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IDFC Alternatives raises $900M in second India infra PE fund

09 October, 2014

IDFC Alternatives, the private equity arm of IDFC Ltd, has raised Rs 5,500 crore ($900 million) for its second fund investing in infrastructure assets in India, one of the single largest funds raised across investment themes in the recent past. The PE firm said the fund was fully subscribed and closed after hitting upper end of the target.

The fund includes a commitment of about $90 million from parent IDFC, besides $810 million from outside investors, including those from North America, Europe and the Middle East, the firm said in a press release.

Christened India Infrastructure Fund II (IIF II), it was launched last year.

“We are very pleased with the high quality and marquee investors that IIF II has attracted and are proud of the speed with which IIF II has been subscribed to, especially given the difficult economic and financial conditions that prevailed during the majority of our fundraising period. We are thankful to the existing investors in our first fund who have re-upped commitments to the second fund and the new investors including some of the largest global institutional investors for having placed their faith in IDFC as their infrastructure fund manager of choice and in India’s potential as an attractive investment opportunity in the infrastructure space,” says MK Sinha, managing partner and CEO at IDFC Alternatives.

Post elections this year, infrastructure has gained attractiveness as the government has come up with policies to boost the sector and cleared several infrastructure projects. Globally too, PE firms like Goldman Sachs are looking to set up a new infrastructure fund.

IDFC Alternatives manages assets worth $3.4 billion and has investments in core infrastructure assets including Delhi International Airport, GMR Energy and National Commodity & Derivatives Exchange Ltd, among others.

Mega corpus

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, from Indian and international institutional investors.

Although the dollar size of the new fund is smaller in comparison with its predecessor, it packs a larger corpus in local currency and would therefore have more money to invest.

UK-based 3i had also raised a much bigger $1.2 billion India infra fund way back in 2008. However, in rupee terms that fund too had a smaller corpus, making IIF II the single biggest infra investment corpus to date. 3i, which was raising a second India fund later discontinued the plans and also decided to scrap new investments in the country.

Indeed, others are also bullish on India infra space. Early this year, diversified cash rich firm Piramal Enterprises Ltd formed an alliance with Dutch pension fund asset manager APG Asset Management for investing in rupee-denominated mezzanine instruments issued by Indian infrastructure companies with a target investment of $1 billion over the next three years. Both partners have each initially committed $375 million for investments under this strategic alliance.

This marks an initial positive signs of how PE firms are once again looking at Indian infrastructure space. The economic slowdown in the country over the last two-three years hit the infra sector particularly hard. Many previous investments are stuck for lack of exits and value erosion or are now delayed in terms of project execution.

Infra-focused PE firms are also sitting on huge pile of dry powder (click here for more).

Even otherwise, the size of IIF II is huge. It surpasses the size of the joint $825 million special situations fund raised by Apollo Global and ICICI Venture under AION Capital early this year.

(Edited by Joby Puthuparampil Johnson)


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IDFC Alternatives raises $900M in second India infra PE fund

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