The Economic Times (ET) reported Friday India’s foremost infrastructure firm, Lanco Infratech is to acquire Australia’s Griffin Coal. According to the ET report, the investment is for a consideration of A$730 million, about Rs 3,400 crore. Lanco’s move comes amidst previous similar moves by Indian firms keen on securing resource supplies for their Indian units.

According to the ET, it is the second biggest investment by an Indian company in Australia, after Adani Enterprises acquired Linc in August 2010 for $2.7 billion. Speaking to ET, Lanco’s chief financial officer, Suresh Kumar, said the acquisition of Griffin Coal will cater for about 30 per cent of Lanco’s overall coal needs to the year 2015.

Lanco needs about 40-50 million tons of coal over the next four years to fuel its power projects in India. Griffin's mines are expected to give Lanco access to 4 million tons of thermal coal, which can be increased to more than 15 million tons, reported ET.

The ET estimated that India, Asia's third-largest economy, is expanding at more than 8% a year. However Indian companies are struggling to meet coal demand from domestic production with many companies venturing to Australia and Indonesia to buy mines.
Lanco’s Australia venture follows such investments by Indian firms such as JSW, Essar Energy, Reliance Power and Tata Power. Indian firms have embarked on an aggressive foreign resource acquisition strategy to cater for demand from their power generation units, with investments as far as Indonesia and South Africa.

Lanco has finalized the funding for acquiring Griffin. ICICI Bank has said it will lend A$480 million for the upfront cost, said ET. The payment will be done in three installments; first the upfront, then about A$100 million as second payout and then A$150 million in four years. This would be funded from internal accruals, said Kumar.

Lanco also plans to increase power generation capacity in India by seven-fold in five years and may bring some of the coal from the Griffin mines to India, said ET. According to Kumar, Lanco expects a large capacity expansion by 2015, a major share of which is based on coal.

Lanco Infratech Ltd is one of India’s top business conglomerates and among the fastest growing. Lanco Infratech has subsidiaries and divisions across a synergistic span of verticals. These include Construction, Power, EPC, Infrastructure, Property Development, and Renewables. Lanco Infratech’s projects, operational and underway, are spread across India.

7 March 2011