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Macquarie-SBI in debut Indian roads deal

Funds jointly managed by the State Bank of India and Macquarie will make their first investment in the roads sector by putting $150 million into highway concessionaire Ashoka Concessions.

The Macquarie SBI Infrastructure Fund (MSIF) and the SBI Macquarie Infrastructure Trust (SMIT) will invest in a portfolio of road projects held by Ashoka Concessions (ACL), a subsidiary of Indian developer Ashoka Buildcon.

This is the Macquarie–State Bank of India (SBI) joint venture’s first investment in the roads sector, after it launched two funds in 2009 with committed capital of $1.12 billion. So far, it had only invested in Indian telecommunications, airports and power generation projects.

ACL will use the investment to help fund seven highway projects worth $1.6 billion. The company builds and operates roads and bridges in India on a build-operate-transfer (BOT) basis. It currently has a portfolio of 25 BOT road projects – 20 in operation and five under construction, it said in a statement.

The Indian government has set out to attract $1 trillion in infrastructure investments over the next five years. 

Despite Fitch Ratings’ recent poor outlook on the infrastructure investment environment in the country, SMIT chief executive Suresh Goyal is “optimistic on the India infrastructure story of which [the] roads sector is a critical component.”

The Macquarie-SBI joint venture raised $910 million from international investors for MSIF and $214 million from Indian institutions for SMIT. The International Finance Corporation, a member of the World Bank Group, is a minority shareholder and cornerstone investor in MSIF.

The Indian roads sector has been attracting the attention of infrastructure funds.

Last year, Morgan Stanley Infrastructure Partners and Isolux Corsan teamed up in a $400 million roads joint venture, while the 3i India Infrastructure Fund invested $111.51 million in KMC Infratech. The fund went on to invest $61 million in Supreme Infrastructure BOT Holdings this year.