India’s UTI to raise $500m for infrastructure(3)

The Indian money manager has teamed with HSH Nordbank and Noor Financial Investment Company to invest in unlisted companies in India's infrastructure sector.

UTI Asset Management Company, one of India’s largest asset management companies, has launched the India Infrastructure Development Fund (IIDF), which will make investments in India’s infrastructure services sector.

The vehicle, which has been set up in partnership with HSH Nordbank of Germany and Kuwait’s Noor Financial Investment Company, is a closed-ended private equity fund targeting commitments of $500 million, Manash Mitra, head and CIO of Global Investment Advisory Services at UTI Asset Management, said in an interview.

Fundraising has begun, Mitra said, and the three sponsors together have committed about $75 million. The firm has the option to raise capital from domestic investors as well, but the focus will be on raising capital from offshore markets. A first close on between $200 million and $250 million is expected in three to four months’ time, Mitra added.

The fund will mainly invest in unlisted companies in sectors such as roads, ports, power, logistics, airports and energy.

The formation of this fund was reported by PEO in May 2008. At the time, a source told PEO that a $600 million infrastructure fund would be raised through UTI International, a subsidiary of UTI Asset Management, in partnership with HSH Nordbank and Japan’s Shinsei bank.

However, as a result of the financial crisis, Shinsei’s financial position weakened and a new partner was found.

The infrastructure sector is a focus area for the Indian government as there is a vast gulf between the demand and the supply of infrastructure in the country. The country requires active participation from private players as it cannot meet the infrastructure financing needs on its own.

“A significant number of PPP projects across various infrastructure sectors are being offered to the private developers,” UK Sinha, chairman and managing director of UTI Asset Management Company, said in a statement. He added that UTI decided to set up this fund in recognition of the potential that exists in India.

IIDF has made one investment so far, in a city gas distribution project in the state of Gujarat. IIDF and two other investors invested a total of $16.5 million in the project.

IIDF is managed by a team with a combined experience of 75 years. Mitra heads the fund and there are five other investment professionals on the fund’s management team, which is based in Mumbai. Two to four new members will be added to the management team in due course, Mitra said.

UTI Asset Management is already engaged in private equity through UTI Ventures, an affiliate focused on making growth capital investments in India. UTI Ventures is currently in the market to raise between $300 million and $400 million for its third private equity fund.

UTI Asset Management has more than 9 million investor accounts and managed assets of about $9.5 billion as of 30 September 2008.