ICICI Bank, India's biggest bank by market value, said it's setting up a $2 billion overseas fund to invest in roads, ports and utilities in the world's fastest- growing major economy after China.
The Mumbai-based bank is meeting global investors and expects to close the fund in about three months, Chanda Kochhar, deputy managing director at ICICI Bank, said today in an interview.
“There's a lot of demand for funds from sectors like power, airports, roads and telecoms,'' Kochhar said. The fund will have a lifetime of more than 10 years, she said.
India's government plans $320 billion of infrastructure projects to ease bottlenecks that are constraining growth. Gross domestic product has expanded at a record 8.6 percent average pace since 2003, faster than any of the world's 20 biggest economies except China.
Citigroup Inc., buyout firm Blackstone Group LP and Europe's biggest publicly traded buyout and venture capital firm 3i Group Plc are already setting up or participating in India-dedicated infrastructure funds.
“India's infrastructure story is just beginning and it has strong appetite for funds,'' said T.P. Raman, managing director of Chennai-based Sundaram BNP Paribas Asset Management Co., which manages the equivalent of $2.5 billion. “Investments related to infrastructure will give very high yields.''
Global Investors
ICICI's fund will be open only to global investors as domestic funds and individuals have various other vehicles to participate in infrastructure projects, Kochhar said. The fund doesn't have any targeted rate of return and its degree of leverage hasn't been decided, she said.
“We would initially begin with investments from the fund and later decide whether to leverage or not, and how much, if we decide to,'' Kochhar said.
3i on Aug. 23 announced plans to raise $1 billion for an Indian infrastructure fund. Inadequate roads, railroads and ports are estimated to shave as much as 2 percentage points off India's economic growth rate, 3i said.
Highways, which move almost 80 percent of the goods in India, account for only about 2 percent of the country's 3.32 million kilometers (2.1 million miles) of roads. It takes an average 85 hours to unload and reload a ship at India's major ports, 10 times longer than in Hong Kong or Singapore, according to government estimates.
ICICI hired Credit Suisse AG to advise on the fund, Kochhar said.
Source: Bloomberg