Exclusive: IDFC to launch renewables, logistics platforms

The Indian asset manager is already seeking controlling stakes in operating road projects through HC1, a vehicle owned by its $930m debut infrastructure fund.

Mumbai-based IDFC Alternatives (IDFC) is to target investments in areas including renewable energy and logistics through dedicated platforms with a structure similar to its earlier venture in the road sector, according to the firm’s managing partner and chief executive.

MK Sinha, who’s been at the head of the multi-asset fund manager since 2012, told Infrastructure Investor that IDFC is willing to push the accelerator on acquiring operating road assets via Highway Concessions One Private (HC1), a vehicle majority-owned by its $930-million India Infrastructure Fund (IIF).

According to IDFC’s website, HC1 currently owns interests in two operating road assets: Ashoka Highways Durg, which connects Durg city bypass to the Chhattisgarh/ Maharashtra border in the state of Chhattisgarh, and SMS Shivnath Infrastructure, an 18.4-kilometre bypass road at Durg, Chhattisgarh.

Sinha explained that although traffic risk is usually considered the biggest challenge to highway operators, India’s road sector is somewhat of an exception.

“The predominant risk happens to be the execution of constructing new projects, or expanding the roads, in terms of land acquisition and utility shifting. Concessionaires have learned the lessons from the past five to seven years when many of projects were delayed and shut down due to land acquisition problems. Now they're learning to secure at least 80 percent of the land before construction.”

The Indian government previously announced policy changes that allow developers to fully divest their equity in all build-operate-transfer (BOT) projects two years after the completion of such schemes. It is also awarding new projects to the private sector through the engineering-procurement-construction (EPC) model with public funding support.

“When it comes to giving out new projects, the government also wants to make sure that concessionaires acquire appropriate land and obtain utility shifting permits. Due to these reasons, new concessions are limited,” Sinha said. “We think it is a great time to navigate India’s operating road projects.”

The prospects opened by HC1 are leading the firm to consider replicating the experience in other infrastructure sectors, he explained. These include ports and airports, he noted, but also renewables energy and logistics, which the firm intends to target through platforms it will set up, own and operate.

The firm’s two infrastructure funds currently have assets under management of $1.8 billion. IIF now being fully committed, the firm is currently investing IIF2, an INR55 billion (€741 million; $845 million) successor fund closed in October last year.

IDFC reportedly intends to deploy INR40 billion from IIF2 over the next 18 to 24 months across a range of transport and energy assets.