PRIVATE EQUITY | Cesar Tordesillas, India

Two infrastructure funds put India plans on hold

Two large infrastructure-focused private equity funds have put their investment plans in India on hold.


3i was on the road to raise a $1.2-billion fund, its second for India, before it announced that it would suspend all new private equity investment in Asia, including India.

Newly-appointed 3i chief executive Simon Borrows reportedly said that political uncertainty in India is keeping 3i from investing there in the near future.

The announcement comes barely six months after 3i's flagship fund, India Infrastructure Fund, invested $61million in a portfolio of four road projects of Supreme Infrastructure India. 3i has made some of the largest private equity investments in the country's infrastructure sector, including Rs 900 crore in Adani Power, about

Rs 1,000 crore in a port project in Andhra Pradesh and Rs 800 crore in GVK Energy.

"We're continuing to invest our first $1.2-billion India Infrastructure Fund, which is currently 70 percent invested. The raising of a possible successor fund is still under review ," said Laurie Yeh of 3i.

SBI Macquarie was expected to float what would have been also its second fund in India in the first quarter of 2012 to invest in infrastructure assets and companies.

The fund's size was to have been in the range of $1-1 .5 billion. Its first fund, the $910-million Macquarie SBI Infrastructure Fund that closed in October 2010, included a co-investment in a $253-million deal in mobile tower company Viom Networks.

Analysts are of the opinion that investors have earned very low returns in infrastructure projects due to cost overruns, lower traffic volumes and construction delays. "Investor interest in infrastructure has reduced a lot, and we are hardly seeing any enthusiasm," said Kuldeep Tikkha, a partner specialising in transaction advisory services at Ernst & Young.

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