Tata Group plans to spend 480 billion rupees over five years.
By R. Chandrasekaran
CHENNAI: Tata group chairman Cyrus Mistry, who took over the reigns from Ratan Tata in January, has taken a significant decision to give a big push to the infrastructure sector, which is lagging and requires big money from the large business houses.
For this, the Tatas are planning to spend Rs.480 billion spanning over a 5-year period through their three unlisted infrastructure companies. The objective is quite clear: increase the combined business size by over three times from the current level.
The three managing directors of Tata Projects Ltd., Tata Housing Development Co. Ltd. and Tata Realty and Infrastructure Ltd. told journalists in Mumbai on Thursday that the projects under their companies’ ambit, which are currently estimated at Rs.200 billion, will likely reach over Rs.700 billion by 2019.
The group aims to achieve the figure by generating likely revenue of Rs.380 billion from Tata Housing, which has 26 residential projects under different stages of development and execution, while Tata Projects is expected to generate revenue of Rs.300 billion from the projects of engineering, procurement and construction.
As far as spending is concerned, Tata Realty, Tata Housing and Tata Projects are expected to spend Rs.227 billion, Rs.240 billion to Rs.260 billion and Rs.15 billion to Rs.18 billion, respectively, in the next five year period.
The government has been hard selling infrastructure projects, not only domestically, but also globally with offers of $1 trillion infrastructure projects. Finance Minister P. Chidambaram had shopped in Britain, France and Qatar in May in an effort to attract big investments from the overseas.
The slow down in Indian economy has no doubt impacted the infrastructure projects. The highways sector had to face financing issues besides abnormal delays in land acquisition forcing the companies to either go slow or remain in the sidelines. For instance, an estimated $10 billion work of road assets either completed, or under progress was at stake for sale.
Therefore, the minister’s aggressive push of infrastructure projects abroad assumed significance as even the Reserve Bank of India urged the government to remove bottlenecks for more infrastructure projects. For its part, the government had set up Cabinet Committee on Investment (CCI) for specifically speeding the clearance of big infrastructure projects resulting in clearing of investments worth $27 billion.
While the government is aiming to achieve 6 percent economic growth in the current year, its long-term goal is to bring back the country to over 9 percent growth rate. For this to happen, infrastructure is a key area of growth and much needed one.
The size of the infrastructure projects will also undoubtedly lure many big industrial houses. The Tatas are keen to be an early entrant into the sector, while Mahindra & Mahindra and Godrej have also entered the housing sector.