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Private equity investments in the infrastructure sector are estimated to grow between 25 and 50 per cent in the next six to 12 months. Public infrastructure outlays will double over the next five years, amounting to $1 trillion, with the private sector accounting for 40-50 per cent of the total, according to the India Private Equity Report 2011 by Bain and company and Indian Venture Capital Association.
There have been 28 recorded private equity investments in the infrastructure sector amounting to $1,615 million in 2011, year to date, according to Venture Intelligence, a research service focused on Private Equity & M&A.
“Even if the infrastructure investment in India were to reach 70-75 per cent of its $1 trillion target envisaged in the Twelfth Five Year Plan, investment of around $700-750 billion is plausible during the plan period,” said Mr Madhur Singhal, Manager at Bain & Company, New Delhi, and co-author of the Bain-IVCA India Private Equity Report 2011.
Plausible
“We estimate that out of this, $220-295 billion would come from the private sector with an additional $150-200 billion requirement by the construction industry. While IPOs have their own set of challenges, commercial banks have limitations on how much exposure they can assume to a single borrower or for long term infra projects — this makes infrastructure an attractive investment avenue for the PE funds,” he said.
According to the India Private Equity Report 2011, private equity investment in infrastructure has grown four-fold from $ one billion in 2006 to $ four billion in 2010.
The top private equity investors in infrastructure from 2006-10 have been Blackrock, Providence Equity, 3i, SBI Macquarie, KKR, IDFC Private Equity and so on.
“Infrastructure projects require huge capital; therefore, private equity firms with a budget of $50-100 million can invest in these projects. Without a doubt there will be huge investment in the years to come in the infrastructure sector,” said Mr Gaurav Saraf, Director, Epiphany Ventures.
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