Sanjiv Goenka looks to generate revenue from realty assets

Kolkata: The RP-Sanjiv Goenka Group is looking to generate revenue by developing the redundant real estate assets of companies such as CESC Ltd, Harrisons Malayalam Ltd and Phillips Carbon Black Ltd.

An arm of power utility CESC is to develop a residential-cum-commercial complex on a three-acre plot at the port town of Haldia in West Bengal, chairman Sanjiv Goenka announced on Wednesday. Other enterprises of his group are evaluating similar projects elsewhere, he added.

The group owns large tracts of land across the country. It owns, for instance, 13 acres in Kochi and 75 acres in Coimbatore—large enough to develop townships, according to Goenka. His group is currently assessing the development potential of these properties, he said.

CESC Properties Ltd was the first in the group to start real estate development. In September 2013, it commissioned a 730,000 square feet upscale shopping mall in south Kolkata. CESC Properties is now looking to build 300 homes and a 120,000 sq. ft shopping mall in Haldia.

For cash rich enterprises such as the RP-Sanjiv Goenka Group, building commercial complexes is a profitable proposition, said Abhijit Das, who heads real consultancy Cushman and Wakefield Inc. in eastern India. While the worth of the underlying assets appreciates with time, rentals create a steady revenue stream, he explained.

Besides vacant land, CESC also owns several antiquated power generation units across Kolkata, which it is looking to mothball. These are expected to eventually make way for real estate projects. In addition, CESC acquired through an auction three tram depots in Kolkata for ₹ 27.7 crore in February last year.

Meanwhile, CESC is evaluating how to minimize the impact on consumers of the ₹ 997 crore penalty imposed on it by the Supreme Court for extracting coal from the Sarsathali block, Goenka said. If it could be realized from all its consumers, the power utility would have to raise tariff by only a “few paise per unit”, he added.

The extent of tariff revision is to be determined also by the “evolving coal linkage scenario”, according to Goenka. CESC, which was the first power utility to receive a captive coal mine back in 1993, will take part in the upcoming auction of coal blocks.

It currently receives around 2.5 million tonnes of coal a year from Coal India Ltd, the state-owned monopoly miner, under a long-term fuel supply agreement, which is 45-50% of its requirement.

The next round of CESC’s tariff revision will also factor in ₹ 900 crore of cost overrun on its newly built 620 megawatt power plant at Haldia, which cost ₹ 4,500 crore. The cost escalation was largely on account of exchange rate fluctuations, said Goenka.