John Hoffmire: I always like to start an interview by asking for a broad brushstroke picture of a career. Will you tell me about yours?
Shailesh: A British friend described my career as poacher-turned-gamekeeper-turned-poacher. After my MBA in 1986 I worked in project finance and investment banking with ICICI for four years in Bombay, as it then was. After a brief stint with HSBC, I joined the Government of India’s top civil service, the Indian Administrative Service (IAS). I spent the next 17 years in the IAS in a variety of fascinating roles at districts and state capitals. In 2007 I re-joined the private sector to specialise in infrastructure finance and execution, and returned to the ICICI group’s private equity firm: I-Ven in Mumbai. Since then, I have been active in infrastructure finance and execution life-cycle, international fundraising, investing and asset management, and also smart cities and urban issues, working out of Mumbai, London, Delhi and Chennai. In 2017 I joined India’s largest infrastructure conglomerate, Larsen and Toubro (L&T) as CEO of L&T IDPL. In brief, over a 35-year career, 18 in the private sector and 17 in the government, so some call me a public-private-partnership (PPP) of the good sort.
John: A combination of business, government, and non-profits seems to have worked well for you. Will you mention briefly how CRISP, the programme through which we met at Oxford, helped you mature your basic notion of how to combine public and private. And then will you go into some more depth for us?
Shailesh: In the inaugural CRISP 2011 programme, I learnt about how leaders and innovators are boundary-spanners who can talk with both science and business and synthesise outcomes. India’s governments are in the national capital, New Delhi, as well as in 28 state capitals, while the finance capital is Mumbai. There are very few professionals who know Delhi and Mumbai equally well, and almost none of these professionals know the state capitals equally well, to understand diverse points of view. With my unique ability to empathise with friends in Mumbai, Delhi as well as state capitals, I have often leveraged this combination of business, government, and not-for-profit perspectives to produce good outcomes for all stakeholders. Currently or earlier, I have been on boards of companies in infrastructure development, ports & logistics, renewable energy, micro-finance, mutual funds, and insurance. As part of the G20 nations’ business group B20, I’ve been a member of their Finance & Infrastructure Task Force since 2016. I am currently Co-Chair, BRICS Business Council Infra Working Group, having joined it in 2012. This is in addition to affiliations with the top two Indian business chambers. Then again, I serve currently or earlier on non-profit advisory boards relating to good governance and urban issues, especially safer cities for women and children, digitalised financial inclusion, road safety, tiger conservation, and also international relations in the context of India growing to be the third largest economy by 2030.
Above all, I hope to keep learning from younger and smarter friends who display the four I’s: Intelligence, Inquisitiveness, Integrity, and Intellectual honesty. The next decade is going to see more change than the last three decades, and I hope to embrace such change.
John: Now that we have talked about the past and the future, please bring me up to speed on the present and L&T IDPL?
Shailesh: L&T IDPL is a subsidiary of Larsen and Toubro, an 80 year old Indian multinational in technology, engineering, construction, manufacturing and financial services with operations in over 30 countries. L&T is a trusted name with many mega-projects already completed or under-construction. (Fun fact: L&T built the bridge in ‘The Bridge over the River Kwai’)
L&T IDPL is a PPP infrastructure developer working across the entire life-cycle from design to financing to execution to operations. Our major projects include the Hyderabad Metro, Bangalore International Airport, three seaports, urban water supply, renewable energy, power transmission and highways.
It is interesting to note that Canada’s largest pension fund’s investing arm, CPP Investments, made a substantial investment into IDPL in 2014 and today has a 49 percent shareholding. We also innovated in May 2018 by launching Indinfravit, an Infra Investment Trust (InvIT) akin to REITs, with three marquee global investors. This has paved the way for many more InvITs in India in both the private and public sectors.
John: In our private communications, we have covered butterflies and caterpillars. Will you let our readers know what you mean by these terms?
Shailesh: Some background is needed first. Infrastructure projects (under-construction) are very different from assets (fully completed). Think of an under-construction airport like Delhi NCR’s Noida International, where Flughafen Zurich AG is the developer. Contrast this with Heathrow Terminal 5 in London. The former is under-construction, with a higher risk profile, while Terminal 5 has been a cash-flow generating asset since 2008. As ugly caterpillars grow into beautiful butterflies, so it is with infra projects transforming into assets. ‘Caterpillars’ are ugly to look at and full of risk. ‘Butterflies’ are lovely cash-flow yielding assets for the next 30 years. The upshot is that ‘butterflies’ will attract international dollars looking for long-term secure cash flow visibility, while ‘caterpillars’ are best financed with sovereign funding.
In 2010, I had suggested to the Government of India a strategy of recalibrating our PPPs, where the initial construction high-risk phase could be funded by government money, using private contractors. Once completed and turned into cash-flow yielding assets, I recommended we use PPP contracts for operation and maintenance. This way, we could get the private sector to pay a much higher price.
This idea was published as a working paper at Stanford University’s Collaboratory for Research on Global Project (CRGP) in January 2011, (https://gpc.stanford.edu/sites/g/files/sbiybj8226/f/wp062_0.pdf) and I was quoted in ‘The Economist’ in December 2012 on exactly this approach (https://www.economist.com/finance-and-economics/2012/12/15/rippp ) . It is gratifying that the current focus of Government of India is on asset monetisation and recycling, with over USD 3 billion raised over the last three years.
Another abiding interest is in railway station redevelopment. Here, India could learn from outstanding examples like Shinjuku (Tokyo), Osaka, Seoul, KL Sentral, Berlin, Shanghai Hongqiao and many others high footfall stations which are transport hubs. If there is a daily footfall of 300,000 in a railway station, of course users need high quality services. With this many people using a station, you know there is money to be made. The private sector would be happy to take up such opportunities, as I’ve been advocating since 2015. It is good to see this as a high priority area now. In the next five years, India will see many railway stations being redeveloped as world class infrastructure, the way our airports have transformed in the last 15 years.
John: I mentioned CRISP earlier. Will you talk some more about your experience with this programme?
Shailesh: In 2011, I was chosen as Chevening Scholar for a four-month leadership programme at Oxford University’s Said Business School. It was a very stimulating programme with excellent course work, lectures, projects, and field trips. One of the most enduring parts of the program and even thereafter has been that I have been able to develop many deep friendships with my fellow CRISP colleagues and faculty from Oxford including Richard Briant and yourself. It was invaluable to spend such a concentrated time with leaders and experts from a variety of industry and government positions and to learn about their perspectives, experiences, and challenges. Spending time at Oxford, of course, was like ‘On First Looking into Chapman’s Homer’ by Keats.
John: In addition to all that we have talked about, I want to highlight one more thing: you have a Bombay Natural History Society’s Diploma in Ornithology! You are truly a renaissance man. Thank you for all the great work you are doing and for taking the time to talk with me.
Shailesh: Ornithology, wildlife and environment sustainability are enduring passions. Indeed, a high point in life (literally) was scaling a 6831 m peak in the Himalayas in 1991.
I have enjoyed talking with you, John. Please let me know when you and Richard are coming to India. It will be good to get together.
Shailesh Pathak is Chief Executive Officer of L&T IDPL (Infrastructure Development Projects Ltd.) and and an alum of the Chevening Research Science and Innovation Leadership Programme (CRISP), 2011.
Interviewer: Dr. John Hoffmire is the Chairman of the Center on Business and Poverty, and Research Associate at the Oxford Centre for Mutual and Co-owned Business.