Although the majority of infrastructure investment activity is centred in developed economies, the opportunity for development in emerging markets is increasing dramatically. India is once such country in desperate need of development in order to meet the demands of a growing population and an emerging industrial economy. India is reported to require around $1 trillion for infrastructure development in the next five years, and the Indian government does not have the means or capability to finance this alone. Therefore a significant proportion of this capital will need to be provided by the private sector, meaning institutional investors and unlisted infrastructure funds will play a key role in Indian infrastructure development in the near future.
Preqin is currently tracking 38 unlisted infrastructure funds with a stated preference for investment in Indian infrastructure projects. 25 of these funds have already held a final close raising an aggregate $9.5bn, and a further 13 funds are currently in market seeking an additional $7.3bn in institutional investor capital. There are also nine India-focused infrastructure funds expected to be launched by unlisted fund managers in 2011, meaning the amount of capital available for infrastructure investment in India over the next few years is expected more than double.
Due to a lack of sustainable existing infrastructure, it is unsurprising that the majority of funds primarily targeting Indian opportunities will invest predominantly in greenfield and brownfield stage projects. 74% of India-focused funds will invest in developmental greenfield assets, 84% will invest in brownfield projects, and just 42% target more established secondary stage opportunities.
Macquarie State Bank of India Infrastructure Fund is the largest India-focused vehicle and is currently in market seeking $2bn. It invests in a range of infrastructure sectors including transportation, energy, telecommunications and utilities. In January 2011, the fund invested $60mn for an interest in Soham Energy, a developer and operator of hydro power facilities across India. The fund’s portfolio also features stakes in the Anuppur Thermal Power Plant in Madhya Pradesh, and Viom Networks, an independent telecommunications company based in New Delhi.