Tata to execute Rs 70,000 crore infra projects in 5 years

Tata Group today announced that its 3 unlisted companies Tata Housing, Tata Realty and Tata Projects will execute these projects

When Cyrus Mistry took the reins of over $100 billion turnover Tata Group from Ratan Tata last year the conglomerate was naturally expected to get special impetus for the infrastructure business. Mistry is the youngest son of construction magnate Pallonji Mistry whose company Shapoorji Pallonji is known for building Mumbai’s landmarks such as the Reserve Bank of India building.

Tata Group today announced that its 3 unlisted companies Tata Housing, Tata Realty and Tata Projects will execute projects worth at least Rs 70,000 crore in the next 5 years. These companies currently have worth Rs 15,000 to Rs 20,000 crore projects under execution in 2013-14. Comparative figures for the previous years are not available.

This is probably for the first time that the companies of the group in infrastructure segment have come together to give a unified ambition. A senior executive of the group who did not wish to be identified says,” On internal forums there is a lot more emphasis on infrastructure business now.”

Besides there is also clear opportunity in the market to be tapped. “There is a large opportunity for Tata Group companies to participate in sectors such as roads and highways in which investments are expected to grow at  16% per annum,” says Siddhartha Roy, economic advisor of Tata Group.

Tata Realty and Infrastructure, a 100% subsidiary of group holding firm Tata Sons is scouting for new highway projects to benefit from increasing investment in road infrastructure. It constructed the 110 km Pune-Solapur four lane project under National Highway Development Programme this year. The company also acquired three road projects from infrastructure firm IVRCL this year. Now it is looking at road projects worth Rs 7500 crore in the next 5 years.

“We are looking for more growth through projects in airport development and urban transport,” said Sanjay G Ubale, managing director and chief executive officer, Tata Realty. The company expects respectively Rs 5000 crore and Rs 3000 crore worth projects from these two business segments.

Tata Realy is also in commercial real estate development and it expects further worth Rs 7200 crore projects in the next five years from developing industrial park and commercial real estate including hotels. Together the company will execute projects worth Rs 22,700 crore out of the estimated Rs 70,000 crore for the three companies.

In the residential real estate business Tata Housing Development Company currently has 55 million square feet of real estate under development in 26 projects spread over 11 cities. “We are also looking at a public private partnership project in Sri Lanka,” says Brotin Banerjee, managing director and chief executive officer of the company.  It expects to execute projects worth around Rs 25,000 crore in the next 5 years.

The biggest order book is however expected from Tata Projects which executes projects in industrial segments with building thermal power plants, transmission network and blast furnaces. The company is also a key player in building railway infrastructure and it was awarded the first Freight Corridor project by the railway.

The company has been growing at a CAGR (compounded annual growth rate) of 23% for the last 5 years. It had an order book of over Rs 15,000 crore and revenue of Rs 3600 crore in 2012-13. It is now expecting an order book of Rs 25,000 to Rs 30,000 core in the next 5 years. “We are also expecting growth from areas such as building drinking water infrastructure in cities," says Vinayak Deshpande, Tata Projects.

The united voice may provide future growth for the group which is seeing cyclical downturn in its key businesses such as steel.