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AXA Identifies $53 Trillion Infrastructure Opportunity, Upbeat On Asia

03 October, 2008

AXA Private Equity, with more than $22 billion of assets under management puts forward a compelling opportunity for private equity groups despite the global downturn. AXA Private Equity’s infrastructure group presents a case of more than $53 trillion of investment required in the next 25 years to support global population growth.Realizing the appetite for the sector, banaks and asset managers are currently raising $100bn to invest in the asset class.

AXA has particularly identified Asia as being one of the key regions for infrastructure investment, citing its strong GDP growth and rapid urbanisation. The firm said a financing gap was growing as some governments were unable to match the required investment, and estimated that this gap would reach $500bn in India alone over the next five years.

The firm also said concerns over the political, legal and regulatory frameworks in Asia had largely been alleviated by improvements made in the last decade. Most recently, the Finance Ministry in India has further liberalised the external commercial borrowing policy in an attempt to provide a greater boost to investments in this sector. Following the new move, infrastructure companies can avail themselves of borrowings of up to $500 million a year, as against the existing limit of $100 million, for rupee expenditure under the approval route.

Infrastructure Funds Splash In India

Infrastructure is being increasingly recognised as a distinct alternative asset class. Anubha Shrivastava, Portfolio Director, South Asia, CDC Group, the U.K. government’s Fund of Funds told VCCircle in a separate interview, “There is a compelling story for infrastructure in India and we are interested in exploring this asset class a little further”.

Among other global funds, Morgan Stanley Global Infrastructure Partners has also appointed their man, Gautam Bhandari on ground to make investments across the infrastructure value chain in India. JPMorgan & Chase Co., has set up a $2 billion fund to invest in Indian infrastructure projects such as roads, ports and power.

Global buyout fund Kohlberg Kravis Roberts & Co (KKR), which recently decided to list on the NYSE, said it is considering investing in infrastructure sector in India and China. Goldman Sachs is raising a targeted $7.5 billion fund and will look at investing in India. As for India specific funds, Citigroup Inc., and Blackstone Inc are planning a $5 billion fund for India (of which Citi has already raised $500 million).

Macquarie Capital Group Ltd. and State Bank of India are co-raising a $2 billion infrastructure fund, while 3i Group of UK has already raised a $1.2 billion fund. ICICI Venture is following suit with a $1 billion fund.

 


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1 Comment
GJ . 6 years ago

Though many PE players are setting up shops and want to ride the high growth in infra, no one seems to take equity risk and prefer structured instruments with downside protection. It makes extremely difficult for even good developer, particularly with capabilities but no or little track record to create new success stories. I feel the investors should shun their extremely conservative approach and create their skills in evaluation of deals thoroughly to get a comfort on the execution capabilities. Many funds, owing to their not-so-thorough appraisal, prefer structured instruments or decline. It thus creates a huge roadblock for good promoters. My urge is that the funds should create domain expertise so as to gain maximum comfort on plans and fill the gaps in management rather than asking for downside protection and minimum IRR guarantees from the promoters. After all, equity bears a risk and those who can make best judgement would make windfalls. I do not propogate a reckless investment, but support a thorough appraisal of all the risks associated and giving all of the potential threats a proper discount in valuation.

All infrastructure investors are welcome to India. We are committed to give them good deals with good players.

Regards

AXA Identifies $53 Trillion Infrastructure Opportunity, Upbeat On Asia

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