CESC to switch focus to power distribution

Plans $3 billion investment across verticals

Five years after Sanjiv Goenka stepped out of RPG’s shadow, a major shift in strategy is underway as flagship company CESC moves focus from power generation to distribution.

“We have invested Rs 8,000 crore in generation but coal linkages are becoming a problem. We think enough power is available so we want to do distribution where we have the real skill,” said Sanjiv Goenka, chairman of CESC.

In the past five years, CESC has moved from a 800-Mw generation capacity to 2,600 Mw, but not much growth in that area is envisaged.

While Goenka will still probably put up another unit, he is not chasing the target of achieving a 8,000-Mw generation capacity set when the RP-SG group was formed.

CESC has distribution rights in Kolkata, parts of Howrah and Hooghly in West Bengal, Noida in Uttar Pradesh, and Kota and Bharatpur in Rajasthan.

“Our agenda will be to get away from government intervention intensive projects. And, we will try and have a certain percentage of our portfolio in international geographies,” said Goenka.

In 2010, the RPG empire was split between sons Harsh and Sanjiv Goenka. “It’s six years since the separation and five years since the RP-SG group was formed,” Goenka recalled.

The size of the RPG empire at that time was Rs 19,000 crore. Today, the RP-SG is a shade under that.

“In terms of profits, we have grown three times in five years; it was Rs 580 crore five years ago; it’s Rs 1,540 crore now. Revenues have grown 2.5 times. For assets, it’s the biggest jump, from Rs 10,000-11,000 crore to Rs 31,000 crore,” said Goenka.

From a turnover-oriented group, the focus is now on bottom lines. The target is to double the asset base and treble profits in the next five years. Top line, too, will double in five years.

“We had said top line will be Rs 35,000 crore in 10 years. What we had said is, we will get to Rs 3,000 crore cash flows in 10 years’ we have already gone to Rs 3,500 crore, and we will get to Rs 7,000 crore, at least, in the next five years. At net profit, we are at Rs 1,500 crore, and we hope to double that,” Goenka added.

Explaining further, he noted: “It’s a different way we are functioning. We have a cell that focuses on special initiatives. We shifted to a much younger team. We reduced the average age of our managing directors by 15 years. It was a difficult decision but it was about getting new energy, new thoughts.”

The firm’s investment in the next five years is pegged at $3 billion. “You will see different areas coming up where government intervention is not strong. Acquisitions will happen, but unrelated to power. We are going to expand in all our businesses,” he added.

In carbon black, a new facility is being set up, which will increase capacity by 25 per cent; Spencer’s will see a 25 per cent growth in square footage; Firstsource will see niche and big acquisitions; one could be as early as six to 12 months.

“We will grow inorganically in the IT space. We are just getting a huge contract from Sky TV. Spencer’s is adding more and more stores, and we have now figured how to add stores profitably. We made a lot of mistakes when we were going forward but today, we have understood the DNA of store expansion,” said Goenka.

Five years ago, Spencer’s was making Rs 30-35 crore loss a month. Today, it makes profit.

A new business is also in the works. “It will be a business adjunct to our retail business. It could be organic or inorganic, but will be finalised in four-five months,” said Goenka.