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At a time when it is putting in significant efforts to make inroads into Africa, the government may have to worry about debt-ridden IL&FS’ ability to sustain its investment in a four-way joint venture (JV) in the continent with State Bank of India (SBI), Export-Import Bank of India (Exim Bank) and the African Development Bank (AfDB).
Given that IL&FS is on a sticky wicket financially, the Indian stakeholders of Mauritius-based Kukuza Project Development Company (KPDC), which was floated in 2015 to take up project development initiatives in the infrastructure sector in Africa, the government may need to move fast to either induct a new Indian partner into the JV or the existing partners would have to raise their stakes.
As China has assiduously built up economic and political influence in Africa over the last couple of decades, India needs to ensure that its financing of crucial projects in Africa is not undermined by the IL&FS imbroglio.
With the IL&FS Group in dire straits, it is unlikely to be in a position to pump in further capital to support KPDC, said sources clued in to the developments.
IL&FS is KPDC’s main sponsor with a 41 per cent stake. The balance stake in the company is owned by SBI and Exim Bank (19.5 per cent stake each) and AfDB (20 per cent).
KPDC was started with an initial capital of $25 million to identify and/or develop infrastructure projects across the African continent to create opportunity for diverse set of investors to develop, operate, and invest in the infrastructure sector in Africa. The objective of KPDC is to bring up to speed an average of two projects ready for investment each year.
The company seeks to utilise the domain expertise of each JV partner during the project development process to establish a bankable and sustainable implementation format based on an in-depth understanding of the concerns of all the stakeholders – public authority, user community, developers/investors, and lenders.
India has undertaken significant investment initiatives in recent years to strengthen its strategic partnership with Africa, and has become one of the largest investors, mainly in energy, construction, information and communication technology, and the railway and auto industries.
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