Hinduja IPO to fund expansion

India's billionaire Hinduja brothers are planning a big stock market listing.

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MUMBAI // India's Hinduja Group plans to list its cable television unit to fund new acquisitions on its home turf and overseas, with the Middle East figuring prominently in its global expansion plans.

The US$23 billion (Dh84.47bn) group, a family-run conglomerate controlled by the billionaire Hinduja brothers Srichand and Gopichand,is one of India's largest business enterprises, with a diversified portfolio of holdings across banking, transport, energy, technology and media sectors spanning 38 countries.

IndusInd Media & Communications, the group's cable distribution arm, which has 8 million subscribers in India, expects to raise up to 5 billion rupees (Dh404.6 million) through an initial public offering this year. Some of the proceeds could be diverted to individual investors, besides funding expansion, Gopichand Hinduja, the group's co-chairman, told Bloomberg this week. Almost 95 per cent of all businesses in India are family-owned, contributing 60 to 70 per cent ofthe country's GDP. While several of these business families have been in the headlines because of bitter infighting and acrimonious inheritance battles, the Hinduja family appears to be an aberration.

The Hinduja Group, founded more than nine decades ago by Parmanand Hinduja, is currently led by his four sons. Srichand and Gopichand, the eldest, are worth a combined $9.9bn, according to the 2008 Sunday TimesRich List. The business is gradually being passed into the hands of the third generation, comprising five siblings.

The media-shy family, which rarely makes members available for interviews and did not respond to requests for comment, is quietly embarking on an aggressive expansion spree. Last month, Ashok Leyland, the group's flagship automotive company and India's second-largest manufacturer of commercial vehicles, inaugurated an assembly unit in Ras al Khaimah. The plant, set up with an initial investment of $50m, is the result of a memorandum of understanding signed between the group and the Ras Al Khaimah Investment Authority in 2006. The 100,000 square metre UAE facility is expected to crank out 2,000 buses and trucks a year. Dheeraj Hinduja, the chairman of Ashok Leyland, said at the inauguration he expected the company, currently the world's 16th-largest, to be among the top 10 commercial vehicle producers by 2015. The company is scouting for acquisition opportunities in the bus segment in South America, north Africa and parts of South East Asia.

Last May, the group acquired KBL EPB one of Europe's largest private banking groups, for €1.35 billion (Dh6.67bn) in an all-cash deal. Shrichand Hinduja, the group's chairman, said the deal would foster "the best of the West to merge with the East", allowing the group to gain access to the fast-growing markets in the Middle East and Asia.

The group has identified the power sector as a key driver of growth. Last year, it announced investments of $12bn to develop power projects planned to produce a total of up to 10,000 megawatt (mw) in the next five years. It is currently building a 1,040mw thermal power plant in Vishakhapatnam in southern India, which is expected to be operational by 2013, according to Prabal Banerji, the group's chief financial officer.

Hinduja Group's India business has an enterprise value of $10.7bn to $13.4bn and accounts for 8 per cent to 9 per cent of its global revenues. The group expects that figure to rise to 25 per cent through its aggressive expansion by the next decade, with investments planned across 10 verticals, including power, property, banking and health care.

That expansion plan, although ambitious, is "over-optimistic", said Vaishali Jajoo, a senior research analyst at Angel Broking in Mumbai. Its business in India is boosted by a buoyant economy, she says, but a slowdown in expansion plans is expected if the Indian economy similarly decelerates.

"The plan looks good on paper, but in the long term, it needs a better cash flow plan," she says.