In December 2015, the Indian Government announced further progress towards the establishment of a INR 400bn National Investment and Infrastructure Fund. The government agreed to provide INR 200bn and is currently seeking private investment for the remainder of the total. The stated objective of the fund is to develop commercially viable greenfield and brownfield infrastructure assets of national importance, with the quasi-sovereign nature of the fund aiming to attract substantial foreign investment. The National Investment and Infrastructure Fund will operate as a fund of funds vehicle, with the Indian Finance Ministry suggesting that investments in infrastructure funds and equity and debt support for infrastructure projects are likely avenues to meeting the fund’s objectives.
Preqin’s Infrastructure Online service provides detailed information on 242 completed Indian infrastructure transactions since 2008, with the chart above illustrating the underwhelming aggregate deal value of infrastructure projects between 2010 and 2013. This information offers an indication as to why India is currently seeking to overhaul and improve funding in the sector. Notably, this period was characterized by a lack of large infrastructure deals, with 70% of completed transactions taking place for $100mn or less.
Although the estimated value of completed Indian infrastructure deals has increased since 2013, deal flow remains subdued. Average deal size has increased from the low of $90mn in 2011 and 2013 to $232mn in 2015; however, this is mostly due to a small number of large greenfield infrastructure projects with deal values of $1bn or more. This includes the concession agreement for the purchase and construction of the Vizhinjam International Deepwater Seaport PPP for $1.2bn by Adani Group, as well as the $1bn acquisition of the Gammon Road & Power Projects Portfolio by a consortium comprising Brookfield Asset Management and Core Infrastructure India Fund.
Indian infrastructure deal flow also remains dominated by secondary stage assets, which represented over 60% of infrastructure transactions completed in 2015. These assets require little or no additional investment, and therefore fail to provide any extra capacity within their respective industries. As a result, India’s large infrastructure ‘gap’ continues to be an ongoing issue.
The National Investment and Infrastructure Fund has been deemed necessary by Indian policy makers as they seek to provide a catalyst for increased infrastructure investment in India. While Indian population growth is slowing, the anticipated demand for new and expanded infrastructure in the coming decades, encompassing greenfield and stalled projects, means the importance of the fund cannot be underestimated. However, with brownfield and secondary stage assets accounting for $20.6bn (59%) of the estimated aggregate deal value during the period examined, meeting the other objectives of the fund may be slow.