Indian infra funds lament project pipeline paucity

While the government says half a trillion dollars of private sector investment in infrastructure will be needed if India is to meets its development goals, financial sponsors say fundable projects with scale are still hard to find.

Delegates at PEI Media's Infrastructure Investor: India 2010 event were told today that sizeable and attractively priced projects remain difficult to source, despite the country’s ongoing efforts to improve its infrastructure. 

India: private
sector wants
more attractive

According to government estimates, India will need to invest approximately $1 trillion in the five years from 2012 if its economic development targets are to be met. Roughly half of this money, some $500 billion, will need to come from the private sector, the government has said.
This vision contrasts with the fact that under India’s current Five-Year Plan, private sector investment in public infrastructure has averaged about $10 billion per year, according to data from the Asian Development Bank.
Financiers speaking at Infrastructure Investor: India 2010 in Delhi today told attendees that although private capital to ramp up private investment was available, fundable projects were still thin on the ground.
“In the two years that we have been actively looking, projects with the kind of risk-return characteristics we look for have been few and far between,” said Manish Kejriwal, head of India, Africa and the Middle East at Temasek, the Singapore state fund.
Anil Ahuja, head of Asia at 3i Asia, said during a panel discussion: “There is a paucity of high quality, or even quality, projects, to invest in. You have to ask, is the infrastructure around an infrastructure project in place? If so, we’ll be very happy to fund it, at a reasonable return.”
M.K. Sinha, president and chief executive at IDFC Project Finance, said that in order to improve project flow, the government would have to address a number of “implementation issues”, such as land acquisition and environmental clearances, which frequently hold up projects.
Mukesh Kacker, director general of the Cuts Institute for Regulation and Competition, suggested a review of the regulatory system was also needed to give private investors more comfort about the long-term commercial viability of projects: “Without empowerment of independent regulators in all sectors, it is going to be difficult to hit targets,” Kacker warned.
Attendees of the forum also insisted that the private sector would need to come to the table having done its homework, and with realistic expectations. Said one chief executive of a large India fund who did not want to be quoted: “We are very interested in financing large projects based on long-term yield returns. 30-year hold-to-maturity structures are probably the future for Indian Infrastructure, as opposed to higher-yielding, 5-7 year private equity structures.”