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Indian infrastructure deals on the rise

The $32m financing of India’s largest private shipyard is the latest in a series of infrastructure-related deals that have seen domestic private equity funds scrambling for a slice of the action.

Agarwal Business Group Shipyard (ABG), India’s largest private sector shipyard, has announced a Rs140-crores ($32 million; €26 million) financing round led by Hong Kong-based Standard Chartered Private Equity (SCPE), Merlion Indian Fund (a fund sponsored by SCPE and Singapore’s Temasek Holdings) and India’s Infrastructure Leasing & Financing Services Limited (IL&FS).

We believe India will play a key role in the Asian shipbuilding industry

Shahzaad Dalal, vice chairman and MD, IL&FS

“We believe India will play a key role in the Asian shipbuilding industry with its inherent advantage of competitive labour costs, skilled engineering and naval architectural talent and the thrust by the government of India to fully exploit India’s vast coastline for growing its trade in the global markets,” said Shahzaad Dalal, vice chairman and managing director of IL&FS in a statement.

IL&FS is one of a number of domestic funds targeting opportunities arising from India’s determination to rapidly upgrade its under-developed infrastructure in order to support the country’s rapid economic growth. Large amounts of investment are currently going into areas such as ports, power stations, hotels, properties, shipyards and gas transportation among others.

IL&FS manages over $300 million on behalf of Indian and international institutions including Bank of India, the Asian Development Bank and the International Finance Corporation. It has recently provided financing for the likes of Hotel Leelaventures, a hotel chain, and Gujarat Pipavav Port, a port operator.

Other domestic infrastructure funds include the Rs850-crores India Development Fund (IDF) and the Rs750-crores India Advantage Fund (IAF), which is managed by ICICI Ventures. IDF has backed the likes of GMR Energy, the Hyderabad-based power producer, and Gujarat State Petronet, which is developing a natural gas pipeline grid in Gujarat. IAF, meanwhile, recently purchased two floors of the Cyber Gateway office building near Hyderabad.

The opportunity for private equity funds to invest in Indian infrastructure is vast. According to a recent report, as much as $56 billion is needed over the next decade for investment in urban infrastructure alone – but only around ten percent of this is accounted for by planned government spending.