Global pension funds' long-term capital is finally finding its way into India, where about $35 billion worth of private operating assets were created in the past decade. The availability of these assets, known as "brownfield" in industry parlance, is set to grow further on the back of the Narendra Modi government's emphasis on infrastructure. Brownfield assets mean assets that are up and running with some revenue stream. Major global pension funds such as Canada Pension Plan Investment Board (CPPIB) and Holland's APG have already established their presence in India. Now, more funds including Ontario Teachers' Pension Plan are believed to be actively exploring opportunities here.
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According to the estimate provided by Mumbai-based Infrastructure Leasing & Finance Service, a fourth of these private operating assets worth Rs 1-2-lakh crore ($17-35 billion) offer yield-seeking investments. Today, these assets are available with a yield expectation of 15-17 per cent. "The trend has started now and my guess is that it will accelerate as the availability of these brownfield assets grow to meet the infrastructure needs of the country," says Gandhi. CPPIB, which has assets worth $229 billion, recently accelerated its investments in India. Late last year, it announced a strategic alliance with Indian construction giant Shapoorji Pallonji Group to acquire office buildings in Indian metropolitan cities. CPPIB has invested $200 million as initial capital investment and it owns 80 per cent of this venture. Early this year, the pension giant also announced a Rs 2,000-crore investment in L&T Infrastructure Development Projects. This was followed by Dutch pension giant APG Asset Management's tie-up with billionaire Ajay Piramal-promoted Piramal Enterprises a month ago. The joint venture plans to invest $1 billion over the next three years in infrastructure companies. The company has also already zeroed in on some road projects and the investment announcement is expected to come soon. "We are indeed seeing increasing interest from global institutional investors to invest in the Indian infrastructure sector. Most of them are still wary of green-field risk in India and, hence, tend to focus only on assets in operation," says Hans-Martin Aerts, head of infrastructure (Asia) at APG. The Dutch firm has pension assets worth ^375 billion ($492 billion). The 12th five-year Plan for the government for the period 2012-17 envisages $1 trillion worth of investment in infrastructure. Half of this amount is expected to come from the private sector, with an expected equity contribution of $150 billion. "There is a large pool of operational assets held on the balance sheets of developers, who need to de-leverage and recycle capital and there are also a lot of infrastructure projects that require last-mile funding to achieve project completion," says Aerts, who seeks to invest in both kinds of assets.