Gautam Thapar, Chairman, Avantha Group, says his company is looking at acquisitions in the power and industrial segments. He tells Bloomberg UTV’s Mini Menon that land and water are the two major problems in the country’s development, especially for the power sector.

Through the period of 2006-2008, you have acquired one company. So what’s the larger plan? Are you taking it global or are you looking at key strategic investments?

Thapar: Well, the company is global today. But it depends on the definition of global… Half the assets and more than half of the sales come from outside of India. To that extent, it is probably one of the most globalised companies in the country. In each of the three business segments, we are very clear as to where and how we want to compete. Power system, which is the biggest in global business, is the first. Then comes industrial business system. By nature, it is more of a domestic business for us. We have been wanting to push more on drives and automation as a natural extension to our motor business… We have been in the search globally for about three years to find a right company… So you will see some further announcements.

So, 2010 could also see some acquisitions?

Thapar: Yes, I think we have the ammunition and certainly the appetite. There is no debt in the balance sheet and we are growing very strongly to go out and look at something. In power systems, if something comes up, especially in technology, we will be interested.

The industrial segment? Is there going to be another global acquisition and will technology drive it?

Thapar: Very much. There is a very clear technology driver here. Most of the drives in automation is digital technology stuff… so that’s clearly a need and it will be an overseas acquisition. There is nothing in India which fits our bill.

Do you think Indian companies need to smell the coffee and say that we possibly are going to leapfrog in growth

Thapar: The leapfrogging will happen if the assets are not owned by the state. It is as simple as that. Mobile telephony is not leapfrogging because the government decides the licenses … same thing with power. If the government is going to go for all the massive drives like privatisation and distribution and transmission, you will have leapfrogging in technology...

What we have planned in the power sector... Can it be done the way it is done or does it need a huge draw of adrenaline and policy changes?

Thapar: I don’t think there is something wrong with the policy in terms of generation. It’s just that in a country of 1.2 billion people, issues around land acquisition and things should have really got attention 20 years ago. All right, now they are getting attention. But, in the interim period, people’s expectations have increased vastly.

There are two things in this country which are really problematic. Water is a huge problem and it’s going to come up as a bigger problem and land. I think the judgment from the Supreme Court is a very fair one. It said you have to compensate according to their values. So you have to go out and make the effort to buy land by yourself… in India, every kind of player gets into the act and who wants to do something. Some of it ranges from extortion at one end to social development on the other end.

So, when you are developing a project in which you are going to be spending Rs 3000-4000 crore, if it takes five years in other countries, here it is probably gonna take you seven years. On the other hand, the whole policy is around fuel supply. If you go to the coal ministry, there are a whole set of allocation issues…

What are the three  things that you would do if you had to get the power situation right?

Thapar: There are no three things. There is only one thing and that is you really need to decide on the fuel policy and get it going. If you look at the money that has been raised, it’s both the reflection of the investors’ hunger and appetite for real assets. Whether you have started work or you haven’t, the fact is that you are going to need half a billion of mega watt power generation in the next 25-30 years. So, if I am an investor, just looking at growth for the next 20-25 years, what will distinguish one project from another and one company from another, is going to be commodity. It is going to be the cost of power generation and how efficiently you are able to execute your investments. A power plant, in my opinion, is no different from a paper mill… Most of the risks are in project execution.

Well, it sounds simple. But I think there are a lot of stuff that needs to be done out there…

Thapar: Business actually is simple. I don’t know who complicates it. If you keep it simple like that, you will allow people to think in very simple terms. They will get rid of the complications. If you make it very complicated, you will never get anything.