Macquarie, State Bank of India Plan $2 Billion Fund
Macquarie Capital Group and State Bank of India (SBI) plan to raise a new $2 billion fund that will invest in direct infrastructure investment opportunities in India.
Macquarie and SBI have signed a memorandum of understanding to set up a company and 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 company.
Macquarie, SBI and the IFC together plan to contribute a total $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 end-June.
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.
Macquarie and SBI's joint deal origination capacity will be backed by their infrastructure-related experience and knowledge in the global and Indian markets respectively.
"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," says Nick van Gelder, head of Macquarie Capital Funds in Asia.
He notes Macquarie and SBI have already identified a strong pipeline of investment opportunities which were under assessment, though he does not elaborate.
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.
The fund is optimistic over the infrastructure opportunities in India, given that the country's population expected to grow to almost 1.7 billion by 2050.
"Some 70% 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," says van Gelder.
Deepak Chawla, deputy managing director of corporate strategy and new businesses at SBI, notes that the Indian economy is expected to grow at 8-9% for the coming few years. With the rapid development of a legal and regulatory framework that facilitates investment in infrastructure in India, SBI expects infrastructure spending in the country to reach $1 trillion in the next decade.
Macquarie has 116 infrastructure assets under management across 25 countries, with 33 funds with equity under management in excess of $49 billion.
SBI is India's largest commercial bank by assets, profits, deposits, branches and employees and is listed on the Bombay Stock Exchange.
IFC, the private sector arm of the World Bank, has a 50-year track record in India, and currently has total direct commitments of $1.4 billion to Indian projects and businesses.
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