Builders in South eye infra sector

Real estate companies in South India are slowly entering the infrastructure segment by setting up subsidiaries to cash in on the emerging opportunities in this space.

Presently, most of these subsidiaries handle the EPC (engineering, procurement and construction) work of their parent companies and are building capacity by hiring professionals even as they are forming separate teams to take care of their future assignments.

Recently, Bangalore-headquartered, Brigade Enterprises floated a subsidiary, Brigade Power and Infrastructure Ltd to enter into the infrastructure sector. “We have formed a separate subsidiary, Brigade Power and Infrastructure Ltd to look at opportunities in infrastructure space. Presently, capacity building operation with hiring of professionals are going on,” Shama Sunder, general manager (finance) of Brigade Enterprises, said.

This infra entity would concentrate on power and road projects within the infra vertical, he added. He, however, declined to give a time frame for bidding for new projects under the road and power verticals.

Similarly, Puravankara Projects has a wholly-owned subsidiary namely Starworth Infrastructure to bid for infrastructure projects. “We have entered the infrastructure space as we see a lot of value in this sector in the coming times. Presently, our infra wing helps us to manage a lot of backend work,” Ravi Puravankara, chairman of Puravankara Projects, said. He also said the company was building capacity to bid for infra projects in the near future. “Rural infrastructure like roads and bridges are pretty much in our radar for which Starworth will bid in future,” he added.

Talking of the rationale behind their entering the infrastructure space, Shama Sunder of Brigade Enterprises said, “With the kind of infrastructure spending proposed over the next decade, there are ample of opportunities that will come our way. Also, there are a lot of operational synergies.”

India is expected to spend around $1 trillion on infrastructure during the 12th Five Year Plan (2012-17) which is likely to open up numerous opportunities for private players under the public-private partnership model.

However, some industry experts have a different view on this matter.

“We don’t want to enter the infrastructure sector as of now as it requires a different level of skillset, human resources among others. We would like to concentrate on our core area of operation and consolidate in residential, commercial and retail verticals in real estate than look at diversification of our operations,” L S Vaidyanathan, executive director of Nitesh Estates said.

Some of the industry watchers feel that the higher capital expenditure is holding back many developers from entering this space.

“Capital expenditure in infrastructure projects is higher than real estate projects. A company needs to raise higher amount of debt which is difficult for many real estate players. Also, developers have less expertise in executing a specialised infra project like power or port, which sometime needs several regulatory approvals before execution,” an industry expert said.