Hunan Construction Engineering Group Corporation, a Chinese contractor based in south central China, has teamed up with Indian infrastructure firm RPP Infra Projects to target big projects in India.
Arul Sundaram, chairman of RPP Infra, said the deal would allow his company to bid for larger projects than was previously possible.
"This is a game-changing development for RPP Infra Projects, to work with one of the largest Chinese infrastructure companies in India to create better valuation for RPP Infra Projects shareholders," he said in a statement, reported Indian newspaper, Economic Times.
RPP’s 2014/15 annual report noted that its relatively small net worth of $20m had to date "prevented the company from participating in large projects".
For Hunan, the deal offers improved chances of winning work in the Indian market, where Chinese firms tend to be treated with some suspicion, and where the nationalist Bharatiya Janata Party government has maintained its distance from Beijing – in contrast to ever closer ties with Tokyo.
This is a game-changing development for RPP Infra Projects– Arul Sundaram, chairman of RPP Infra
The rewards for entering the Indian market may be substantial. The 12th five-year plan, which runs between 2012 and 2017, has an infrastructure budget of $1.3 trillion, and the Indian government recently formed a $3bn infrastructure fund to develop a 37,000km all-weather road network and the $15bn "Power for All by 2022" scheme which aims to install a modern power grid.
India is in dire need of better infrastructure. The World Bank has estimated that its infrastructure could require investment of up to $1.7tn by the end of the decade.
The tie-up is not a marriage of equals, however. RPP had a turnover of $40m in 2014-15 and made a profit of $6.8m, while Hunan is state-owned enterprise with more than 218,000 employees, assets of $950m and a production capacity of about $10bn.
The difference in size will be reflected in the degree of control. A joint statement by the companies said: "Hunan will act as lead partner of the joint venture to make all necessary statement on behalf of the joint venture. Performance guarantees, advance guarantees or any such other bonds, securities shall be provided by the lead member."
RPP has also entered into a joint venture agreement with Canadian construction group Delamore & Owl.
Photograph: Women repair a road in Umaria district, Madhya Pradesh, India. The country is in dire need of better infrastructure (Yann/Forget/Wikimedia Commons/CC BY-SA 4.0)
