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UK, India partner on £500m infra fund

The two governments will invest a combined £240m and raise the remaining capital from London-based investors for a green infra-focused vehicle to be managed by a third-party fund manager.

The governments of UK and India have agreed to create a £500 million ($624 million; €585 million) private equity fund targeting India’s infrastructure sector, as a sub-fund under India’s $6 billion national infrastructure vehicle.

The two governments will each invest up to £120 million in the sub-fund, dubbed Green Growth Equity Fund, with the remaining capital to be raised from London-based investors. The initiative was proposed late last year, with details emerging in the latest announcement by both governments released this week.

The vehicle will invest in mid- to large-sized companies in the green infrastructure space, spanning across renewable energy, energy distribution and transmission, clean transportation, water treatment, waste management and other sub-sectors. Targeting gross returns in the 14-16 percent INR range, the fund will look to acquire a mix of minority and majority stakes in the target companies.

The fund is expected to provide predictable and stable returns for its investors. However, it will have a proportion of its portfolio invested in emerging businesses or businesses exposed to market risks, in order to provide an upside kicker to the returns.

The UK government said the fund will be “independently managed by a high-quality fund management team, which will be selected based on its track record in sectors included, as well as capability to execute the proposed strategy.”

The fund’s early market engagement events will be held in early and mid-May, with one event in Delhi and another in London respectively.

The India-UK fund is part of India’s National Investment and Infrastructure Fund, a sovereign vehicle created in 2015 by the South Asian government to attract capital to fund the country’s infrastructure programme. The government has committed half of the fund, and been looking for equity investments from global institutional investors. It has secured support from Russia’s RUSNANO, Qatar Investment Authority and Abu Dhabi Investment Authority so far.

Last October, the Russian Direct Investment Fund and India’s NIIF agreed to set up a $1 billion joint fund, as one of the sub-funds under the NIIF. The fund aims to support Russian businesses operating in India.