Dalian Wanda Group has agreed to spend $10 billion to build an industrial city in Haryana state in northern India, adding to the conglomerate's growing list of outbound projects as it presses on with diversifying its revenues.
In a press release on Friday, Dalian Wanda said that in a memorandum of understanding signed with the Haryana state government it committed to develop a “world-class comprehensive industrial park" dubbed Wanda Industrial New City.
The project is designed to cater to the needs of multiple industries, including software, automotive manufacturing, machinery, healthcare, and education, and will be built on a 13 square-kilometre site in the Delhi-Mumbai industrial corridor, close to New Delhi.
The investment, which will total $10 billion in the first phase of the development, is a bold attempt by Wanda to take advantage of India’s massive population and ongoing rapid economic growth, which is predicted to hit around 7.8% this year and is expected to lead to major socioeconomic changes.
The average age in India is only 26 but 56% of the population do not enjoy basic human economic needs such as clean water and sanitation, according to McKinsey Global Institute. The country is also urbanising fast; around 30% of its populace live in towns or cities compared with more 50% in China.
To support this demographic trend, Prime Minister Narendra Modi wants to encourage manufacturing and has indicated a desire to work with states to help offer incentives. The national government recently announced plans to create 100 new "smart" cities and to modernise its 500 existing cities.
Preferential policies
Wanda’s plans fit neatly with such objectives. Indeed, the press release said the project “ is the outcome of meetings between…Modi and Wanda Group chairman Wang Jianlin.”
Wang visited India at the invitation of Modi on June 9, 2015, where he conducted talks with both the prime minister and with Manohar Lal Khattar, chief minister of Haryana state, about investment opportunities.
According to the press release, Haryana state will offer Wanda “the most preferential policies” to support the new project. The state government will establish a management committee with the Chinese company that adopts a “Chinese special administrative region management model to oversee the project and provide a one-stop service for investors.”
This wording suggests the project will be overseen by a form of quasi-autonomous administration of the site, perhaps only partially answerable to the Haryana state government, in a similar manner to Hong Kong’s relationship with the Chinese government.
Phase one of the project is projected to cost $10 billion, which Wanda will mainly be responsible for investing, and will start being constructed this year. The conglomerate is also seeking to attract interest from international “and especially Chinese companies from other industrial, tourism and residential sectors” to help develop the project. Wanda and Haryana state are expected to sign a formal investment agreement regarding the project in the near future.
Wanda’s press department did not respond by press time to a detailed set of questions from FinanceAsia about how the company intends to finance the project or how it fits into its broader strategic plans.
Diversification drive
Wang, who is China’s richest man, is not known for the modesty of his corporate plans.
According to data provider Dealogic, Dalian Wanda has made $14.8 billion-worth of acquisitions at home and abroad. Outbound acquisitions account for the bulk of it with $10.7 billion.
Some of these have been very recent. On January 12 the group announced a $3.5 billion acquisition of US movie studio Legendary Group, an acquisition that makes it one of the world’s leading film makers and distributors, when combined with its existing assets.
Then on January 18, Wanda announced plans to complete five more "substantial" acquisitions. It said three of these acquisitions would be global and two in China.
Wanda has been an aggressive buyer of overseas assets. Its acquisitions so far include a 20% stake in Spanish soccer club Atletico Madrid for $49.04 million in January 2015 and the US theatre chain AMC Entertainment for $2.62 billion in 2012.
Wang's desire to grow Wanda's overseas business makes sense, given the lacklustre revenue performance of its core mainland property operation. Wanda has estimated that whole group revenues will drop by 12% to Rmb254.3 billion ($35.65 billion) in 2016, mainly due to its sluggish mainland property business.
“Many outsiders say all what Wanda knows is buying stuff, so we will keep buying [this year],” Wang joked while speaking at the Asian Financial Forum.
He said Wanda will target established international brands, mainly firms that can localise in China. In light of his latest move in India, it would appear Wang is intent on adding major construction investments onto this wishlist.
The share price of Dalian Wanda Commercial Properties, the Hong Kong-listed construction arm of the unlisted Dalian Wanda Group, closed at HK$36.75 on Friday, up 3.96% on the previous day.
Julie Zhu contributed to this article.
