Tata Power, ICICI Venture create $850 mn fund to back power projects
Tata Power Co Ltd and ICICI Venture Funds Management Co Ltd have joined hands to set up a platform that will raise an initial capital of $850 million (Rs 5,650 crore) to invest in power projects. The platform has got commitments from CDPQ of Canada, Kuwait Investment Authority and State General Reserve Fund of Oman.
VCCircle had first reported in June that the private equity arm of ICICI Bank Ltd that invests across asset classes such as real estate, infrastructure, sector-agnostic growth equity and special situations, had secured initial commitment of around $843 million for the joint investment platform.
The total commitment could be increased depending on market opportunities, Tata Power said in a statement.
If the fund size is increased, it would surpass the largest comparable India-dedicated fund in the infrastructure space--India Infrastructure Fund II (IIF II). IDFC Alternatives, the private equity arm of IDFC, had made final close of IIF II at $900 million in September 2014. IIF II is the successor to IDFC Alternatives’ debut infrastructure fund–India Infrastructure Fund–which closed in June 2009 with a fund size of $927 million against its target size of $1.25 billion. UK-based 3i had also raised a much bigger $1.2 billion India infrastructure fund in 2008.
As part of the latest transaction, Tata Power's Singapore-based unit Tata Power International Pte Ltd has entered into a subscription agreement to invest in a platform called Resurgent Power Ventures Pte Ltd (RPV) that is created to facilitate investment in power projects in India in the coming two-three years.
Tata Power has an installed gross generation capacity of 9,432 MW with presence in all segment including generation (thermal, hydro, solar and wind), transmission, distribution and trading.
RPV will seek to invest in power projects that are in advanced stages and near operational readiness or already operating. The platform will target acquisition of controlling stakes in power generating companies, both thermal and hydro-electric, and transmission assets in India.
It will be jointly held by ICICI Bank, Tata Power International, Caisse de dépôt et placement du Québec (CDPQ) of Canada, Kuwait Investment Authority and State General Reserve Fund (SGRF) of the sultanate of Oman. Co-sponsor Tata Power will own 26% of the platform.
While the fund didn't disclose the quantum of the anchor commitment, it was reported that CDPQ along with the sovereign wealth funds of Oman and Kuwait have committed $650 million in the joint fund in February this year.
Anil Sardana, CEO and managing director, Tata Power, said the fund will leverage opportunities in the Indian power sector through organic and inorganic means.
Rashad Kaldany, executive vice-president, growth markets, CDPQ said that Tata Power and ICICI are key strategic players as they will provide critical insights to the platform in India, a priority market for CDPQ.
The platform comes at a time when demand for power in India is growing. In 2014, the government adopted a five-year programme worth $ 250 billion to complete the electrification of the country to sustain economic growth, increase penetration and replace traditional fuels with electricity.
ICICI Venture revving up
ICICI Venture, one of the oldest home-grown PE firms, saw its dominance dissipate as other PE firms raised newer and bigger funds. ICICI Venture had been struggling to raise its standalone infrastructure fund after making a first close for Indian Infrastructure Advantage Fund VII three years ago. In its annual report for 2014-15, it had disclosed that it was trying to raise additional resources for the mezzanine fund to reach the requisite scale to commence operations.
As returns from Indian PE firms that invested from legacy funds during the go-go years of 2006-08 were below expectations, foreign Limited Partners (LPs), or investors, tightened their purse strings. The sharp depreciation of Indian currency against the dollar made things worse.
However, the fund got its mojo back when it raised $190 million (Rs 1,263 crore) to mark the first close of its new sector-agnostic fund. The latest success will push ICICI Venture back up in the top charts of significant PE firms in the country.
To be sure, a part of the credit goes to its strategy to partner with others to float joint funds. In 2014, it had made final close for its maiden special situations fund at $825 million under AION Capital Partners, a joint venture with global PE major Apollo Global.
ICICI Venture, which saw a change in top management with Prashant Purker being elevated as the managing director and CEO last December and Vishakha Mulye moving on to another ICICI Group firm, also hit a fundraising milestone for its growth equity firm. The two-decade-old fund has invested in over 500 companies, said the statement.
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ICICI Venture Funds Management Company Ltd. is a private equity firm with $3 billion assets under management. It provides capital for buyouts, expansion, turnaround, recapitalization, secondary transactions and ownership consolidations to companies operating in India. It also invests in structured debt through private equity, real estate and mezzanine finance, with infrastructure and special situations being the latest additions to its spectrum of activities. The firm seeks to invests in information technology, life sciences and healthcare, media and entertainment, banking and financial services, infrastructure, retail, aviation, auto components, construction services, real estate, biotechnology, textiles, fine chemicals, consumer products and logistics sectors. The company was founded in 1988 and is based in Mumbai, Maharashtra with an additional office in Bengaluru.
Kuwait Investment Authority is a sovereign wealth fund with $592 billion under management. It makes long-term investment globally. The firm manages two funds, General Reserve Fund (GRF) and Future Generations Fund (FGF) on behalf of the state of Kuwait. It seeks to invest in oil, infrastructure and financial services sectors. The company was founded in 1953 and is based in Kuwait city, Kuwait.