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‘RPG’ll spend Rs 20K cr on power’

The diversified RPG Group, with interests in power, retail, carbon black, entertainment, tyres and chemicals

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The diversified RPG Group, with interests in power, retail, carbon black, entertainment, tyres and chemicals, feels there could be an indirect impact of the global slowdown on its businesses.

It has deferred initial public offer plans for its retail and carbon black businesses. However, the group is on track to achieve a turnover of Rs 15,000 crore this fiscal, up from Rs 13,500 crore in the last, RPG Enterprises vice-chairman Sanjiv Goenka told Madhumita Mookerji of DNA Money. Excerpts from an interview:

Do you think the current global slowdown will affect any of your businesses?
Clearly, the slowdown effect will be felt on the Indian economy because it is no longer insulated from the global economy. It would be foolhardy to assume a zero impact on the RPG Group. No direct impact as such, mainly indirect, for instance in Phillips Carbon Black…

What sort of investments will happen across the group?
We will be investing heavily in power - Rs 20,000 crore - in generation and distribution. These will be funded through internal accruals and debt in the ratio of 1:2.3. In retail, we are looking at an investment of Rs 1,500 crore for the back and front ends. Another Rs 1,500 crore will be invested in the carbon black and tyre segments.

You have the licence for power distribution in the Kolkata region. How is this market different from say Mumbai?
You see, Mumbai is a lot more receptive to change — newer ideas, more exposure. But we are delighted with the response from our customers. There are a lot of consumers below 300 units per month.

How are you tackling power theft?
Power theft is a social menace. There have been lots of talks about keeping this in check with cooperation from the state government and the police, coupled with a modern distribution network. But, our transmission and distribution losses have come down from 22.8% to 13.8% in the last five years. The state government passed a law, which made power theft a cognizable offence. In the past, there were no deterrents to pilferage. There is now a full-time loss control cell in place as well.

What’s the update on your power projects?
We have got the environmental clearance for Haldia Phase II. The land clearance is almost through for about 500 acres. We will get the financial closure in about three weeks.

Where Jharkhand is concerned, we hope to get the financial closure in six months. In Orissa, we are yet to get the fuel linkages for one of the coalfields close by. In Orissa, we do not have any captive mine. We have applied for a mine licence in this state. Another round of bidding is slated to take place shortly. Overall, about 55% of our power plants are serviced by captive mines.

What about water supply for these  projects?
Water supply does not seem to be an issue. We have got the water clearances.

Which other states are you looking at, considering you have plans for an additional 1,300-1,500 mw of projects?
We are keen on any project that can generate power cheap - below Rs 2.5 per unit a year. We are open to acquisitions.

What percentage of your revenues do you expect from outside West Bengal when all your future projects are up and running?
I would expect about 35% of the total revenues from power generation to come from outside Bengal. These ongoing projects will be completed by 2012-13.

You were looking at acquisitions for Phillips Carbon Black. What happened?
We did look at a few potential acquisitions but these did not work out… We would have gone in for initial public offer (IPO) this year itself, but had to change our plans because of the market conditions.

What are the challenges facing Saregama today?
In the music industry, the main challenges are now in technology and the delivery mechanism. We have to recognise this in order to be compatible and consistent. Unfortunately, we have not done much. There is a need for more delivery through the digital platform, mobiles and multiple vendors.

What’s the latest on the film production front?
We have just signed a Rs 45 crore film with Abbas Tyrewala who directed Jaane Tu Ya Jaane Na with John Abraham and a debutante in the female lead role. Two more big projects are on the anvil, which are to be directed by two major Bollywood directors. The first of the three films is slated for a 2009 Diwali release.

What happened to Draupadi, Saregama’s English adaptation of Mahabharata? Wasn’t production supposed to have been completed last year?
Draupadi will take time. We are re-scaling it - may be we will make it an even bigger project — a truly large canvas film.

How are you tackling music piracy?
Piracy is a huge issue. More than half the sales in the music industry happens through piracy. We need more stringent IPR rules. The legal music industry is about Rs 1,200 crore. The illegal industry would perhaps be worth a similar amount. However, overall growth in the music industry is strong, at about 30% per annum.

In retail, how do you plan to tighten cost control?
The future looks good provided costs are kept under control. Growth in the retail industry is not reckless, but planned. We plan to close down any store that does not perform up to the mark in 12 months of opening. We plan to close about 46 stores. On the other hand, we would like to open one store a day, but one has to be sensible about the geographical location, rentals, electricity costs, etc. We have aggressive rollout plans.

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