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International Finance Corporation (IFC), the investment arm of World Bank, continues to be bullish on India, and might invest $400 million in equity deals in FY14 in India, IFC's South Asia Director Serge Devieux told Business Standard in an exclusive interview.
For IFC, India has emerged as the second largest market in Asia, after China, for direct equity investments. "I will not be surprised if India is ranked amongst the top three globally. We expect to do 25 per cent of our new investments in equity out of our total investments in India," said Devieux in a telephonic interview.
IFC follows a pattern while making investments in various countries. The equity component of IFC's investment in a country doesn't go beyond 25 per cent of its total investment commitment -including loans and other products - for that particular country.
However, IFC seems to have broken away from this practice to increase its investment in India. The fund's equity investment in the country has crossed 28 per cent of the total commitment. Of the total committed portfolio of $4.5 billion, the equity portion stood at $1.28 billion ($1,281 million, to be precise), as of June 30.
IFC's investment in India has been in important sectors such as infrastructure - including telecom and IT ($550 million), agribusiness ($60 million), manufacturing ($254 million), consumer services ($125 million) and financial markets ($292 million).
The fund invested $1.4 billion in India in FY13, of which $350 million was in the form of equity, Devieux said. IFC invests in direct equities as well as in private equity funds, which in turn invest in companies.
He added in India, the fund focuses on support for low-income states, increased access to infrastructure, climate change, and regional and global integration. IFC looks at investments in terms of where it can have the highest impact. ''IFC's priority is to support a vibrant, sustainable private sector that contributes to eradicating extreme poverty and pursuing shared prosperity in emerging markets," Devieux added.
Notably, IFC is No 1 among the top 10 equity investors in India in terms of number of deals, but it comes at the ninth place in terms of value, according to VCCEdge data. This, according to Devieux, is because IFC often deals with smaller firms to diversify geographically. "We usually take below 20 per cent of share holding. The sweet spot being between 10 per cent and 20 per cent."
Plus, IFC does deals across the spectrum as it is "not averse to doing large or small deals". Devieux said IFC has never shied away from deals just because of the size. He pointed out that in some cases, it has taken investments as low as $4 million. IFC's average ticket size in the country has been around $20 million, which might increase.
"Last year, for example, our larger deals in India were about $75-100 million worth of equity," Devieux pointed out, adding the fund is ready to go for deals of $150-200 million.
Going forward, IFC will continue to invest in infrastructure, logistics, financial services, health and education, agribusiness and manufacturing sectors in India.
According to VCCircle report, IFC, which looks at both development and financial returns, has generated an internal rate of return of 19.8 per cent from its private equity portfolio in the past 18 years. "We partner with our clients for the longer haul, through good and tough times. We look at overall impacts like jobs created, incomes enhanced, economic opportunities created, among other goals," said Devieux.
