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The Hinduja rate of growth

Suman Layak     February 17, 2011
Gopichand Hinduja, Cochairman of the Hinduja Group , skipped his annual vacation in the Maldives last December. Instead, he visited Chennai, Rajasthan, Nagpur and Delhi. At 70, the second of the four Hinduja brothers is eager to get a fresh feel of India. "We have larger stakes abroad, but gradually we are coming towards India," says GP, as he is known within the group and the family.

The $40 billion group (by market capitalisation) has only 20 per cent of its business in India. GP believes this will change. "2010 was our best year and this year we will take off," he says. But will they really, given their recent track record in India? Some threeand-a-half years ago, the group announced plans to invest $50 billion (Rs 230,000 crore) in India, which was likely to be scaled up to $100 billion (Rs 460,000 crore). This included an unsuccessful $20 billion-bid (Rs 92,000 crore) for what was then Hutchison-Essar's wireless operations.

Today, the group is talking of a relatively modest though yet ambitious investment programme of $30 billion (Rs 138,000 crore) by 2014. Harish H.V., Partner at Grant Thornton India, who has dealt with the Hindujas, says: "If the projects take off, this $30 billion may scale up to $40 billion. But if they don't, we will be asking the same questions."

For the Hindujas, while thinking big is not unusual, the approach is always conservative. As GP says, "We do not believe in high leveraging. We want solid, sustainable growth."

Eldest brother and Chairman S.P. Hinduja explains his investment strategy: "In 1986, I could foresee what was about to happen in Europe. By 1987-88, I started liquidating our risks there. Today I am liquid and secure." Third brother Prakash attributes this trait to the family's genetic make-up; the brothers have inherited from father Parmanand - the instincts of a trader who never underestimated the value of liquid assets.

In 1987, the Hindujas acquired Ashok Leyland Ltd, or ALL, and since then they have also promoted a bank in India, IndusInd. The group has five listed companies (see The India Presence) with a combined market cap of Rs 21,100 crore. That's too small compared to their global stature. In a bid to scale up their Indian operations, the brothers have signed a series of joint ventures and made a string of acquisitions to ride the India story in the next 10 years.

Power, infrastructure, realty and defence are the new mantras and the acquisition of a "small, well-managed" infrastructure firm is set to be announced soon. Most interesting is a joint venture between ALL and Hinduja Group India to cater to the defence sector. As SP and GP are British nationals and Prakash is based in Switzerland, ALL was considered foreign owned, with the promoters owning 52 per cent. Current norms cap foreign direct investment, or FDI, in defence at 26 per cent. Hinduja Group India has Ashok Hinduja, the youngest brother and an Indian passportholder, as chairman.

S.P. Hinduja
S.P. Hinduja
'Corruption has exceeded all limits'

Edited excerpts from an interview with S.P. Hinduja, the eldest among the second generation Hindujas

How would you describe your investing strategy now? Are you moving towards India?
Our group philosophy has been to diversify - by sectors and geographically. We are looking at eight to 10 sectors. The percentage of investment in India is changing according to time, but there are no set rules.

You seem to have fi nally laid the Bofors ghost to rest...
All that was a game - politics and economics go together everywhere. Business tycoons and our rivals are to be blamed for that. Even when we acquired Ashok Leyland, there was a huge hue and cry.

Do you think it is now easier to invest in India?
In India corruption has exceeded all limits. It was always there, but now it has become dangerous. Evil seems to exceed the good. Now you have to make people accountable. We are never pro or anti any political group anywhere in the world. We always look at whether (what we do) is in the best interest of the host country and the mother country.

Power is where the Hindujas hope to ride the biggest wave and the man at the helm is Ashok Puri, a former chairman of BHEL. "South and west India will be focus areas," says Puri. The group has already closed the financing for its Vizag project - a $1.2-billion (Rs 552 crore), 1,040-MW unit that is slated to go on stream in two-and-a-half years. The group hopes to install 10,000 MW by 2016 and Puri says he is scouting for projects on hold. He is also in talks with Karnataka, Gujarat and Madhya Pradesh for greenfield ventures.

The power venture will soon try for an India listing, as will the realty arm that has 800 acres on which the plan is to build 27 million sq. ft. of commercial and residential space.

But first off the blocks will be IndusInd Media & Communications, which, the Hindujas say, is the largest and only profit-making multi-system cable TV player in India. The Hindujas are eyeing a valuation of $1.5 to $2 billion (Rs 6,900 to Rs 9,200 crore) and the listing is likely in early 2012. Managing Director Ravi Mansukhani says around Rs 100 crore of private equity has poured in and efforts are on to tie up another Rs 500 crore borrowing. Plans are afoot for broadband and related services, and acquisitions are also on the radar.

Do such plans excite investors? Says Vinod Sharma, Head of Private Broking and Wealth Management at HDFC Securities, "The market still does not value the Hinduja companies to their full potential."

Dheeraj Hinduja (left), Chairman, Ashok Leyland
Dheeraj Hinduja (left), Chairman, Ashok Leyland
The Hindujas may not be in the top league in India but, unlike many domestic family-owned groups, the brothers have stuck together. While the second generation is still active, five members of the next generation have taken up their posts. SP's daughter Vinoo heads the healthcare foray, another India-focused venture that is expected to be a 2,000-bed operation soon. Prakash's son Ramkrishan heads the BPO, IT and media arms, while another son Ajay heads banking and finance and is on the board of IndusInd Bank. GP's sons Sanjay and Dheeraj head oil and gas and automotives, respectively.

Automotives, essentially ALL, has the biggest plans, including going global. The company has inaugurated new plants in Pantnagar in Uttarakhand and Ras al Khaimah in the UAE. Dheeraj chairs the ALL board and spends 10 days a month in India. Outside India, the group had reentered Iran in 2008, which was its base under the Shah regime before the shift to London. But US sanctions have made the group cautious, although it is there via a joint venture with ONGC. At home, the Bofors ghost has still not been exorcised, what with the Income Tax Appellate Tribunal recently ruling that Ottavio Quattrocchi and Win Chada had indeed received kickbacks for the deal. The Hindujas would be relieved that there was little mention of them.

That would allow GP to travel across India and get a feel of the country without the burden of history weighing him down.

Additional reporting by N. Madhavan

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