The world’s largest listed player in the private equity (PE) and venture capital (VC) business, 3i, is planning a booster shot for India’s infrastructure. The UK-based company has indicated to the Indian government that it would invest over $5 billion in infrastructure projects in India in collaboration with India Infrastructure Finance Company Ltd (IIFCL).
Ports, roads, airports, logistics, power and water supply are among the areas identified by the firm for investment in Indian infrastructure. 3i has a market capitalisation of nearly e6.5 billion. The global PE leader plans to achieve synergy with IIFCL by jointly focusing on key infrastructure projects. While 3i will focus on equity, IIFCL-owned by the government — will focus on the debt portion. The collaboration is expected to come as a major boost for large infrastructure projects.
The 3i-IIFCL collaboration is expected to get going right away, said sources close to the tie-up. After due diligence of projects for debt, IIFCL would refer them to 3i for equity. Similarly, the PE giant would apprise projects for equity and then refer them to IIFCL for debt. 3i has funds to the tune of e10.4 billion under management and the combined value of its portfolio is estimated to be around e7.6 billion.
A formal memorandum of understanding (MoU) between 3i and IIFCL was inked on Thursday afternoon in the presence of finance minister P Chidambaram, the sources said. The PE major entered India in 2005 and it is estimated that investments to the tune of Rs 1,600 crore have been pumped into projects in various segments.
“India is a very important market for 3i,” said Mr Chris Rowlands, the firm’s managing partner for Asia. “We see attractive investment opportunities here and we want to be in the forefront,” he added. According to estimates, the investment required for infrastructure building in India would be over $320 billion over the next five years. Hence, the government is also keen to attract global funds to invest here.
“We are ready with the groundwork and we are in a position to start infrastructure investments,” said Mr Anil Ahuja, partner, managing director & co-head of 3i for Asia. We see the tie-up with IIFCL as a significant in view of the huge potential for investments in India, he added.
Government sources said 3i is likely to come up its own investments of up to $500 million. The remaining corpus would be third-part funds, they indicated but could not confirm in the investment would be routed through a special purpose vehicle.
While 3i has operations in 14 countries, IIFCL has been set up by the government specifically to promote infrastructure projects which are financially viable but find difficulty in accessing funds. Set up as a special purpose vehicle, IIFCL has a paid up capital of Rs 10 crore and authorised capital of Rs 1,000 crore.
A similar initiative was launched by US-based Citi Group and Blackstone recently. They had joined hands with IIFCL and Infrastructure Development and Finance Corporation for a $5 billion fund.
Source : Economic Times