Hyderabad infrastructure companies flush with private equity investments
07 Jan 2008
From GMR to GVK to a small company Soma Enterprise, investors are pouring in money into Hyderabad's infrastructure companies. Around $550 million of private equity has come in the year 2007, reports CNBC-TV18's Viswanath Pilla and Suresh Venkat.
Who would have heard of names like GMR and GVK until they stunned everyone by pipping old and established companies to bag the modernisation projects of the New Delhi and Mumbai airports. This galvanised at least a dozen Hyderabad-based companies to grab the lion's share in the booming Indian infra industry.
Syam Prasad Reddy, managing director and chief executive officer, Indu Projects, said, "They know how to manage labour and taking risks. The productivity of Andhra Pradesh companies is high compared with other companies."
No wonder private equity firms are putting in big bucks. Around $550 million of private equity has flown into Hyderabad companies in 2007 alone. It's a long list - L&T, IDFC, Lehman Brothers and Singapore-based Amansa Capital have picked up 7 per cent stake in B Seenaiah projects. IND Barath Infra raised $70 million from Citigroup's private equity arm and UTI Ventures.
Nagarjuna Construction raised $150 million from Blackstone. And Indu Projects raised $33 million from the Citigroup Venture Capital International Mauritius. Aparna Constructions raised $100 million from JP Morgan. And a small firm like Soma Enterprise raised $101 million from 3i India.
"Everyone wants to be part of booming infrastructure sector, where the real growth is going to take place," said Maganti Ankineedu, director, Soma Constructions.
The infrastructure industry in Andhra Pradesh is not a recent phenomenon. Large irrigation and industrial projects like Nagarjuna and Visakhapatnam Steel Plant in the 1960's and 70's spawned a number of contractors. Many of these contracting companies eventually grew into infrastructure companies. A case in point being Gayatri Projects, founded by first generation entrepreneur and now incumbent minister T Subbirami Reddy, it has been transformed into an infrastructure company by his son Sandeep Reddy.
"Influx of PE funds, corporate governance are helping our companies in the process of transformation," said TV Sandeep Reddy, MD, Gayatri Constructions "To scale up you need to professionalise, that is where the second generation is making a difference."
The government of India is also planning to spend nearly $500 billion on infrastructure projects. This means that maybe a dozen Hyderabad-based companies could soon join the billion dollar club.
