UTI AMC scouts for foreign partner for $500-mn PE fund

UTI Asset Management Company (UTI AMC), the country’s oldest mutual fund, is on the lookout for another foreign partner to float its first-ever infrastructure focused private equity fund.

The AMC is seeking another partner as Shinsei Bank of Japan, with whom UTI AMC had signed a deal along with HSH Nord Bank of Germany in 2007, HAS suffered heavy financial losses.

Hit hard by the global sub-prime crisis, Shinsei Bank lost 143 billion yen ($1.45 billion) in the financial year ended March 31. “We did not see much value addition by Shinsei Bank, so the earlier agreement lapsed. We have decided to ink a fresh agreement with another partner for the fund,” an official said.

Recently, UTI AMC had signed a fresh agreement with HSH Nord Bank to launch the fund, with a target to raise nearly $500 million over the next three years, after inducting a new foreign partner, sources said.

While each partner was committed to invest $25 million in the fund’s corpus, the two foreign partners expected to mobilise around $200 million each through institutional investors. A final agreement in this regard is likely to be signed this month.

The fund, which will invest in areas such as roads, power, telecom and airport among others that are operating in the public private partnership (PPP) model, aims to raise about $250 million in the next four months.

UTI has also a joint venture company with Shinsei Bank called UTI International (Singapore) for investment management and distribution of financial products in the South East Asian region.

UTI AMC already has an infrastructure equity fund, which invests in the stocks of the companies like metals, building materials, oil and gas, power, chemicals and engineering among others.

Mutual fund houses have been focusing at infrastructure, given the government's target of spending for the sector at $500 billion by 2012.

In the 2009-10 Budget also, Finance Minister Pranab Mukherjee said the government aimed to increase infrastructure spending to 9 per cent of the gross domestic product by 2014.