BW Communities

‘Lanco Is Unique’

Anup Jayaram Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Nearly 20 years after he returned from the US, Lagadapati Madhusudan Rao heads India's largest private power-generating company, Lanco Infratech. He is a difficult man to meet since he is out of the country most of the time. Rao tells BW's Anup Jayaram that he is in the process of giving a professional touch to what has been a family-run business till now. Excerpts:  What was the catalyst for Lanco to get into the power business?     The opportunities in India came only after liberalisation in 1991. We were a small construction company in the early 1990s. There was an opportunity and we said let's look into it. The first experience that we had as a group outside construction was in the steel industry. From 1980-89, we were in Visakhapatnam. At the same time, we were looking for opportunities in other sectors. In 1993-94, seven power plants were given out through MoUs. In the second tranche, every state was motivated to develop independent power plants. We participated in the opportunity in Andhra Pradesh. Among the seven fast-track projects, two were from Andhra. Hundred letters of intent were given all over the country. Each state had given 6-7 letters of intent. Out of close to 100 MoUs signed in the late-1990s with independent power producers (IPPs), Lanco Kondapalli is one of the few successful IPPs. We got the letter of intent in December 1997 and we were able to bring the project to financial closure in December 1998. Many projects failed in the power sector in that period. Very few people were able to successfully convert the opportunities into a project.   Some of the marquee names of Indian industry are there in the power business. How do you compare to them? We are benchmarking ourselves from where we stand in capability in the construction business. We do not have to worry that the brand Lanco is not up to the big names. What is more important is that we realise where we have to go. Focusing on the best practices in the industry and on human resources are the only answers to remain a winner in this game. That is where our focus is. We are very unique to what corporate India is doing. There are a few things. Lanco is a family business. We — three brothers and a brother-in-law — decided that we needed to grow Lanco in a professional way. Most important is to separate ownership from management. In the past two years, the four of us went through multiple sessions along with the family business practice of PricewaterhouseCoopers Dubai to structure a constitution on how we need to position Lanco as a global operation. Second, we are developing initiatives in terms of people capability. The question is: do we have the right person at the right place? We have a very structured formal concept called LEO — leadership, entrepreneurship and ownership. As part of taking this forward, we are setting up the Lanco Academy. We have worked with Accenture to give shape to the Lanco Academy. A few years from now, 80-85 per cent of the senior leadership should be able to come from within Lanco itself.   Do you see a shake-out in the power business? Are you looking to acquire new assets? Yes, we do see a shake-out. I would say that there could be one around 2015-16. Over the past two years, lots of people have set up projects with the intention of selling them. I do not think we will buy out. There are at least 10 companies that are serious and are here for the long term. All these companies, including Lanco, have a good portfolio of assets at different stages of development. We may not acquire any new assets. (This story was published in Businessworld Issue Dated 11-07-2011)