Chillin' out till it needs to be funded
Macquarie SBI Infrastructure Fund (MSIF) has taken off with initial investor commitment of $1.037 billion. According to a disclosure made to the stock exchange by SBI, international investors have already committed $887 million while SBI is going to bring $150 million to the fund.
The fund, which is a tri-party joint venture between financial services firm Macquarie, SBI and World Bank’s private sector financing arm IFC, is targeting to raise $2-3 billion in total and will continue to seek money from prospective investors through 2009.
The fund is targeting so called ‘traditional’ infra assets which generate long term identifiable cash flows. These include roads; airports; seaports; power generation, transmission and distribution; telecom and logistics. The investments will be aimed at both greenfield and existing projects.
Though there were reports earlier, that the fund may revise it targeted $2 billion target size to $1-1.5 billion, the sponsors are still optimistic of sticking to a higher corpus. The three partners had signed a JV agreement last October after signing an MoU for the proposed infra fund in April 2008.
SBI joins a growing list of financial firms planning or setting up large infrastructure funds for India. IDFC-Citigroup sponsored mega $5 billion India Infrastructure Fund is already in the process of raising funds (the fund size has a revised equity ceiling of $1.25 billion as against the $2 billion originally) and Blackstone which pulled out of the above mentioned India Infrastructure Fund is looking to come up with its own standalone infrastructure fund for India.
Last year, UK-based 3i (which scooped $1.2 billion) was the first to raise a billion dollar infra fund dedicated for India.The interest in infrastructure sector stems from a Planning Commission report which projected that India requires infrastructure investments to the tune of $450-500 billion by 2012.
With the new fund SBI could well be on its way to challenge the dominance of ICICI(which operates through ICICI Venture Funds) in the PE business in the country. SBI already has a $100 million VC fund with Soft Bank of Japan since 2006. It had earlier bought a 20% stake in Mumbai-based Sage Capital Fund Management’s $250 million special situations fund and had also indicated plans to float a real estate fund.
zyakaira notes: Once a stable UPA/Congress government is in place in June 2009, we also see a new era for deficit financing budgets as the infrastructure gap requirement is unlikely to be solved as easily as we solved the telecom superstructure issue. Power, Roads, Aviation and the Others would need to become spending and thrust centers. More on this in coming posts as we look to the election to establish the direction and find that cornerstone on which future budgets would now be built ( which would be as acceptable to MSA and Manmohan Singh & P Chidambaram ) and run alongside debates for the not so palatable segments of Indian polity and society. China has also jumped a lead on us.