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PE players make a beeline to tap infra sector

Hoping to cash in on infrastructure development in the country, large private equity firms are making a beeline for the sector. The road sector, especially, has been increasingly attracting the attention of private equity players, as infrastructure in general and roads in particular feature on the government’s immediate execution agenda. The 11th Plan has set a $500-billion target for infrastructure spending and this is expected to increase to $1 trillion in the 12th Plan.

Norwest Venture Partners and The Xander Group Inc last week invested about Rs 400 crore in Sadbhav infrastructure, an EPC player in the infrastructure sector involved in the development of highways and road projects.

According to the reports, Nandi Infrastructure Corridor Enterprises (NICE), which is developing the 164-km toll way between Bangalore and Mysore, is currently in talks with PE players to raise around $100 million.

In a recent deal, private equity major Actis in April 2010 formed a $200 million joint venture with Tata Realty & Infrastructure to develop roads and highways. India Venture Advisors in May 2010 also invested Rs 50 crore in C&C Constructions, a player in roads and highways.

 “The two themes that are dominating the PE space are infrastructure and consumer spending. Last year, there were no big ticket deals in the PE space due to subdued environment. There were hardly seven deals of $100 million in size. However, this year, we are witnessing an appetite for big ticket deals and till June so far have already seen deals in the range of $100–$400 million in the infrastructure space,” said Arun Natarajan, MD & CEO of Venture Intelligence, a firm that tracks venture capital (VC) and PE activity in India.

In April, GMR Infrastructure received $297.87 million from an unknown investor, and IL&FS Milestone Realty Advisors invested $122.34 million in HCC Park developed by a subsidiary of Hindustan Construction in June. In the same month, the Xander group invested $110 million in Panchshil Realty.

Sid Yog, managing partner of The Xander Group said, “An investment of approximately $75 billion is expected in the road sector over the next four to five years, with an opportunity of $5 billion being used in the next six to twelve months to upgrade and strengthen existing highways across the country. This represents tremendous growth opportunities for companies like Sadbhav Infrastructure.”

PE majors like Blackstone are also looking for opportunities in infrastructure. Akhil Gupta, chairman, Blackstone India said, “Though we are sector-agnostic when it comes to investment, we are looking at two dominant themes, namely infrastructure and personal consumption. Infrastructure includes ports, power and roads, while there are sub-sectors in personal consumption like media, retail and FMCG that have high propensity to consume. We are looking at the two of them in a 50-50 way and one investment can turn into another.”

Source: Financial Express

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