Laxmi Prasad, the NRI investor is now a talk of corporate circles. With the headline-making air India privatization, he is in the headlines too.
Investment lessons to learn from Laxmi Prasad
It was this year itself that the government announced a policy decision allowing NRIs to acquire a 100% stake in Air India. Earlier it was limited to just 49%. The hurdle of Substantial ownership and effective control clause has also been removed for NRIs. Despite these relaxations, Laxmi Prasad has offered to give a 51% stake to the employee consortium, another air India bidder. It might be puzzling for a few as to why someone who has the money would offer effective ownership to someone else. But not many understand the shrewd business mindset of investors.
Laxmi Prasad has embarked upon the age-old lesson taught by the British in India. In 1765, when the British were starting to capture India, they came up with the system of dual governance of Bengal. Despite victory in the Battle of Buxar, the British passed on namesake ownership and management to the nawabs of Bengal. They only retained treasury rights with them thus avoiding any direct responsibility. Similar look the plan of this NRI investor. Joining hands with the employee consortium will amplify his chances of winning the bid substantially. Also, with ex-employees of the airlines by his side, smooth operations can be ensured given his lack of experience in the airline sector.
With fluctuating oil prices, travel restrictions worldwise, an overall economic slowdown, and falling airline share prices, it might not be the best time for an airline investment. But investors think differently. Laxmi Prasad has come up with a planned $9 billion investment for the Indian aviation sector. An important investor tip in the words of Laxmi Prasad Palaypu, ‘Get introduced to one client and you have seven cross-selling opportunities’ might help you as well in the long run. It is the same business tip that has piqued his interest in the ailing airline. It is not the airline per se that he intends to capitalize on, but the massive data generation that would come with the operation of a national carrier. Yes, data is the new currency and the smart cash upon it. The chase for aviation industry data has led him to run after not just Air India but also other beleaguered airlines worldwide. Another deal that he had been pursuing earlier this year was the purchase of 49% stakes in AirAsia India. The deal could not take off.
The funding source for the big billion deals-where does Laxmi Prasad get all the money from?
The NRI investor is not plucking money from trees. His investment firm, Interups Inc, manages the retirement account of more than 27000 NRIs in the USA. With an asset base of $10.8 billion, Prasad is on an aggressive investment spree. He plans to multiply his asset base to ten times in the next 5 years.
His company, Interups Inc, is embarking on some nine deals in India. Apart from the airline sector, the investment firm has expressed interest in Asian Color Coated Ispat Ltd (ACCIL), real estate projects by Phoenix Mills Ltd, 100% acquisition of Hotel Claridges and Hotel Intercontinental, Lavassa Corporation city among others. However, none of the deals has been concluded so far. It remains to be seen whether Laxmi Prasad Palaypu can walk his talk. For now, the Air India disinvestment has only been made more interesting for us to follow.