3i India Infrastructure Fund saw 16.8 per cent drop in asset value during the six months ended September 30, 2011 to £117.9 million as compared to £134.7 million as of March 31 this year, making it the single biggest underperforming block in the portfolio of London Stock Exchange-listed private equity firm 3i Infrastructure plc.
Although this was partly due to unhedged foreign exchange positions and currency translations, it also reflected mark-to-market decline in portfolio value.
Incidentally, the overall portfolio of 3i Infrastructure plc generated an unrealised value loss of £18.1 million in the six months period driven by drop in the valuation of the holding in Adani Power Limited, held through the 3i India Infrastructure Fund and the holding in Télédiffusion de France junior debt. 3i Infrastructure plc., which focuses on infrastructure assets investments in Europe and India, had a portfolio of 15 assets valued at £716 million, and net assets of £1,030 million as of 30 September 2011.
The mark-to-market valuation of the holding in Adani Power declined in the period, from £53.0 million at 31 March 2011 to £37.8 million at 30 September 2011, reflecting fall in the Indian equity markets and the quoted power sector, as well as a significant depreciation of the rupee against sterling.
Sterling appreciated by 6 per cent against the Indian rupee in the six months, resulting in foreign exchange losses of £8.1 million for 3i Infrastructure, as its exposure to the Indian rupee through the 3i India Infrastructure Fund remains unhedged. The foreign exchange losses suffered within the US dollar denominated 3i India Infrastructure fund was pegged at £12.4 million.
3i India Infrastructure Fund:
The $1.2 billion fund that was closed in 2008 to invest in a diversified portfolio of equity (or equivalent) infrastructure investments in India, focusing on the port, airport, road and power sectors is backed by 3i Infrastructure plc that has committed $250 million as well as 3i Group plc that has committed a similar amount.
As at 30 September 2011, the Fund was 65 per cent invested and 70 per cent committed, having completed six investments. Its portfolio includes Adani Power, Krishnapatnam Port Company Limited, Soma Enterprise Limited, KMC Infratech, GVK Energy and Ind-Barath Utkal. It did not make any fresh investments in the April-September 2011 period.
While the total asset value fell, operationally the portfolio assets continue to perform well, the Fund disclosed. In India, the growth rates in earnings are considerably higher compared to the European portfolio, as the 3i India Infrastructure Fund’s early stage investments build up their capabilities. In aggregate, the EBITDA of the operational assets held in the 3i India Infrastructure Fund (Adani Power, Soma Enterprise and Krishnapatnam Port) increased by 23.8 per cent over the prior comparable six-month period.
During the year ended March 31, 2011, it had invested $177.9 million in GVK Energy (it is developing a power portfolio, principally gas-fuelled, comprising an operational capacity of 915 MW, with a further 3,132 MW under various stages of development), $111.4 million in KMC Roads (it owns a portfolio of 10 build-operate-transfer road projects) and $45.2 million in Ind-Barath Utkal (it is building a 700 MW coal-fired power plant in the state of Orissa).
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