Videocon shifts focus from SEZs to mid-sized business hotels

Videocon Realty and Infrastructure will shift its focus from SEZ projects. It is planning to launch business hotels across the country

Following the footsteps of realty players life DLF and Parsvnath Developers, consumer electronics giant Videocon Group has also decided to put its special economic zones (SEZs) on the backburner. Its realty unit Videocon Realty and Infrastructure Ltd (VRIL) will now focus on medium-sized business hotels, said a director of the group.

“We are developing medium-sized business hotels across the country. The first hotel will be in Kolkata, which is already in the construction phase. We are no more looking at SEZ projects as of today,” said SM Hegde, director, Videocon Group.

VRIL’s first project is coming up at Kolkata where it plans to develop hotel, retail and information technology space. Last year, it had bought around 30 lakh sq ft of land from Philips India at Rs9 crore. The company has initiated the first phase of construction in about 8 lakh sq ft of land. The construction area is divided into 1.5 lakh sq ft for hotel & retail space and 6.5 lakh sq ft for information technology space.

The Philips factory is still operational in the same land and occupies 30% of the total space. The first phase is supposed to be completed in the next 12 months to 18 months. Ahluwalia Contracts (India) Ltd is constructing the property for VRIL in Kolkata.

The group is planning to construct 200 rooms with a daily rental between Rs2,000-Rs5,000 per room, depending upon the location. VRIL is in talks with a few established players in the hospitality segment like Hilton Worldwide for design, planning and operation. 

“We are coming up with hotels in other places like Aurangabad, Ahmedabad, Nashik, Bengaluru and Hyderabad,” said Mr Hegde.

The company has got land parcels available in ten locations across the country and has a land bank of more than 2,000 acres. In a few cities, projects are in the design and planning stage and the company aims to come up with two to three such properties in the next two years.

After Kolkata, the next projects will be initiated in Ahmedabad and Aurangabad. The company believes that now is the best time to enter the real-estate market when property rates are depressed. VRIL expects the overall environment in real-estate to improve by the time these projects are up and running.

“According to various reports, India’s GDP will grow at 8%; if this happens, it will open more job opportunities in the country. With the boom in the job market, the information technology sector will also start hiring. At present, commercial real-estate prices are reasonable and attractive,” said Mr Hegde.

According to various media reports, Videocon had two SEZ projects in Maharashtra and four in West Bengal, which it had planned to implement by special purpose vehicles (SPVs). The company had planned to tie up with separate players for SEZ projects. It had earlier planned to list its real-estate arm by 2010. However, considering the state of the real-estate industry, Videocon has held back this plan.

Last year, realty major DLF got four SEZs de-notified by the commerce ministry, citing lack of demand for commercial space, and Parsvnath had put 12 projects on hold.

In 2006, when the SEZ rules were notified, there had been a mad rush for setting up such enclaves. These special enclaves have been hit by land-acquisition problems, resistance from farmers and new regulations. Big projects like the Navi Mumbai SEZ, Reliance’s Haryana SEZ and Posco’s SEZ could not take off as land-acquisition problems remained unresolved.

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    India allows ONGC, GAIL to buy stake in China gas pipeline

    Besides buying a 12.5% stake in the pipeline that China is building in Myanmar, the Indian companies will also invest $1 billion in fields

    The Indian government on Thursday permitted state-run Oil and Natural Gas Corp (ONGC) and GAIL to pick 12.5% stake in a pipeline that China is building in Myanmar, and allowed them to invest another $1 billion in fields that will provide gas to be shipped to China through the pipeline, reports PTI.

    The Cabinet Committee on Economic Affairs (CCEA) headed by prime minister Manmohan Singh allowed ONGC Videsh Ltd, the overseas investment arm of ONGC, to invest $167.84 million in taking 8.35% stake in the pipeline.

    GAIL will invest $83.88 million for taking 4.17% stake in the pipeline being constructed by China National Petroleum Corp (CNPC) to transport gas found in block A-1 and A-3 off the Myanmar coast, an official spokesperson said.

    CNPC is building the $2.01-billion pipeline to ship gas from blocks A-1 and A-3, where OVL and GAIL India hold 17% and 8.5% stakes respectively, to China.

    Gas from the blocks would be sold to China for $7.72 per million British thermal unit at the landfall point in Myanmar. The block is operated by South Korea's Daewoo which holds 51% stake.

    Daewoo, OVL, GAIL and Korea Gas, which has 8.5% stake, are investing $2.79 billion in three gas fields in Block A-1 and A-3 off the Myanmar coast and another $936.26 million in laying a separate undersea pipeline to take the gas to the shore.

    An official said that CNPC had offered 49.9% stake to the consortium developing gas fields in blocks A-1 and A-3. South Korea's Daewoo Corp holds 51% stake each in Block A-1 and A-3, while OVL has 17% stake.

    GAIL and Korea Gas Corp have 8.5% each while the remaining 15% is with Myanmar's Myanma Oil and Gas Enterprise (MOGE). The consortium is investing $3.61 billion in bringing to production gas fields in the two blocks.

    "The 49% stake is being apportioned in the same ratio as individual stakes in Block A-1 and A-3," the official said.

    Daewoo too was inclined to participate in the 40-inch, 870-km pipeline and final shareholding in the pipeline project would be CNPC (50.9%), MOGE (7.37%), Daewoo (25.04%), OVL (8.35%), GAIL and KOGAS (4.17% each).

    The official said that Shwe and Shwe Phyu gas fields in Block A-1 and Mya discovery in Block A-3 would be tied together to produce a plateau of 500 million standard cubic feet per day of gas for 19 years. The field life is envisaged for 28 years.

    The first gas flow is anticipated in the first quarter of 2013.

    Myanmar has decided that the gas from A-1 and A-3 would go to China. CNPC will pay $6.71 per mmBtu for the gas plus an offshore pipeline tariff of $1.02 per mmBtu.

    The 30-year sale contract is indexed to US inflation, sources said. Sources said that the gas in A-1 and A-3 is lean (99% methane) with less impurities. Gas reserves of 4.532 trillion cubic feet in Blocks A-1 and A-3 have been certified.

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    India Inc urges govt not to raise excise, service tax

    Indian corporates have urged the finance minister not to raise excise or service tax till economic growth rate reaches the pre-crisis level of 9%

    Concerned over the possibility of withdrawal of stimulus packages in the upcoming Budget, Indian corporates have urged finance minister Pranab Mukherjee not to raise excise or service tax till the economic growth rate reaches the pre-crisis level of 9%, reports PTI.

    "We are afraid that rollback of stimulus packages, even partially, could derail the growth process and adversely impact the industrial sector," FICCI president Harsh Pati Singhania told PTI.

    The stimulus packages should continue for another year or at least till 31st October, he said, pointing out that the economy is yet to achieve the pre-crisis growth level of 9%.

    The finance ministry is believed to be considering partial withdrawal of stimulus given to the industry to combat the impact of the global financial crisis triggered by the fall of financial services firm Lehman Brothers in September 2008.

    The Budget is slated to be presented on 26th February.

    As part of the stimulus, the government reduced the excise duty in two tranches from 14% to 8% and service tax from 12% to 10%.

    Chandrajit Banerjee, director general, Confederation of Indian Industries (CII), while responding to queries send by PTI on withdrawal of stimulus said, "The very fact that we have had the worst financial crisis since 1929, involving the entire globe, reflects that recovery will be slow and enduring, with ample risk of double-dip recession on the way."

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