L&T Infra Finance plans to raise $1bn through PE route


As India gears up to strengthen its infrastructure under the Narendra Modi-led NDA Government, L&T Infrastructure Finance plans to raise about $1 billion in a private equity (PE) fund for making investments in power, roads, ports and other projects, according to sources.

The infrastructure finance arm of the engineering giant resumed its fund-raising exercise post-general elections, and the exercise is likely finish by next year. Domestic and foreign institutional investors are to be tapped for the purpose, according to the sources. Some of the global pension funds, sovereign wealth funds and family offices have been approached as part of the exercise.

There is renewed interest in infrastructure with the Modi Government keen to ensure that projects stuck for years get going again so that the country can take advantage of an economic turnaround that’s looking increasingly likely, given the economic and industrial data.

Delays in execution, mostly due to lack of government approval, and high-debt levels have plagued infrastructure companies over the past few years. Investor confidence has been dented, leading to a slump in capital expenditure. This meant that the L&T Infra PE fund had met with muted investor demand when it was l launched last year.

According to an L&T Infra Finance official, the company had a first closing of approximately Rs 500 crore from domestic investors, after which international investors are being assessed on account of change in their outlook towards India.

“Private equity represents a modest share of the $1-trillion to be spent on infrastructure in 2012-17, about half of which would come from private sector funds, compared with a target of one-third in the previous five years,” it had said in a report.

Betting on a massive need for electricity, roads, ports, irrigation, water supply and sanitation projects, other PE companies such as IDFC Alternatives, ICICI Venture and IL&FS have either recently raised funds or are in the process of doing so. But investors would not be jumping back in with their eyes closed.

“The investor is selective with capital this time around. We will not see the kind of euphoria we saw in the previous cycle,” said a senior official at an infrastructure-focused PE fund. The subdued sentiment is also because existing infrastructure-focused funds have failed to deliver.

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