Business Today

As uncertainty mounts, investors watch Telangana

For some of the region's key investors, the 40-year-old demand for a separate Telangana is now a cause for concern mainly on account of the uncertainty on the way forward on this issue.

E. Kumar Sharma   Hyderabad     Last Updated: July 27, 2011  | 22:32 IST

The demand for an independent Telangana state grew more intense on July 4 when 41 MLAs and MPs, including 11 ministers from the ruling Congress party in Andhra Pradesh, resigned in a attempt to put pressure on the Congress high command to grant statehood.

For some of the region's key investors, the 40-year-old demand for a separate Telangana - which has again been renewed since late 2009 and has continued in bursts ever since - is now a cause for concern mainly on account of the uncertainty on the way forward on this issue.  Telangana spans ten of the 23 districts in Andhra Pradesh, including Hyderabad.

A quick drive around the city shows causes for concern. Nylon mesh covers the glass facades of some of the major stores, malls and information technology companies in the area, perhaps to make the buildings less susceptible to stone throwing.

Recent strikes or bandhs have led to concern over employee turnout.

BLOG: MLAs put pressure on Congress over Telangana issue

"Our normal employee attendance is between 85 and 87 per cent. Turnout has slipped a little during bandhs to low 70s or high 70s," says B V R Mohan Reddy , chairman and managing director of Infotech Enterprises, one of region's leading IT firms. "I personally do not perceive any worry really among investors though some may be concerned over the uncertainty."

"Uncertainty can be killing and further delays in deciding on the Telangana issue and on the fate of Hyderabad will have both short term and long term implications, " says T. Sreedhar, managing director of headhunting firm TMI Network, headquartered in Hyderabad. Already, he says "analysts have been telling me that investors today are not in a hurry to look at Andhra Pradesh largely because of the uncertainty over the Telangana issue."

Companies - many of whom say they are eager to invest in the state or in Hyderabad - agree that uncertainty could be killer.

"While Hyderabad is ideally suited for biotech and research based companies because of a good talent pool and infrastructure, uncertainty (over Telangana) is not good for future investments into the state , " says Krishna M. Ella , founder chairman & managing director of Bharat Biotech International Limited. Bharat, he says, decided to locate its diversification project in Bangalore and invest around Rs 100 crore to expand there, largely because of the uncertainty over the issue.

Despite some investors' caution, other companies in the region have decided to stay the course.  On July 12th there was a ground breaking function underway for a new international B-school in Hyderabad . The GMR Group, one of the country's leading infrastructure developers, and the Schulich School of Business (SSB) of York University in Toronto, Canada , are establishing a Schulich campus in Hyderabad near Rajiv Gandhi International Airport.  

Also read: Pressure for Telangana

The government has been quick to allay concerns.

"Facts are a bit different from the perceptions that people have, " says B.R.Meena , vice chairman and managing director , Andhra Pradesh Industrial Infrastructure Corporation (APIIC). "There is no panic among investors on account of issues relating to Telangana."

Meena says the region has attracted several major projects during 2010-11.

"The Tatas have committed to investing around Rs 2000 crore over the next two years or so across four major projects including one to make helicopter cabins. In addition, Mahindra and Mahindra has committed to invest around Rs 500 crore for making tractors. All in all, some Rs 25, 000 crore worth of investment proposals have been cleared in 2010-11 which is significantly higher than the previous year , " he says.  

While he sees the manufacturing sector still upbeat about the region , even those from the IT sector, which tends to be man-power intensive, are not facing any slow down, he says , and points to the example of Facebook.  Last year, the social media biggie chose Hyderabad as the site for its India operations.

On reports that Hinduja Foundries was opting to move out of Andhra Pradesh, company managing director B Swaminathan said: "I am watching the political developments. We have our heart there and we are very keen to take the Toopran project forward."

Hinduja Foundaries has been planning to set up a greenfield castings project near Toopran in Medak district."

Apparently Swaminathan and others like him feel it's best to watch the situation for now.

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