The $1.2 billion Macquarie-SBI Infrastructure Fund (MSIF), a joint venture infrastructure fund closed in 2009, has deployed around $900 million of its committed capital in infrastructure assets across India at this point, sources with direct knowledge of the matter told Infrastructure Investor.
MSIF, which is managed jointly by the A$337 billion (€230 billion; $306 billion) Australian group and the INR12 trillion (€142 billion; $190 billion) State Bank of India, has made eight investments in everything from airports to telecom towers and roads. The fund’s largest investment was a $200 million investment in GMR Airports, the holding company of India’s two largest airports, in March 2011.
MSIF has, however, also made investments as small as $28 million. Its most recent investment was a $50 million outlay into Trichy Tollways Private, an operating road in the south of India. Investments are made jointly from the fund’s two separate structures, one onshore and one offshore.
Despite being 75 percent invested, a source close to the matter told Infrastructure Investor that those involved in the fund still consider it too early to start fundraising again. While both institutions are always looking for ways to expand their equity under management, and a second fund could be considered later on, Macquarie and SBI are understood to be focusing on maximising their current asset value and finding appropriate exits.
Few infrastructure funds raised for India have been able to produce returns for investors yet, due to various project execution issues and the time it’s taken to stabilise cash flows. MSIF is set to give out returns, but in India generally “most returns will be packeted together at the time of the exit,” according to Infrastructure Investor's source. An overall internal rate of return in the high teens is “realistic,” but the 10-year fund is also under no time pressure yet.
In addition, before fundraising again, both partners will have to agree on the terms. While an identical joint venture fund is not the only option being considered, the sources said that developing the relationship is considered important to both Macquarie and SBI.
Macquarie and SBI declined to comment for this story.