The Hindu Business Line : Reliance Infra to enter steel plant construction biz

On the cards
Nine infrastructure projects with a total investment of Rs 16,000 cr over 7 yrs
Five road projects worth Rs 3,100 cr
Two metro rail projects in Mumbai, Delhi worth Rs 4,900 cr

Amit Mitra

Mumbai, Nov. 11 The Anil Ambani-controlled Reliance Infrastructure is set to expand its engineering and construction business in India by getting into construction of steel plants through a Chinese tie-up.

The company, which currently handles construction of power plants, has tied up with China Metallurgic Corporation to form a special purpose vehicle that will bid for EPC contracts for construction of steel plants. The Chinese major will provide the technology to set up key units of a steel plant such as blast furnaces and coke ovens, while Reliance will contribute its project management expertise.

Reliance Infrastructure, formerly called Reliance Energy, also plans to get into construction of nuclear power plants. “We are in talks with a few world leaders in nuclear power plant construction for a similar tie-up. Nothing has been finalised yet,” Mr Lalit Jalan, company’s CEO and director, told Business Line.

Infrastructure focus

Originally a power generation and distribution company, Reliance Infrastructure is betting big on infrastructure, with plans to invest about $7 billion (over Rs 30,000 crore) in the next three years to expand its engineering and construction business — out of this about 80 per cent will be raised through borrowings.

The company’s EPC division is currently sitting on an order book of Rs 20,790 crore. It expects its EPC division to contribute Rs 2,500 crore this fiscal to the company’s overall turnover. In the EPC vertical, the company is into construction of roads, highways, flyovers, urban transportation systems, power projects and airports. The company notched up a total income of Rs 9,760 crore and net profit of Rs 1,178 crore in the last fiscal.

“We are quite upbeat on infrastructure. The Government has lined up an investment of $500 billion to improve infrastructure, including roads, railways, power plants and ports, in the 11th Plan period (2007-12), doubling our infrastructure spending from the current 4 per cent of GDP to 8 per cent in 2012. It is estimated that at least 30 per cent of this planned expenditure will be met through private sector participation,” Mr Jalan pointed out.

The transformation from Reliance Energy to Reliance Infrastructure in May this year was aimed at broadening its business canvas to cover the entire infrastructure sector. Having so far completed 8,000 MW of power generation EPC contracts, the company has recently tied up with Chinese major Shanghai Electric to set up equipment manufacturing facilities for the power generation sector. “Through the tie-up we plan to cater to the domestic sector, as well as markets in West Asia, Africa and South East Asia,” according to the company’s CEO.

Mr Jalan said the company was setting up nine infrastructure projects with a total investment of Rs 16,000 crore over the next seven years. These include five road projects worth Rs 3,100 crore (two of which will be ready by this year) and two metro rail projects in Mumbai and Delhi with an investment of Rs 4,900 crore.

On the power transmission sector, the company has finalised plans to enhance its extra high voltage (EHV) transmission network with a capital outlay of Rs 1,800 crore in Mumbai. It is developing two projects under the Western Region System Strengthening Scheme-II on a BOT basis—these are the first projects to be awarded for 100 per cent private participation on an upfront tariff commitment.