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GMR Infrastructure – Adding Class to the India infrastructure story | Advantage 'zyaada'

PART – I: Building the base case for Infrastructure plays

Power units of 250 MW and smaller stretches of highway on the golden quadilateral and on state highways as well, were all that the India Infrastructure story had in 2005. India Infrastructure Finance Company Limited had also failed at this juncture.

Infrastructure projects have deep funding requirements with each project lasting 15 years on an ideal basis but mostly even structured for 20 and 30 years. Certainly Corporate governance issues are bandied around in such a sunrise sector where $2.6 Trillion has been identified as the Infrastructure Funding Gap. However, each project in Power, Road, Ports and even aviation has revenue guarantees built in to the project, there being a fixed return on projects in Power and even to facilitate profitable concessions and thus enable GMR Infra, GVK Energy and even construction equipment players, turnkey project manufacturers and drilling rigs for example to raise long term funds.

The GOI has specifically enabled Take Out financing and even World Bank, that has already committed $2 billion is committing an additional $1 billion through anointed banks like SBI. PE Funds have been clamouring for PIPE financing deals with $100m investments now commonplace. In China each municipal authority has access to global players partenering for Financial Districts and individual PE funds in each zone, enabling $2-3 billion in funds. Entire cities are being built ready to move in. While overheating fears have become commonplace in such a scenario in China, India still has a sizable gap in funding and established players like GMR continue to create the models and deploy the acquired business acumen, while players like Reliance and ADAG move in for the kill.

Indian Investors are also able to access International PE deals and funds like Macquarie and 3i have been able to raise $1-2 billion each in each tranche. (Aside: Global plays are no longer squeezed, commodities ar coming out of the wrapper and eeven Petro margins are moving north, showcasing the attractiveness of base sectors and larger syndicate / PIPE plays, bringing back sovereign wealth funds and large investors scared by negative market propensities since 2008, China is awaiting the inevitable correction and the new India Infrastructure fund would be working out a scalable model for its first $10b fund and more to follow)

Among policy measures, increased transparency in report cards also shows indian projects at 65% + infrastructure completion records much in accord with international governments from Brazil to US and Europe. China, infact seems to have keeled over from its quick implementation model, with the low occupancy rates showing heightened fears of a bubble

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This entry was posted on June 24, 2010 by in Banking, Emerging Markets, India, India Infrastructure and tagged , , , , , , , .


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