Hyderabad infra companies flush with PE investments

From GMR to GVK to a small company Soma Enterprise, investors are pouring in money into Hyderabad's infrastructure companies. Around USD 550 million of private equity has come in the year 2007, reports CNBC-TV18’s Viswanath Pilla and Suresh Venkat.

Who would have heard of names like GMR and GVK until they stunned everyone by pipping old and established companies to bag the modernization projects of the New Delhi and Mumbai airports. This galvanized at least a dozen Hyderabad-based companies to grab the lion's share in the booming Indian infra industry.

Syam Prasad Reddy, MD & CEO, Indu Projects said, “They know how to manage labour and taking risks. The productivity of Andhra Pradesh companies is high compared with other companies."

No wonder private equity firms are putting in big bucks. Around USD 550 million of private equity has flown into Hyderabad companies in the year 2007 alone. It's a long list - L&T, IDFC, Lehman Brothers and Singapore-based Amansa Capital picks up 7% stake in B Seenaiah projects. IND Barath Infra raised USD 70 million from Citigroup's private equity arm and UTI Ventures. Nagarjuna Construction raised USD 150 million from Blackstone. And Indu Projects raised USD 33 million dollars from the Citigroup Venture Capital International Mauritius. Aparna Constructions raised USD 100 million from JP Morgan. And a small firm like Soma Enterprise raised USD 101 million from 3i India.

Maganti Ankineedu, Director, Soma Constructions said, “Everyone wants to be part of booming infrastructure sector, where the real growth is going to take place. "

The infrastructure industry in Andhra Pradesh is not a recent phenomenon. Large irrigation and industrial projects like Nagarjuna and Visakhapatnam Steel Plant in 1960's and 70's created a wave of contractors. Many of these contracting companies eventually grew into infrastructure companies. A case in point - Gayatri Projects. Founded by first generation entrepreneur and now incumbent minister T Subbirami Reddy, it has been transformed into an infrastructure company by son Sandeep Reddy.

TV Sandeep Reddy, MD, Gayatri Constructions said, “Influx of PE funds, corporate governance are helping our companies in the process of transformation. To scale up you need to professionalise, that is where the second generation is making difference."

The government of India is also planning to spend nearly USD 500 billion on infrastructure projects. This means that maybe a dozen Hyderabad-based companies could soon join the billion dollar club.