheads, a fishing harbour at Khajouri and imp-rove the road network as part of the Prime Ministers look east strategy.
He iterated the demand for upgrading Bagdogra to an international airport, linking it to Nepal, Bhutan and Bangladesh.
In the long run, he said, it would be necessary to develop a deep draft seaport somewhere near the mouth of the Hooghly or at the Sandheads at Sagar to deal with the international trend of larger ships requiring to be berthed.
Bhattacharjee wanted the Centre to treat the proposed fishing harbour at Khajouri as a national project as it had the potential of achieving exports worth Rs 600 crore from the Haldia port located 25 km away. The proposed harbour is expected to be the countrys largest.
He took to the national platform Bengals long-standing complaint about inadequate devolution of funds from the Centre.
In language that was reminiscent of the anti-Centre tirade indulged in by Jyoti Basu in the times of Indira and Rajiv Gandhi, Bhattacharjee said Bengal was getting a raw deal by way of transfer of funds.
The chief minister dismissed the Centres new debt-relief scheme, saying it is much too inadequate to be of any significant assistance.
Under the scheme, high-cost loans can be swapped with low-cost borrowings, reducing the repayment burden.
What is more disturbing is that the (high-interest) loans given to the state from the national small savings fund from 1999-2000 onwards have been excluded from the scope of debt relief, he said.
Ship scrap prices fall in India, Bangla
The price offered for ships to be scrapped fell last week in Bangladesh and India, the worlds largest markets, after prices of recycled steel plates dropped.
Indian buyers offered $315 a tonne of recoverable steel for oil tankers, down $35 a ton from a week earlier, Maryland based GMS Inc. said in a market report. The price of recycled steel plates dropped $10 a ton to $380, said GMS, which buys ships from owners and sells them to scrapyards. Prices for oil tankers fell in Bangladesh to $350, down $10 from a week earlier.
Prices paid for ships to be scrapped rose to a record $470 a tonne in Bangladesh in February because of a shortage of ships sold for scrap and rising global steel prices.
The price offered for ships to be scrapped fell last week in Bangladesh and India, the worlds largest markets, after prices of recycled steel plates dropped.
Indian buyers offered $315 a tonne of recoverable steel for oil tankers, down $35 a ton from a week earlier, Maryland based GMS Inc. said in a market report. The price of recycled steel plates dropped $10 a ton to $380, said GMS, which buys ships from owners and sells them to scrapyards. Prices for oil tankers fell in Bangladesh to $350, down $10 from a week earlier.
Prices paid for ships to be scrapped rose to a record $470 a tonne in Bangladesh in February because of a shortage of ships sold for scrap and rising global steel prices.
Core sector growth
The infrastructure sectors growth rate slowed at 5.6 per cent in May compared with 6.7 per cent a year ago because of lower crude and petroleum refining output. However, a sharp recovery in coal and electricity generation, both of which recorded a double digit growth, coupled with a moderate growth in cement and finished steel output had managed to keep the overall growth of six core industries in the positive territory. Coal output was up by 11.2 per cent and electricity generation by 10.5 per cent.
TopCurbs on steel exports likely to be reimposed
To prevent a sharp spurt in domestic steel prices, the government is likely to reimpose curbs on steel exports which have risen 27.65% in April-May period of the current fiscal.
According to sources, the steel ministry is considering a freeze on export incentives like duty entitlement passbook scheme (DEPB) on steel once again to prevent exports that have the potential to push up the domestic steel prices.
Last year (in March 2004), the government had frozen DEPB benefit on steel to prevent the spiralling growth in exports. It was restored early this year as exports started declining.
If the current growth trend in exports continues, incentives will be revisited, sources in the steel ministry said.
As per the government data, during April-May period of current fiscal (2005-06), the estimated exports of steel stood at about 9 million tonne compared to 7.05 million tonne in the corresponding period of previous fiscal.
The rise in exports has largely been attributed to high international prices of steel, particularly in the months of February and March when these orders were booked.
Industry experts say that this situation is still continuing where domestic steel prices are still lower marginally (Rs 20,000 to Rs 25,000 per tonne) compared to internationally prevailing prices ($500 to $550 per tonne).
While overall steel export growth has been 27.65% in April-May period, SAIL has reported 9% growth at 94,000 tonne during the period. Tata Steel, which reports about 11% to 13 % export growth every year has also seen double digit growth in the first two months of the current fiscal. Other steel producers like Jindal Steel and Power Ltd, Ispat and Essar Steel have also reported a rise in exports during current fiscal.
Incidentally, SAILs exports fell to less than half during the last fiscal (2004-05) at 4.6 lakh tonne from 11 lakh tonne during the fiscal previous to 2004-05.
There are fears that an increase in steel exports would put pressure on domestic prices where demand is growing annually at about 8%. The expected increase would come at a time when steel companies earlier this months reduced prices between Rs 500 to Rs 1,500 per tonne on account of softening of international prices and a subdued demand.
Meanwhile, steel imports have also increased substantially in the two-month period of current fiscal particularly from the CIS countries like Ukraine.
India produces about 38 million tonne of steel annually and exports comprise less than 10% of this.
Orissa seeks SEZ status for Posco plant
The claim that the 12 million tonne project of South Korean steel major Posco in Orissa will bring over Rs 1,11000 crore in revenues for the central and state governments, by way of taxes, appears to be tall considering that the project stands to gain huge tax benefits because of special economic zone (SEZ) status promised to it.
The Orissa government shall recommend to the central government and facilitate granting of (SEZ) status as required by the company, states the MoU signed between the state government and Posco.
This would include granting to the various aspects of the project, the status of 'SEZ developer' or 'SEZ unit', as the case may be, so as to receive the same incentives and benefits as an SEZ (as permissible under the policy of the central government), it said.
If the company applies for setting up its different facilities under the SEZ scheme of the Government of India, the Government of Orissa will direct the case to the Government of India and accord necessary facilitation with regard to the approved scheme of the Government of India as modified from time to time, the MoU stated.
If Posco is awarded an SEZ status, it is expected to get a few thousand crore rupees in tax rebates.
The setting up of the steel plant by Posco is likely to benefit the central government to the tune of Rs 89,000 crore over a period of 30 years by way of excise and Customs duties, service taxes and corporate income tax, Orissa Chief Secretary Subas Pani had said while singing the MoU.
The government of Orissa, on the other hand, is likely to get approximately Rs. 22,500 crore over a period of 30 years by way of sales tax and value-added tax , works contract tax, electricity duty, royalties, Orissa infrastructure tax and a share of central taxes, he added.
But, going by the SEZ policy of the Centre, the Posco project will enjoy the benefits of no-licence for import, exemption from Customs duty on import of capital goods, raw materials, consumables and spares, exemption from the central excise duty on procurement of capital goods, raw materials and consumable spares from the domestic market, reimbursement of central sales tax paid on domestic purchases, 100 per cent income tax exemption for a block of five years, 50 per cent tax exemptions for two years and up to 50 per cent of the profits ploughed back for the next 3 years.
Jharkhand set to get Rs 29,000 cr investment
Jharkhand Chief Minister Arjun Munda today claimed that his state was close to finalising investment worth Rs 29,000 crore in the steel and power sectors, which included the L N Mittal-promoted Mittal Steel.
Speaking to reporters on the sidelines of the National Development Council meeting here today, Munda said, We have already had two rounds of discussions with representatives of Mittal Steel and they are slated to visit Jharkhand again. Talks are in the final stages and the prospects (to ink the deal) look good, he said.
When asked to comment on Tata Steel's opposition to the Mittal Steel project, the chief minister said the companys needs for iron ore would be taken care of.
In addition to the Mittal group, Munda said other domestic groups like the Aditya Birla group, Essar and Jindals were also envincing interest in the state.
We have already reached an understanding with the Aditya Birla group for a Rs 8,000 crore investment. The investment is for setting up an aluminium smelter greenfield project and for expanding their existing project in the state, the Jharkhand chief minister said.
The chief minister said his government had also signed an agreement with the Essar group for enabling the later to construct a power project at the cost of around Rs 10,000 crore in Jharkhand.
Similarly, the Jindal group has signed an agreement with the Jharkhand government to set up a five million tonne steel plant at Chandil near Jamshedpur besides another project at an estimated cost of Rs 11,000 crores.
Kerala Chief Minister Oommen Chandy said he too was anticipating investments to the tune of Rs 30,000 crore in the state.
We expect an investment of Rs 10,000 crore for the second stage of the National Thermal Power Corporation project in the state and are hopeful that Rs 10,000 crore would be invested by the private sector. In addition to this we are expecting substantial investment by the Central government in the Vallarpadam container terminal, the Kerala chief minister said.
SAIL to buy Nilachal
Steel Authority of India (SAIL) has offered to take over Nilachal Ispat Nigam (NINL). SAIL chairman V S said the shareholders - Minerals & Metals Trading Corporation (MMTC), which owns 51 per cent stake in NINL, Industrial Promotion and Investment Corporation of Orissa and Metallurgical & Engineering Consultants (Mecon) - are evaluating the offer.
If the proposal goes through, Nilachal will become the second company to join the SAIL fold after Indian Iron and Steel Ore Company (IISCO), whose merger with SAIL was cleared by the Union Cabinet on June16. Jain said the willingness on the part of the Orissa government to merge is the prime reason for him being hopeful of merger.
At present, Nilachal Ispats installed capacity at Kallinga Nagar, District Jajpur, includes 6 lakh tonne of pig iron and 4 lakh tonne of structurals.
NINLs project was initially designed as a two million tonne unit but a huge debt forced the project to be left incomplete. NINL also has a coke plant and captive mines. NINL is the countrys largest producer and exporter of saleable pig iron.
On South Korean Steel giant Posco s entry into the country, Jain said it opens up greater degree of challenges for companies. The chairman also tended to sideline with Union government stance that in wake of private competition heating up, it made sense that various Public Sector Steel units should merge.
It makes no sense for Rashtriya Ispat Nigam (RINL) and SAIL to be competing, said the chairman, who proffered that increasing synergies between public sector companies should be followed on lines of path followed by Mittal Steel and, other steel giant, Arcelor.
Jain also said with the revised mines allotment policy in place, it was much more easy for companies to set up their steel plants in the state.
With a focus on captive use and mineral processing, the policy stipulates that an application for allotment of mining lease will be considered after the applicant invests substantially in a value addition project within the state
As per the norm, the lease will be allotted only after the promoter has committed 50 per cent of the proposed investment.
Of late, steel firms making a beeline for Orissa. With 3,567 million tonne of iron ore reserves, 26.50 per cent of Indias reserves are in Orissa.
Orissa has substantial reserves of other minerals which go into steel making, such as coal - 51,571 million tonne (24.37 per cent of the national deposit), dolomite - 434 million tonne (10 per cent) and limestone - 1,032 million tonne (1.36 per cent).
Steel industry to remain firm: Aditya Mittal
Aditya Mittal, son of steel baron and chairman of Mittal Steel L N Mittal has said that the present slump in the steel industry is temporary and that the steel industry is both strong and healthy.
Aditya Mittal, President & CFO, Mittal Steel said, "The steel industry is healthy and strong. So prices will not collapse, they are down, the steel industry is a bit weak, but earnings tend to remain strong throughout the rest of the industry. So we predict a bright future for the steel industry. "
He added, "We have been saying that repeatedly, and we maintain our point of view. Our strategy is very simple. It is consolidation and globalisation. We believe that globalisation brings tremendous benefits for operating margins. We are a consolidated company in the sense that we are the largest steel company in the U.S, we have a leading position in Europe and Africa."
When asked if he expected more consolidation in the global steel industry, Mittal said that consolidation should be insulated from the peak and lows.
Aditya Mittal said, "Consolidation should be insulated from the cycle, whether it is the peak or the trough. We have consolidated in both enviornments. When the industry was going through its worst down turn, we doubled our sales. Last year, at the peak, we got ISG. We are happy with that acquisition as well. We continously maintain, and believe, and encourage others to consolidate their positions regardless of the cycle we are in vis-a-vis the steel industry."
SAILS production up in May, 2005
The Steel Authority of India Limited (SAIL) has achieved production of 1.211, 1.082 and 0.949 million tonnes of hot metal , crude steel and saleable steel respectively during the month of May, 2005 representing 108 per cent , 105 per cent and 107 per cent of respective targets.
During this period , there has been an increase of 20 per cent , 13 per cent and 16 per cent in the production of hot metal, crude.
Steep increase in steel exports during April-May05
There has been steep increase in export of steel during April-May ,2005 . The total export of steel during the period has been estimated to 9 lakh tonnes showing an increase of 27.65 per cent as compared to 7.05 lakh tonnes for the corresponding period last year.
This increase in export is on account of the high international prices particularly in February-March ,2005 when these orders were booked. Imports of steel have also increased substantially particularly from the CIS countries like Ukraine.
Orissa villagers oppose POSCO project
The news that international steel major POSCO is setting its sights on Paradip for its new steel plant has left it right in the middle of controversy.
Hundreds of people are likely to be displaced by plans to set up a massive steel plant that could earn the state millions of dollars in revenue.
The stretch of land near Orissa's Paradip port is the site of much controversy and competition. Essar Steel made a bid for 2500 acres to build a 4 million tonne steel plant here, but international steel major POSCO seems to have won the state government over.
The promise of greater foreign revenue though comes at a major human cost. To make it viable, POSCO says it wants more land, something that will surely displace hundreds.
What POSCO needs is 6000 acres and to get that extra 3000 acres the state government has to displace people across five villages, but public resistance against the possible displacement is building up.
Dhinkia is one such village that faces the bulldozers. Most of the villagers are too poor to afford land of their own.
So they either depend on fishing or on betel cultivation on government land for their livelihoods.
That means none of them are eligible for any displacement benefits and they promise to dig in for a long battle against the international conglomerate.
"No one can drive us out. They will have to shoot us dead before occupying our land," said a villager.
POSCO officials insist they have the villagers' interests in mind.
For resettlement and rehabilitation we will talk to the Orissa state government and we will respect the state government's guidelines. Don't worry about that," said Hiun Jeong, Director, POSCO India.
Few are convinced by those assurances.
"We know what has happened to people displaced elsewhere, so we do not trust any rehabilitation plan. We won't allow them to enter our village at any cost, even at the cost of our lives," said a villager.
The US$ 12 billion POSCO deal may be the largest FDI deal in India's history, but already it's up against uncomfortable precedents.
Local people in Gopalpur shut down plans for a TATA project because it would mean mass relocations.
So now it's a question of how far the state government is willing to go to push POSCO's ambitious plans.
Tata Motors plans to invest Rs 6,000 crore by 2009
Auto major Tata Motors, which has promised a Rs one lakh peoples car to the country, said it will be investing up to Rs 6,000 crore by 2008-09 in product development and capital expenditure.
The funds raised from the international offerings have been partly utilised for refinancing the acquisition of Tata Daewoo Commercial Vehicle Co and on-going product development and capital programmes, expected to aggregate approximately Rs 6,000 crore over the period 2004-05 to 2008-09, the company said adding in the interim, it has parked abroad $244 million remaining unutilised funds as deposits with banks.
Tatas, who expect a slowdown in demand for commercial vehicles and passenger vehicles, plan to tackle this by augmenting product offerings.
The domestic commercial vehicle industry sales, which is growing year-after-year for the past three years in succession, is susceptible to a slowdown due to its cyclical nature. The company plans to counter this cyclicality through entry into newer geographies and by entering new segments like the recent launch of a small commercial vehicle Tata ace, Tata motors informed shareholders in the annual report for 2004-05.
The company said the passenger vehicle market is likely to slow down further compared with the previous year, but still maintain leading growth rates among the various automobile markets.
A series of new emission norms and safety-related norms introduced selectively in various cities/states has brought in complexities for the automotive and component manufacturers, which could impact production/sales for the year, the company said.
Tata Motors chairman Ratan Tata said the unprecedented increase in steel prices and other input costs have placed considerable pressure on margins and while the industry has absorbed a major part of these costs during the year, it is most likely that prices of passenger cars will increase, possibly having a dampening effect on demand.
He said rising fuel prices will also impact the viability of the transport industry and new commercial vehicle sales. Tata Motors will have to aggressively reduce its costs without compromising quality and be able to market products, which have appeal in terms of price, appearance, performance and reliability as well as good customer support, the chairman said.
Mr Tata said the company will also need to differentiate itself by developing products designed to meet the needs of the vast and growing lower segments in the pyramid, in addition of the product range it sells currently.
The recently-introduced mini-truck and the new low-end car being developed by the company are amongst such initiatives, he said.
Steel stocks melt as global prices soften, but mining stays firm
Even as the sensex touches levels of 7200, the situation in the metals sector is not all that rosy. The steel sector, particularly, has seen erosion in stock prices. This is attributed to the changing equations in the steel market as China adds more capacity and western nations cut production in a struggle to maintain prices.
The story of non-ferrous metals is similar. The only positive stock price movement has been in stocks of mining company GMDC.
Stock movements in the steel sector in the past quarter have been mostly negative. All major steel stocks have fallen from the stratospheric levels they were at in March 05. Ispat has lost more than 35% in stock prices since March 05. Tata Steel and SAIL have lost 15% and 22%, respectively, since January 05. Jindal Saw and Jindal Stainless were the only stocks showing a rising trend. But Jindal Saw has also slipped over the past few days.
The reduction in stock valuations is attributed to the expectations of lowered earnings growth over the coming year. Analysts have reduced their earning estimates for the steel industry by up to 6-7% due to the steel price cuts announced at the start of June 05.
The price cuts were expected since March 05. Growing inventories with suppliers and traders had raised expectations of a meltdown in prices since late last year when prices in the western markets fell. Price data from metal bulletin shows that the US prices of HR coil have fallen to around $520/tonne in May 05 from $705/tonne in August 04.
The situation in the non-ferrous sector is similar. Stocks of all major copper and aluminium producers have dipped in the past six months, with the exception of Hindustan Copper, which has seen a major hike in stock prices since the beginning of this year. Otherwise, stock price erosion has been as high as 14% for Nalco since January 05.
Malco and Nalco have lost more than 20% in stock prices since the start of the current quarter. Hindalco and Sterlite have lost nearly 15%. This can again be linked to the non-ferrous metal price movements over the past six months. Copper and aluminium prices touched highs in March-April and have declined since. LME cash prices for copper hit a high of $3,500/tonne in April 05 and dropped to $3,200 per tonne in June 05. LME Aluminium cash prices also touched a high of $2,030/tonne in March 05 and have fallen to $1,700 per tonne in June 05.
The situation is the exact opposite for mining companies. GMDC and Gujarat NRE are trading at significantly higher levels than they were six months ago. The differential treatment from investors to mining vis the metal industry can be reasoned by the fact that metal prices reached a plateau in March and are showing downward trends since.
This has cast a shadow on the future revenue growths.
Earning estimates for the steel industry have been revised downwards by up to 6-7%.
Mineral prices on the other hand are still expected to retain their price levels. The supply constraints in the mining industry are expected to persist for some time as capacity additions take place. This situation has raised expectations of continued high earnings for the mining industry in the short term.
Centre plans to revamp 30 airports: Patel
THE Minister of State for Civil Aviation, Mr Praful Patel, said that 30 airports in the country have been identified for revamp. Three greenfield projects will begin in Pune, Goa and Navi Mumbai, and Nagpur will be made a dedicated hub for cargo.
Talking to newspersons here on Saturday, he said the revamp of the 30 airports would entail an investment of Rs 6,000 crore. The Government is in the process of floating bonds for raising the amount and the initial formalities have been completed. He said the consultants for the project would be appointed soon and by the end of the fiscal, the bonds would be out.
The tender for the design of these airports had been floated some time ago. All the airports would have an international design and they are expected to be completed by 2009.
Mr Patel said the first international flight would be taking off from the Pune airport by December 12 this year. For this, a short-term.
arrangement will be made, as a full-fledged revamp of the airport is not possible within six months.
He said work on the terminal building would also begin soon. The new airport at Pune will sport four new aero-bridges and also have additional capacity. "The intention is to ensure that most of the international and domestic flights are in a position to land at the airport," he said. He said an investment of Rs 75 crore would be required for the total up-gradation of the Pune terminal.
Asked whether the issue of watch hours had been sorted out with the Air Force, Mr Patel said most of the issues had been sorted out and whatever "concessions the Air Force was giving us here at Pune, we would give them double concessions at the other air fields they would ask us for."
He said that the watch hours would be extended up to 10 p.m. He said more scheduled flights should be allowed during the watch hours, which would help increase air connectivity for cargo and passengers not only across the country, but also from abroad.The present airport at Pune, which is under the Defence control, has several restrictions on watch hours for security reasons. It was pointed out that continuous watch hours from 6 a.m. to 10 p.m. is a dire need.
Mr Patel said that Nagpur would be made a dedicated hub for cargo and the domestic carrier Indian Airlines would be having its full-fledged operations from there by early 2007. He said a major volume of import and export cargo from the Pune region is now being handled out of the Sahar Airport in Mumbai.
Mr Patel said that from among 77 companies that had been surveyed, about 54,000 tonnes of materials had originated from the Pune region alone, and had been air-freighted through Mumbai annually.
On the Chakan international airport, which is still under consideration, Mr Patel said certain issues have to be tackled before anything could happen. This includes the air traffic management issue, which has to be jointly addressed by civilians and the Air Force.
Engg, construction cos scout for investors to fund 'core' push
With action hotting up in the infrastructure sector, leading engineering and construction firms are scouting for long-term financial investors for their wholly-owned investing arms.
The capital infusion in these arms will enable them to pick up critical stakes in project-specific, special purpose vehicles (SPVs).
L&T, the countrys largest engineering and construction firm, is in advanced talks with a string of private equity investors for offering a minority stake in its wholly-owned arm, Infrastructure Development Projects (IDPL), which will now become the groups main vehicle for investment in domestic infrastructure projects. The plan is to augment the financials of IDPL which will pick up stakes between 50-100% in build, own, operate, transfer projects. Plans are also underway to offer minority stakes in 20-odd SPVs as well, which will be taken up at a later stage.
Construction firm Gammon India, which has pumped in Rs 120 crore into four SPVs through the wholly-owned Gammon Infrastructure Projects (GIPL), is looking at roping in long-term financial investors into GIPL. Company officials say that GIPL will offer between 10-25% to prospective investors to mop up Rs 250-300 crore. Temasek, along with a few other private investors, is learnt to have shown interest in joining hands with Gammon. Hyderabad-based IVRCL Infrastructures is wooing private equity investors to pick up minority stakes in its subsidiary IVR Prime Urban Developers. The company has so far made an equity investment of around Rs 30 crore in the SPV.
L&Ts wholetime director and CFO YM Deosthalee says that they are looking at financial partners for IDPL with a long-term horizon. This is the only way in which the private sector can effectively participate in infrastructure projects, which have long gestation periods. Our plan is to induct a couple of financial partners who will hold a minority stake in IDPL. Talks with a few prospective investors are currently underway, he says
IDPL currently holds equity stakes of up to 100% in a string of project-specific SPVs, operating in areas like roads, ports, bridges and urban infrastructure, and it has plans to bring in investors to pick up stakes in these SPVs.
Around 15 of these infrastructure projects, where IDPL holds stakes, are completed, while five-six are currently under execution. L&T has so far committed around Rs 400 crore in IDPL through equity investments, guarantees and letters of comfort.
Also, IDPL will hold the groups 50% stake in the Rs 1,200-crore Dhamra Port, which will be built in joint venture with Tata Steel. The financial closure of the project is likely to be around August 05 and work is slated to start later this year. Besides, L&T plans to make its wholly-owned arm Bhillai Power Supply Company as the principal vehicle for making investments in the power sector, as and when action picks up in the sector.
At this juncture we are looking at diluting our stake in IDPL, although L&T will continue to hold a comfortable majority. The next step would be to rope in financial investors to pick up minority stakes in the SPVs. This would, however, depend on the completion of the project and the groups shareholding in the SPV, said Mr Deosthalee.
Gammon says GIPL will be in charge of all future SPV projects. Currently, the arm holds its stakes in four SPVs, which include 87% in two road projects, 98% in a bridge project in Kochi and 38% in the Vizag port project.
Besides, the company has been shortlisted as the lowest bidder for three more projects. We are in talks with a few funds for raising additional resources for GIPL. We may offer a 10-25% stake in GIPL to long-term investors through the issue of fresh shares. However, at this juncture we are not inclined towards any specific fund, says Parvez Umrigar, chief operating officer of Gammon India.
