Report: SBI and Gujarat plan INR 50bn infrastructure fund

In doing so the State Bank of India will join a long list of other private equity firms such as 3i which have been busy setting up large infrastructure funds in the country.

The State Bank of India (SBI) has entered into an agreement with the state government of Gujarat to create an INR 50 billion (€800 million; $1 billion) infrastructure fund to invest in the equity of infrastructure projects in the state, O.P. Bhatt, chairman of the bank, told the Press Trust of India.

The fund will join others in the market that are targeting investments in the country's infrastructure, including another $2 billion fund that was launched by SBI in April 2008. The bank created that fund with Australian investment bank Macquarie Group and International Finance Corporation, the World Bank's private equity arm.

The India Infrastructure Fund, a joint venture between the Indian government, Citi and India’s Infrastructure Development Finance Company aims to raise $5 billion in debt and equity to invest in the country’s transport, telecommunications infrastructure and power sectors.

The fund had raised $900 million by last October, said a market source. It also has a revised equity ceiling of $1.25 billion, down from the original $2 billion, according to the source. 

The Blackstone Group, which pulled out of the India Infrastructure Fund as it was allocated just $35 million, intends to launch its own Indian infrastructure fund.

In April 2008, 3i raised $1.2 billion for its India infrastructure fund, surpassing its $1 billion target.

Private investment to build India’s infrastructure will top INR 4 trillion by 2012, according to a study by professional services firm Ernst & Young.

The State Bank of India was not available for comment at press time.