Eyeing huge potential in India’s construction market ahead of the 2010 Commonwealth Games, Russian conglomerate Sistema on 8 April announced plans to develop hotels, offices and residential complexes in major cities with an initial investment of $100-200 million.
The Russian giant has partnered with Shyam Group, which has sold 51% stake in its telecom venture to Sistema, said Yevgeny Kolodkin, vice-president (strategy and business development) of Sistema’s construction subsidiary.
The Sistema-Shyam JV will develop a 22- acre property in Gurgaon, Kolodkin said, adding that the land bank is owned by Shyam Group promoter Rajiv Mehrotra and the ratio of investment between the two partners is being negotiated.
Mehrotra could not be contacted for comments.
This will be Sistema’s first construction and real estate venture outside Russia and Ukraine and the firm is likely to announce long-term plans in the sector soon, Kolodkin said. Major areas of interest are office buildings, hotels and SEZs, he added.
Asked whether Shyam Group partner all future real estate related projects, Kolodkin said: “No final decision has been taken... we are in talks with small to medium developers to partner with us for the sector.”
Sistema’s construction subsidiary (Sistema Hals) is listed at London Stock Exchange. The group’s turnover in the first nine months of 2007 stood at $9.6 billion.
SistemaHals, the construction subsidiary, is currently present in nine locations across Russia and Ukraine and is expected to replicate its Moscow experience in other Russian regions, CIS countries, India and also in China.
“Besides, India, we are looking at opportunities in China,” he said.
Elaborating on Indian plans, Kolodkin, who has been working on Indian business, said the company would focus on major cities like Delhi, Mumbai and Kolkata and the model would be owning the properties and giving them on rents in the initial years.
Asked how soon the first project would begin, he said the government is keen to start it at the earliest in the wake of Commonwealth Games in 2010. “We are finalizing the details and the project will start by end of 2008 or early 2009.”
Sistema’s entry in construction would also provide it synergy in its telecom venture. Sistema-Shyam have recently been allocated spectrum in various circles to offer mobile telephony and are hoping to become a pan-India player in the coming days.
“Realty developers such as Reliance ADAG, DLF and Parsvnath also have telecom operations or are in entering the sector. Since telecom also requires lot of real estate and construction, Sistema’s plans will provide much required synergy”, he said.
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