Global generation
GMR has also undertaken half-a-dozen road projects, of which two in Andhra Pradesh and Tamil Nadu are ready. But power is something Rao never lost sight of. Indeed, till December 2007, power accounted for two-thirds of the GMR group’s revenues.
Over the past decade, The Netherlands-headquartered InterGen has built a powergenerating capacity of a little over 16,000 MW in 10 countries. Some 10 years ago, back in India, a firstgeneration entrepreneur called Grandhi Mallikarjuna Rao was taking his first tentative steps in the Indian power sector. Frustrated by complexities courtesy of a maze of regulations, Rao steered his enterprise into a different direction of infrastructure-creation. In 1999, he thought of building airports and today his company, the GMR group, has developed the state-of-the-art Hyderabad airport.
GMR has also undertaken half-a-dozen road projects, of which two in Andhra Pradesh and Tamil Nadu are ready. But power is something Rao never lost sight of. Indeed, till December 2007, power accounted for two-thirds of the GMR group’s revenues.
Rao has as many as seven projects in hand—three completed and four under development—with a total capacity of 5,148.50 MW. But as Pankaj Namdharni, Senior Investment Analyst at SPA Securities, points out: “The market always valued the company for its airports, roads and SEZs.”However, last fortnight GMR, the owner of the Delhi Daredevils team in the Indian Premier League, propelled his power operations into a totally different orbit with some daredevilry on a global scale in the power sector. Rao bought out InterGen for $1.1 billion, making it the largest ever acquisition of a global energy utility by an Indian company.
InterGen has a total capacity 12,766 MW (8,086 of it operational), making it one of the biggest players in the country, with a combined capacity of 18,000 MW (including projects in the works). Only Anil Ambani, who is aiming to build up capacities totalling 28,200 MW by 2016, would visibly be blueprinting grander ambitions in the power sector. The big difference, of course, is that Rao at a stroke gets power capacities in foreign markets.
Says the Chairman of the GMR Group: “This acquisition is an integral part of our global strategy to be the world’s leading energy and infrastructure company.” What this acquisition also does is to make the $500-million GMR group almost totally power-driven, with 94 per cent of its revenues set to come from this sector.
One advantage of having power assets overseas is that GMR gets to operate in relatively less regulated markets, which in turn could mean higher profitability. “Globally, power is an attractive business as there is flexibility to fix prices based on operational efficiencies,” says an analyst with a domestic brokerage business who expects more acquisitions overseas in the power space. What also works in GMR’s favour is that unlike other multi-billion cross-border M&A that were struck at the peak of a boom in global markets (Tata-Corus, Hindalco-Novelis), the Hyderabad company appears to have done this deal at the right time.
Madhu Terdal, Executive Vice-President at GMR, attributes the “better deal price” to the US subprime crisis and a subsequent meltdown in equity markets. “We have actually paid half the price that these assets could have commanded (in booming markets),” explains Terdal. Another positive fallout of the InterGen transaction is that GMR can now access a global talent pool and global expertise. Terdal hints that the InterGen buyout isn’t the last one. “We can now pursue international growth strategy in power more aggressively,” he says. And it’s not only in power that GMR is looking overseas. Airports is another area where the group has taken international strides—last July it was awarded the Sabiha Gokcen Airport in Turkey.
—Anand Adhikari
G. M. Rao
Rao has as many as seven projects in hand—three completed and four under development—with a total capacity of 5,148.50 MW. But as Pankaj Namdharni, Senior Investment Analyst at SPA Securities, points out: “The market always valued the company for its airports, roads and SEZs.”However, last fortnight GMR, the owner of the Delhi Daredevils team in the Indian Premier League, propelled his power operations into a totally different orbit with some daredevilry on a global scale in the power sector. Rao bought out InterGen for $1.1 billion, making it the largest ever acquisition of a global energy utility by an Indian company.
Future play How GMR benefits from the InterGen buyout.
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Says the Chairman of the GMR Group: “This acquisition is an integral part of our global strategy to be the world’s leading energy and infrastructure company.” What this acquisition also does is to make the $500-million GMR group almost totally power-driven, with 94 per cent of its revenues set to come from this sector.
One advantage of having power assets overseas is that GMR gets to operate in relatively less regulated markets, which in turn could mean higher profitability. “Globally, power is an attractive business as there is flexibility to fix prices based on operational efficiencies,” says an analyst with a domestic brokerage business who expects more acquisitions overseas in the power space. What also works in GMR’s favour is that unlike other multi-billion cross-border M&A that were struck at the peak of a boom in global markets (Tata-Corus, Hindalco-Novelis), the Hyderabad company appears to have done this deal at the right time.
Madhu Terdal, Executive Vice-President at GMR, attributes the “better deal price” to the US subprime crisis and a subsequent meltdown in equity markets. “We have actually paid half the price that these assets could have commanded (in booming markets),” explains Terdal. Another positive fallout of the InterGen transaction is that GMR can now access a global talent pool and global expertise. Terdal hints that the InterGen buyout isn’t the last one. “We can now pursue international growth strategy in power more aggressively,” he says. And it’s not only in power that GMR is looking overseas. Airports is another area where the group has taken international strides—last July it was awarded the Sabiha Gokcen Airport in Turkey.
—Anand Adhikari
