Indian engineering company launches $1bn PERE fund

Larsen & Toubro, one of the rising stars of India’s new economy, has entered the private equity real estate arena with a fund for real estate-related infrastructure projects.

Indian construction company Larsen & Toubro is reportedly raising a RS4500 crore ($1 billion, €640 million) private equity fund to invest in real estate-related infrastructure projects.

A source familiar with the plan told India’s Business Standard newspaper that the new fund has an anchor investment of about $200 million through its subsidiary L&T IDPL. The investments would be made largely through special purpose vehicles formed by real estate companies, which would then give the construction contracts to L&T. N Sivaraman, L&T’s head of mergers and acquisitions, is heading the push, according to the source. L&T could not be reached for comment.

The fund would join a number of others which large Indian industrial companies have set up over the past year. The Tata Group and Reliance Industries both now have $1 billion funds in the works. The Piramal Group its second real estate fund, targeting $800 million, through its investment firm Indiareit Fund Advisors. The new L&T fund will reportedly be modeled on the Kshitij fund, one of four real estate funds launched by the Future Group totaling $1.2 billion.

Over the past few years L&T, which was founded by two Danish engineers, has landed high-profile contracts for various industry projects such as airports and ports, SEZs, townships and oil pipelines. Recently the company has taken losses on international hedging contracts between $25 million and $35 million, causing its stock to tumble.