State Bank of India and Macquarie Group have announced the launch of the Macquarie-SBI Infrastructure Fund, which will invest in infrastructure projects in India.
State Bank of India and Macquarie Group have announced the launch of the Macquarie-SBI Infrastructure Fund, which will invest in infrastructure projects in India.
International investors have committed USD887m to MSIF alongside a direct co-investment commitment of USD150m by SBI, bringing total capital raised to USD1.037bn.
MSIF will continue to raise capital during 2009, and together with Indian domestic institutions, the total capital is anticipated to be between USD2bn and USD3bn.
Foreign institutions will invest through MSIF and Indian domestic institutions will invest through a domestic entity called the SBI-Macquarie Infrastructure Trust (SMIT).
MSIF and SMIT will invest together into infrastructure projects in India.
MSIF is managed by the SBI and Macquarie joint venture, with the International Finance Corporation, a member of the World Bank Group, as a minority shareholder and cornerstone investor in MSIF. SMIT will also be managed by the joint venture.
SBI, Macquarie and IFC have committed USD150m each to bring a total of USD450m of sponsor commitments.
Investments will be made in traditional infrastructure assets that generate long term identifiable cash flows, and that exhibit essential service characteristics. These include roads, sea ports, airports, power generation, transmission and distribution, gas distribution, telecommunications and logistics businesses. Investments will include green-field projects as well as established operating businesses.
An investment pipeline has been identified and is under assessment. The sponsors anticipate further investment opportunities over the next two to three years, which corresponds with the investment period of MSIF.
Anita George, director of infrastructure, IFC, says: "Infrastructure is a key priority for India. IFC’s contribution to the creation of this fund, in partnership with Macquarie and SBI, is part of its counter-cyclical investment strategy that fulfils its longer term development mandate. Through this fund India will be able to sustain infrastructure investments, in power, toll roads, and ports, despite a tough environment and help generate jobs and enhance incomes."
R. Sridharan, managing director of SBI, says: ‘As per the Planning Commission of India estimates, the country will need close to USD500bn in infrastructure investments in the next five years. Funding of this magnitude cannot be supported domestically alone and must be supplemented by other sources of capital.
‘Traditional methods of debt financing must be supported with equity funding. SBI aims to bridge this funding gap by establishing this fund and bringing in international expertise through our joint venture with Macquarie.’
Nick van Gelder, head of Macquarie Capital Funds in Asia, adds: ‘This joint venture provides unparalleled access for international and domestic investors to the underlying economic growth story of developing India. Our ability to raise over USD1bn in exceptionally challenging markets is a testament to investors’ confidence in India as an investment location and ultimately the compelling demographic story that is driving the Indian economy.’
