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Indian giants GVK, Hindustan upbeat on Modi's infrastructure push

GV Sanjay Reddy, vice chairman of GVK Power & Infrastructure, has big ambitions for the company's airport business.

He wants to be one of the largest players in the global airport sector, growing GVK's airport unit to be a 200 million-passenger-per-year business within five years.

The company is involved in two airport projects in Indonesia, but the jewels in its crown are definitely in India, where GVK operates the airports in two of the biggest cities in the country: Mumbai and Bangalore.

"Bangalore is the fastest growing airport in India, Mumbai is also growing at a very good pace," Reddy told CNBC.

"The Civil Aviation Industry of India said the current passenger traffic in India is about 160, 170 million passengers, and that's expected to grow to about 500 million passengers in the next 10 to 12 years. So there's a huge potential upside for the business."

India is suffering from an infrastructure deficit. The World Bank estimates that the country will need to spend up to $1.7 trillion by the end of the decade to fix its crumbling infrastructure, and improve its roads, rail, ports and power utilities

So far, improvements at airports in the country have won approval from visitors.

Delhi's Indira Gandhi International Airport, managed by GVK's rival GMR, was been named the world's best airport last year by the Airports Council International (ACI) in the 25-to-40-million-passengers per annum category. GVK's Mumbai International Airport was at fifth place in the same category.

Both airports were developed in partnership with the Airports Authority of India, under a public-private-partnership (PPP) scheme.

But not all PPP projects have been similarly successful. Some projects - which were meant to encourage private investment in India's infrastructure - were awarded before environmental clearances and land acquisition issues were sorted out, causing delays, escalating costs and putting developers and their lenders under stress.

Ajit Gulabchand, chairman of Hindustan Construction Company, blames political paralysis in the previous government for a greater part of India's infrastructure ills.

"We have created a structure of rules for PPP which were very naive and simplistic," said Gulabchand, who added that older PPP agreements tended to put the greater part of the burden on the private sector.

"But these issues are getting resolved, and as new PPP concessions agreements come in, they will share the risk better," he said.

"However, serious damage has already been done, so I think it will take one or two years before the country can really look into a serious investment cycle," Gulabchand added.

Until then, companies such as HCC and GVK have to work harder to meet their debt requirements.

Reddy intends to focus on investing in airport projects.

"In sectors like power, toll roads etc, there is too much competition. So when bids are invited, we have 20 to 30 companies wanting to take part, which means somebody is going to do something crazy, and when somebody does something crazy then you also end up doing something crazy," Reddy joked.

"Whereas for airports, there are only two private players and one government player, so there is limited competition."

Reddy's next ambition is to win the bid for the international airport project in Mumbai's twin city, Navi Mumbai.

As the operator of Mumbai International Airport, GVK has the first right of refusal for the project. That means that if GVK's bid is within 10 percent of the price quoted by the highest bidder, the company has the option to match the bid and win the Navi Mumbai's airport contract.

"In the last 12 months or so, the new government has identified infrastructure as one of the key areas of growth. While the issues are extremely complex, they have started addressing them, and are doing quite well," Reddy told CNBC.