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Infra funds make a beeline for India

T. E. Raja Simhan Chennai | Updated on May 02, 2011

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India-specific infrastructure funds from abroad and in the country are queuing up to invest large sums.

There are 13 India-specific infrastructure funds targeting an investment of nearly $7.3 billion in projects. Nine funds are set to be launched in 2011, according to a report.

Due to a lack of sustainable infrastructure, majority of funds unsurprisingly target invest in greenfield and brownfield projects, according to a recent report from UK-based Preqin.

India requires nearly $1 trillion worth of infrastructure development in the next five years if it is to meet the demands of a growing population and an emerging industrial economy.

The government does not have the means or capability to finance this requirement. A significant proportion of the capital will come from the private sector. Institutional investors and unlisted infrastructure funds will play a key role in Indian infrastructure development, said Preqin, an independent research firm focusing on alternative assets.

Record deals

Preqin said while 22 deals were finalised in Indian infrastructure assets in 2010, the country attracted the third highest (after the US and the UK) number of infrastructure deals with 103 deals being completed between 2004 and 2010. Of this, nearly 80 per cent of the deals completed by unlisted infrastructure fund managers in India were in energy, transportation, telecommunications and utility sectors. Other important sectors include logistics and social assets such as education and healthcare facilities.

Global capital will move across countries. For a capital-scarce country as India, any capital is fine. In the present context of uncertain stock market, IPO may be inappropriate and the funds fit the bill. But the question in the long run is if India can emulate China in attracting long-term capital as foreign direct investment (FDI) in the infrastructure sector.

FDI investors know the business, take a long-term view and bring global best-industry practices, said Mr A. Balasubramanian, Senior Director, IDFC.

Given the long payback period and the nature of infrastructure industry, such people would prefer to invest in countries that can provide a legal and regulatory framework that is transparent, investor friendly and predictable.

Indian courts and the legal fraternity would also need significant capacity building as several public policy issues and investor concerns have to be balanced equitably with limited precedents for guidance in the private-public-partnership space, he said. Also, policy and procedural issues surrounding land acquisition and clearances should be resolved for speedy implementation of private-public-partnership projects, he added.

Published on May 02, 2011

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