After working together at the International Finance Corporation for roughly two decades, most recently co-heading the IFC Asset Management company’s global infrastructure fund, Darius Lilaoonwala and Viktor Kats have left the organisation to launch their own emerging markets-focused investment firm.
“We have a very strong network of relationships across emerging markets and with investors around the world,” Lilaoonwala says. “We took advantage of that to start this partnership with Old Mutual Group and AIIM in particular.”
“Having an institutional partner who’s in emerging markets, understands and is comfortable with emerging markets was really critical in our choice of a partner,” Lilaoonwala explains, noting that Old Mutual, which is an anchor investor in the new joint venture, has been in Africa for around 170 years.
It is these relationships and their network that Lilaoonwala and Kats, both managing partners at Augment Infrastructure, capitalised on to originate and close their first investment, acquiring a majority stake in CleanMax, an Indian renewable energy company, from Warburg Pincus affiliate Yellow Bell Investment and the IFC. UK Climate Investments, a joint venture between Macquarie’s Green Investment Group and the UK government, will retain its stake in the company, CleanMax said in a statement.
CleanMax, billed as India’s largest provider of renewable energy to industrial and commercial customers, was founded in 2011 and has a portfolio of solar and wind assets with a generating capacity of more than 500MW.
Augment Infrastructure is paying 16.5 billion rupees ($224 million; €190 million) for a majority stake in the company, though Lilaoonwala and Kats declined to specify the exact interest acquired.
CleanMax is also a very good example of the strategy Augment Infrastructure will be pursuing more broadly.
Growth is the word
“‘Growth’ is one of the key words we use in the way we communicate,” Kats says. “Markets in which we invest grow – their populations grow, their economies grow but they lack the necessary infrastructure. We’re really focused on backing companies that know how to expand, that can provide services to the population, services that those countries need.”
“When companies we invest in grow with us, it creates interesting opportunities for exit as well because some of the larger investors – whether financial or strategic – may be interested in a bigger platform. And these are companies that can potentially be listed, not only on the local stock exchange but internationally. That’s the journey we’re embarking on: backing established businesses of a certain size that need to get to the next level,” Kats explains.
Asked if their strategy will always entail acquiring a majority stake in investee companies, Kats replied: “The preference is to have control, but if what it takes is to be a minority investor with strong governance rights, we can do that, too. We’ve done it many times before. But like-minded partnerships is what’s key for us here.”
The firm will invest across the infrastructure space, including digital infrastructure, transportation and water, in addition to renewable energy. It will invest in the mid-market with ticket sizes ranging between $50 million and $100 million.
Geographically, Augment Infrastructure will initially focus on Latin America and Asia, “though the entire world is open to us”, Lilaoonwala says, noting that he, Kats and their team at IFC Asset Management have invested in over 40 countries. The exception is Africa, which will remain AIIM’s priority.
It is this experience across a large number of markets that gives Augment Infrastructure a competitive edge, according to Kats.
“What we’ve seen in these markets is there is a concentration of capital flows that’s going on with large fund managers,” he says. “And there aren’t many global teams that have the extent of experience that our team has. We’ve basically grown out from these markets,” Kats says.
Currently, the firm has a four-member team, which is expected to grow in the coming weeks. The objective is to establish a local presence in some key geographies Augment Infrastructure will be targeting, since Kats and Lilaoonwala are both based in the Washington, DC area.
“We have very strong networks – personal and professional – in all of these countries,” Kats comments. “But there is no substitute for having a local presence, so we will be building that.”