SBI, Macquarie to sponsor $2 bn infra fund

Fund to be launched by September this year.

State Bank of India (SBI) and Macquarie Capital Group said on Wednesday they intended to raise a new $2 billion fund that would invest in direct infrastructure investment opportunities in India.

BILLION-DOLLAR BOOST

IFC, as one of the fund's cornerstone investors, will also have a stake in the proposed fund management company

The fund is scheduled to launch by the end of the second quarter of 2008

The fund intends to provide equity and equity-like capital for investments in traditional infrastructure, such as roads, ports, airports and power

A memorandum of understanding was signed by SBI and Macquarie to manage the proposed fund. The International Finance Corporation (IFC), as one of the fund's cornerstone investors, will also have a stake in the proposed fund management company.

Macquarie, SBI and IFC together plan to contribute $450 million in anchor investments to start the fund, which will raise further capital from both domestic and international institutional investors.

The fund is scheduled to launch by the end of the second quarter of 2008.

The fund intends to provide equity and equity-like capital for investments in traditional infrastructure, such as roads, ports, airports and power. It will also look at investment opportunities in infrastructure-related assets and businesses.

As the primary sponsors of the fund, Macquarie and SBI will enter into a partnership for the sourcing and execution of direct equity investments in India's infrastructure market, which is expected to experience exponential growth over the coming decades.

The two firms' joint deal origination capacity will be backed by their infrastructure-related experience and knowledge in the global and Indian markets respectively, according to a press release issued on Wednesday.

"Teaming Macquarie and its global experience with SBI in its home market, where its reputation and credentials are beyond compare, will create a powerful partnership in India," said Nick van Gelder, head of Macquarie Capital Funds in Asia.

He said Macquarie and SBI had already identified a strong pipeline of investment opportunities, which were under assessment.

SBI has been a leader in the Indian banking for 200 years and has more recently established itself as the leader in providing project finance to India's infrastructure sector," said Deepak Chawla, the deputy managing director of corporate strategy and new businesses at SBI.

"We are delighted to combine these unsurpassed local strengths with Macquarie's significant global experience in infrastructure investment."

Van Gelder said the infrastructure opportunities in India were tremendous with the country's population expected to grow to almost 1.7 billion by 2050.

About 70 per cent of the Indian population is expected to fall within the working age bracket by 2025 and with disposable income levels increasing across India, we anticipate a relentless demand for infrastructure in the coming decades, he said.

Macquarie is a global leader in the infrastructure finance sector with 116 infrastructure assets under management across 25 countries.