Lanco Infratech
Encyclopedia
Lanco Infratech Limited is a large India
n business conglomerate
involved in construction, power, real estate, and several other segments. Founded in 1986 by
the Indian National Congress
politician Lagadapati Rajagopal
- currently a member of 15th Lok Sabha
representing Vijayawada
- the
group of companies is among the fastest growing in the world.
However, its key businesses have been frequently involved in a number of controversies.
politician Lagadapati Rajagopal
, who is currently a member of 15th Lok Sabha
representing Vijayawada
.
While Rajagopal remains the chairman, his brother Lagadapati Madhusudan Rao is the executive chairman. Another brother Sridhar Lagadapati, was involved with the company in the early years, but now heads the related entertainment business, Larsco.
Lanco has grown at a tremendous pace since the early 1990s, after Rajagopal married the daughter of veteran Congress leader P. Upendra, and joined politics himself. Initial growth was driven by large contracts primarily in construction. Later, other infrastructure areas such as power generation, transportation etc. were also added.
The company stock has seen a decline of 46% since september 2010, possibly owing to debt being about 4 times equity . However, the clearance of the environmental licence for the group company Lanco Vidarbha Thermal Power, resuscitated confidence in the stock.
The license is for setting up 1320 MW Coal power plant in Maharashtra
.
In March 2011, Lanco commissioned the Anpara-1 unit and became India's largest independent power producer with a generation capacity of 3.3 GW, which overtakes Tata Power
's capacity of 3GW.
and Power (Rs 1.799), Reliance Energy
(1.296) and Tata Power
(Rs 1.412). However, two months later, Lanco (along with Jindal) acquired Globeleq Singapore, and other competing bidders alleged foul play.
Eventually, Lanco's bid was cancelled and Reliance Energy
went on to win the contract at Rs. 1.19 per unit. The consultant for the bid, Ernst and Young, was blamed by the vigilance group of Power Finance Corporation
, while Lanco blamed the Globeleq Generation Ltd of Houston for the situation.
In 2007, the company won a bid for the 1000MW Anpara-C power plant. The bid included one plant of 500MW capacity but after winning the contract, Lanco requested that the bid be re-negotiated for 600MW. At this stage, some of the other firms in the original bid protested since the re-negotiation process made the initial bidding meaningless. However, Lanco managed to retain the Anpara project. Later, it ran into further controversies when it sought to gain control over additional coal supplies than were specified in the original contract.
s (about 90,000 USD) in cash. Babu stated that the money belonged to Lanco. Although Babu was very close to Madhusudana Rao, the latter denied any Lanco involvement in the cash, and Babu later changed his story, claiming it was his personal money. The media alleged that such large amounts of cash were being used for payoffs to parties involved in overseeing earlier contracts.
Subsequently, New India Assurance
claimed that the policy number 610200/44/08/03/60000027 of Rs. 1.89 crores, submitted to the housing ministry, had not been issued by it, and may have been a forgery.
After the cases were revealed in the media in August 2009, the chief minister of Andhra Pradesh
, Y.S. Rajasekhar Reddy also of the Congress party, initiated criminal investigation into the matter.
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
n business conglomerate
Conglomerate (company)
A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure , usually involving a parent company and several subsidiaries. Often, a conglomerate is a multi-industry company...
involved in construction, power, real estate, and several other segments. Founded in 1986 by
the Indian National Congress
Indian National Congress
The Indian National Congress is one of the two major political parties in India, the other being the Bharatiya Janata Party. It is the largest and one of the oldest democratic political parties in the world. The party's modern liberal platform is largely considered center-left in the Indian...
politician Lagadapati Rajagopal
Lagadapati Rajagopal
Lagadapati Rajagopal is an Indian industrialist, entrepreneur and Politician, who is currently serving as the 15th Loksabha Member for Vijayawada constituency in Krishna District, Andhra Pradesh. He is a politician belonging to the Indira Congress party. He is the son-in-law of ex-MP P. Upendra...
- currently a member of 15th Lok Sabha
15th Lok Sabha
Members of the 15th Lok Sabha were elected in 2009 during the General Elections in India.- Important members :* Speaker: Meira Kumar, Indian National Congress, Sasaram, Bihar...
representing Vijayawada
Vijayawada (Lok Sabha constituency)
Vijayawada is a Lok Sabha parliamentary constituency of Andhra Pradesh. Total electorate is 1561705 in 2007.Vijayawada lok sabha seat has seven assembly segments under it namely vijayawada,vijayawada,kankipadu,nandigama,mylavaram,Tiruvuru,jaggayyapet.After delimitation Vijayawada has 1402904 voters...
- the
group of companies is among the fastest growing in the world.
However, its key businesses have been frequently involved in a number of controversies.
History
Lanco was founded by the Indian National CongressIndian National Congress
The Indian National Congress is one of the two major political parties in India, the other being the Bharatiya Janata Party. It is the largest and one of the oldest democratic political parties in the world. The party's modern liberal platform is largely considered center-left in the Indian...
politician Lagadapati Rajagopal
Lagadapati Rajagopal
Lagadapati Rajagopal is an Indian industrialist, entrepreneur and Politician, who is currently serving as the 15th Loksabha Member for Vijayawada constituency in Krishna District, Andhra Pradesh. He is a politician belonging to the Indira Congress party. He is the son-in-law of ex-MP P. Upendra...
, who is currently a member of 15th Lok Sabha
15th Lok Sabha
Members of the 15th Lok Sabha were elected in 2009 during the General Elections in India.- Important members :* Speaker: Meira Kumar, Indian National Congress, Sasaram, Bihar...
representing Vijayawada
Vijayawada (Lok Sabha constituency)
Vijayawada is a Lok Sabha parliamentary constituency of Andhra Pradesh. Total electorate is 1561705 in 2007.Vijayawada lok sabha seat has seven assembly segments under it namely vijayawada,vijayawada,kankipadu,nandigama,mylavaram,Tiruvuru,jaggayyapet.After delimitation Vijayawada has 1402904 voters...
.
While Rajagopal remains the chairman, his brother Lagadapati Madhusudan Rao is the executive chairman. Another brother Sridhar Lagadapati, was involved with the company in the early years, but now heads the related entertainment business, Larsco.
Lanco has grown at a tremendous pace since the early 1990s, after Rajagopal married the daughter of veteran Congress leader P. Upendra, and joined politics himself. Initial growth was driven by large contracts primarily in construction. Later, other infrastructure areas such as power generation, transportation etc. were also added.
The company stock has seen a decline of 46% since september 2010, possibly owing to debt being about 4 times equity . However, the clearance of the environmental licence for the group company Lanco Vidarbha Thermal Power, resuscitated confidence in the stock.
The license is for setting up 1320 MW Coal power plant in Maharashtra
Maharashtra
Maharashtra is a state located in India. It is the second most populous after Uttar Pradesh and third largest state by area in India...
.
In March 2011, Lanco commissioned the Anpara-1 unit and became India's largest independent power producer with a generation capacity of 3.3 GW, which overtakes Tata Power
Tata Power
Tata Power is India’s oldest and largest private sector power utility with an installed generation capacity of over 2977 MW.On the 22 March 2011 it has announced partnership with Sunengy an Australian firm, to build India's first floating solar plant....
's capacity of 3GW.
Contract irregularities
Infrastructure contracts are decided by government departments, and there have been frequent allegations of improper advantage given to the company. In December 2006, the company, togewith Globeleq Singapore, won a contract for the 4,000 MW Sasan ultra mega power project by quoting a record low price of Rs 1.196 per unit beating NTPC (Rs 2.126), L&T (Rs 2.251), Jindal SteelJindal Steel
Jindal Steel and Power Limited is the most valuable private steel producer in India, with an annual turnover of over US $2.1 billion , Jindal Steel & Power Limited is a part of about US$ 12 billion diversified O. P. Jindal Group. JSPL is a leading player in Steel, Power, Mining, Oil & Gas and...
and Power (Rs 1.799), Reliance Energy
Reliance Energy
Reliance Infrastructure, formerly known as Reliance Energy and prior to that as Bombay Suburban Electric Supply , Its India's largest private sector enterprise in power utility and its a company under the Reliance Anil Dhirubhai Ambani Group banner, one of India's largest conglomerates. The...
(1.296) and Tata Power
Tata Power
Tata Power is India’s oldest and largest private sector power utility with an installed generation capacity of over 2977 MW.On the 22 March 2011 it has announced partnership with Sunengy an Australian firm, to build India's first floating solar plant....
(Rs 1.412). However, two months later, Lanco (along with Jindal) acquired Globeleq Singapore, and other competing bidders alleged foul play.
Eventually, Lanco's bid was cancelled and Reliance Energy
Reliance Energy
Reliance Infrastructure, formerly known as Reliance Energy and prior to that as Bombay Suburban Electric Supply , Its India's largest private sector enterprise in power utility and its a company under the Reliance Anil Dhirubhai Ambani Group banner, one of India's largest conglomerates. The...
went on to win the contract at Rs. 1.19 per unit. The consultant for the bid, Ernst and Young, was blamed by the vigilance group of Power Finance Corporation
Power Finance Corporation
Power Finance Corporation Ltd. is an Indian financial institution. Established in 1986, it is the financial back bone of Indian Power Sector. Net worth of the company in the year 2007-2008 was 8688 Crore Indian Rupees. Initially wholly owned by the Govt. of India, the company issued an IPO in...
, while Lanco blamed the Globeleq Generation Ltd of Houston for the situation.
In 2007, the company won a bid for the 1000MW Anpara-C power plant. The bid included one plant of 500MW capacity but after winning the contract, Lanco requested that the bid be re-negotiated for 600MW. At this stage, some of the other firms in the original bid protested since the re-negotiation process made the initial bidding meaningless. However, Lanco managed to retain the Anpara project. Later, it ran into further controversies when it sought to gain control over additional coal supplies than were specified in the original contract.
2007 payoff accusations
In March 2007, the then Managing Director of Lanco Infratech, G Venkatesh Babu, was caught at the Hyderabad Airport with a suitcase containing Rs. 34 lakhLakh
A lakh is a unit in the Indian numbering system equal to one hundred thousand . It is widely used both in official and other contexts in Pakistan, Bangladesh, India, Maldives, Nepal, Sri Lanka, Myanmar and is often used in Indian English.-Usage:...
s (about 90,000 USD) in cash. Babu stated that the money belonged to Lanco. Although Babu was very close to Madhusudana Rao, the latter denied any Lanco involvement in the cash, and Babu later changed his story, claiming it was his personal money. The media alleged that such large amounts of cash were being used for payoffs to parties involved in overseeing earlier contracts.
2007 insurance controversy
In 2007, it was revealed that the company had also been the beneficiary of a number of multi-crore insurance "re-appraisals". These Contractor-All-Risk (CAR) policies were required by the contracts, and involved government owned insurance companies.- Lanco Infratech would first negotiate the policy with an insurer and pay up the premium. It would get this premium paid by the contracting principal. Thereafter it would go back to the insurer to renegotiate the premium, saying it had got a lower quote from a competitor company. “The insurer agreed to lower the premium and refunded the balance, which Lanco Infratech would not report to the principal."
Subsequently, New India Assurance
New India Assurance
New India Assurance is currently the largest General Insurance Company in India based in Mumbai. It is one of the five Public Sector insurance companies in India.It was founded by Dorab Tata in 1919.It was nationalized in 1973....
claimed that the policy number 610200/44/08/03/60000027 of Rs. 1.89 crores, submitted to the housing ministry, had not been issued by it, and may have been a forgery.
After the cases were revealed in the media in August 2009, the chief minister of Andhra Pradesh
Andhra Pradesh
Andhra Pradesh , is one of the 28 states of India, situated on the southeastern coast of India. It is India's fourth largest state by area and fifth largest by population. Its capital and largest city by population is Hyderabad.The total GDP of Andhra Pradesh is $100 billion and is ranked third...
, Y.S. Rajasekhar Reddy also of the Congress party, initiated criminal investigation into the matter.