Infrastructure India plans £41m fundraising

The London AIM-listed infrastructure fund focused on investments in India has announced plans to place £40.88m of ordinary shares as it seeks to help its portfolio companies overcome the deterioration in India’s capital markets.

Infrastructure India (IIP), the India-focused infrastructure fund listed on London’s Alternative Investment Market, has said an issue of equity is “the best option and only practicable means” to address a near-term financing requirement of up to £41 million (€52 million; $65 million), which was identified in a July trading update.

As part of its annual results statement for the year to the end of March 2012, the firm said it was proposing to place £40.88 million of its ordinary shares at a price of 33p per share. It added that an affiliate of Guggenheim Global Infrastructure Company – part of Guggenheim Partners and a major shareholder in IIP – had entered a subscription agreement  “to subscribe for ordinary shares worth £12.8 million and to underwrite the balance of the placing”.

Moreover, IIP said the placing will address the working capital requirements of the company for the next six months and that it would consider “selective disposal” of assets to provide additional finance in conjunction with a strategic review of the business and asset portfolio.    

Tom Tribone, chairman of IIP, said the firm’s portfolio companies need to complete greenfield construction projects and acquisitions that are “in progress” and which require “ongoing investment”. However: “The recent deterioration in India’s capital markets has disrupted the short-term fundraising capabilities of IIP’s portfolio companies”, meaning that IIP “will need to provide the capital necessary to achieve its portfolio’s latent value”. 

Sonny Lulla, chief executive of IIP, added: “Once the company’s capital requirement has been met IIP will be in a strong position to take advantage of the opportunities in India’s high growth transport and energy sectors.”      

IIP, which was launched in 2008, aims to generate an internal rate of return of between 15 percent and 25 percent per annum from its investments in assets and projects in India’s energy and transport sectors.

Despite the widely reported problems facing the Indian ecomomy  – such as slowing GDP, the devaluation of the rupee and high interest rates – IIP points out in its statement that GDP is still expected to grow at an annual rate of more than 6 percent and that liquidity constraints are creating “interesting acquisition opportunities” as companies look to divest holdings and exit sectors.