Rajiv Lall, vice chairman and managing director of IDFC, spoke to NDTV's Shweta Rajpal Kohli on the sidelines of the annual meeting of World Economic Forum in Davos, Switzerland.
Here's full transcript of the interview:
SHWETA RAJPAL KOHLI: It's such a pleasure to have Rajiv Lall of IDFC. Thank you so much for being with us. What's your mood, are you picking up in Davos?
RAJIV LALL: Much better than last year. I think there is sense of relief around here that 2013 will be better than 2012, marketing-wise.
SHWETA RAJPAL KOHLI: What about the India story? How hard is to really convince the foreigner investor?
RAJIV LALL: I think it's interesting. Last year, there was mark distinct lack of interest in India, this year I sense more neutral from that low bar which was disappointing. I think this year, there is interest, it's not tremendously enthusiastic but people are reengaging with India....
SHWETA RAJPAL KOHLI: But neutral isn't good news. Clearly, I think we need much more because we've already seen slowdown. There is very little window of opportunity to bring back their interest also...
RAJIV LALL: Because you have to understand that there is the wide range- the community is very wide, you are very academic, your policy makers, business people, you don't have market people necessary, so markets have been quite enthusiastic about India. We have seen that reflecting in industries...
SHWETA RAJPAL KOHLI: You talked about it last year, you made that prediction.
RAJIV LALL: Yes, I am quite pleased with that and thank you for reminding.
SHWETA RAJPAL KOHLI: But what you predict 2013, do you think that borrowing will continue? Do you think that it's over-exuberating the market?
RAJIV LALL: There is over exuberance. So there are improvements of various fronts, but still we have a long way to go and markets are expecting little bit high too soon.
SHWETA RAJPAL KOHLI: Let's talk about the policy announcements that have taken place. Let's talk about the cabinet policy about the investments. Are you seeing a huge upside there?
RAJIV LALL: That's too early to say that. It's absolutely a necessary step we are waiting to see. It's a sufficient step...the wheels of the government are turning, so very difficult problems like imported coal and pricing are slowly building consensus around to handle the tricky problems...other issues with respect to revision of tariffs, that is also happening, eight states revising tariffs significantly. It's a huge improvement. So things are happening but a lot more needs to be done or serious appetite to return for the development of new green assets, particularly in infrastructure. I think the biggest problem is the confidence that this government and the Finance Minister are serious about fiscal restraint, so that's the major plus. There are improvements in the micro economic outlook...
SHWETA RAJPAL KOHLI: But we are still messed up with end of deficit target quite a bit even though there is fiscal restraint worry still remaining...
RAJIV LALL: I am not sure that they will miss the fiscal target... I think the Finance Minister signalling he will pretty much hit the target is quite impressive. I know, for a fact, that he is growing in very systematic fashion, but despite all the efforts made on that front, I don't think that it's enough to change entrepreneurs' appetite for risk.
SHWETA RAJPAL KOHLI: You talked about infrastructure. The cabinet committee on investments will only be a significant step to resolve the aspect... Are they still concerned with their projects not taking long?
RAJIV LALL: After all bureaucratic procedure bottlenecked in the couple of years, which should wait for some time, the intend is signally being cancelled, efforts are being made...We will have to give it some time to see whether it has a real impact.
SHWETA RAJPAL KOHLI: Let's talk specific now. What's happening at the Delhi-Gurgaon expressway? Do we see IDFC taking over?
RAJIV LALL: Well not yet, the news is striking now in the market and I should address this. There is no secret that there is a problem with Delhi-Gurgaon expressway. Users have been dissatisfied, I am dissatisfied, the government has been dissatisfied and the lenders are also concerned about the situation. So we have been engaging with the concessionaire from NHAI to sort out the problem. I am cautiously optimistic that in next several weeks we will arrive at some kind of solutions. I cannot tell what the solution will be.
SHWETA RAJPAL KOHLI: But the obvious solution is to take over, isn't it? Isn't it true that NHAI has asked you to do that, Sir?
RAJIV LALL: No, that is not true. And we have to use that takeover implies that will... We have been asked to substitute the existing concessionaire which buys the term of the concessionaire agreement. Legally speaking, it's not possible. It requires a collaborative solution which will be negotiable settlement to arrive at formulation that will comfort to the lenders who stabilise the management of the expressway and full collaboration and cooperation by NHAI.
SHWETA RAJPAL KOHLI: Given exposure to the project, what's the ideal solution?
RAJIV LALL: The deal solution is that it will be serviced. It will be a management issue and will get sorted out.
SHWETA RAJPAL KOHLI: Does this project excite you in terms of giving full commitment? Now you have significant exposure here but working out the whole legal solution you have to do...
RAJIV LALL: We have to do (that), we have to solve the problem. Our exposure is Rs 500 crore and not Rs 1200 crore, I am not concerned that debt will not be serviced, (but) I am concerned and focused on a workable solution.
SHWETA RAJPAL KOHLI: Moving forward to talk about what needs to be done in terms of unlocking the potential in infrastructure. We talked about the linkages, we talked about the cabinet investments, (and) there are some decisions out of the way of changing the sentiments to more tough decisions that you like the government...
RAJIV LALL: The biggest and most important decision that needs to be sorted, as far as infrastructure is concerned, is making a few available as soon as possible. And that's not as easy as it sounds. It's not mining coal and making it magically available, it has contractual improvements... There are too many questions that how much coal it will cost. Who bears the burden of that, the ultimate consumer bears the burden? Does the state electricity board bear the burden? I think we are slowly moving in that direction as far as the whole mess regarding coal import is concerned...
SHWETA RAJPAL KOHLI: What about NHAI? What about road structures there, and the bidding structure?
RAJIV LALL: Everybody is learning. NHAI has learned. The bids have been aggressive but on the flip side of it, land wasn't acquired in a friendly fashion partly because of the environmental issue...
SHWETA RAJPAL KOHLI: Will the acquisition be a game changer?
RAJIV LALL: It will definitely make life harder... First, it will take time to see the solution, and that is even if you find a solution; investors, developers, all will be more cautious and that means it will be a steady home back return to attraction.
SHWETA RAJPAL KOHLI: We hope that slow and steady returns back to attraction, it isn't all that slow but steady growth. Thank you for talking to us.
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