Red Fort plans $600-m infrastructure fund

After infusing money into real estate projects, Red Fort Capital Advisors is now planning a new infrastructure fund with corpus in excess of $600 million by 2008-end.

Red FortCapital – which manages three active funds under its aegis including an offshore and a domestic fund for Indian real estate market, as well as a hedge fund for listed Indian entities – is already in talks with some of its existing investors for floating the new fund, which would invest in infrastructure projects in the country. It may also rope in new investors to the proposed fund.

 “The new fund is likely to be over $600 million and will focus on projects such as ports and power, amongst others. In fact, some of our existing investors approached us for a fund in the infrastructure, a sector whose risk profile is very different than the real estate segment. Globally, the returns for infrastructure projects are in teens whereas in India it averages at about 20 per cent,” Mr Subhash Bedi, Director and Partner, Red Fort Capital Advisors, told Business Line.

He said that in future, the investments in infrastructure projects could also find synergies with the projects that Red Fort has funded in the real estate sector. “For instance, there could be synergies between port projects and development of warehouses,” he pointed out.

Red Fort Capital has already stitched seven deals worth $200 million in the Indian real estate market during the first six months of 2008 and expects to infuse another $300 million by the end of the calendar year. In comparison, the company had pumped-in $300 million into six projects in 2007.

It has an exposure to projects in Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Kolkata and takes positions in affordable housing projects as well as office space projects.

“A lot of PE investors who were aggressive early last year, are now staying away from the real estate market, and we feel that only the serious players who believe in the 10-year growth story of the realty sector are now left in the fray,” he said.

Red Fort Capital, which counts Government entities, Pension Funds and Life Insurance companies amongst its investors, feels that realistic expectation by the developers on project valuations could lead to more deals for the fund this year.

“In the first six months of 2008, we surpassed the total number of deals inked in the whole of last year. We expect to be able to close 2008 with about 10-12 deals in our kitty,” Mr Bedi added.

Source: Business Line