Macquarie SBI Infrastructure Fund (MSIF) has taken off with initial investor commitment of $1.037 billion. According to a disclosure made to the stock exchange by SBI, international investors have already committed $887 million while SBI is going to bring $150 million to the fund.
The fund, which is a tri-party joint venture between financial services firm Macquarie, SBI and World Bank’s private sector financing arm IFC, is targeting to raise $2-3 billion in total and will continue to seek money from prospective investors through 2009.
SBI and Macquarie are the lead sponsors of the fund holding 45% each in the JV with IFC owning the balance 10%. The investment vehicle will have a two pronged structure. While foreign institutions will invest through MSIF, Indian domestic institutions will bring in money through another entity SBI-Macquarie Investment Trust(SMIT). MSIF and SMIT, both of which will be managed by the tri-party JV, will together invest in infrastructure projects in the country.
The three JV partners have committed $150 million each to the fund taking total sponsor commitment to $450 million. The fund is being watched closely due to the strong partnership with Macquarie bringing in fund management skills(specially of infrastructure assets) and SBI which is already one of the largest project finance arrangers in Asia.
The fund is targeting so called ‘traditional’ infra assets which generate long term identifiable cash flows. These include roads; airports; seaports; power generation, transmission and distribution; telecom and logistics. The investments will be aimed at both greenfield and existing projects.
Though there were reports earlier, that the fund may revise it targeted $2 billion target size to $1-1.5 billion, the sponsors are still optimistic of sticking to a higher corpus. The three partners had signed a JV agreement last October after signing an MoU for the proposed infra fund in April 2008.
SBI joins a growing list of financial firms planning or setting up large infrastructure funds for India. IDFC-Citigroup sponsored mega $5 billion India Infrastructure Fund is already in the process of raising funds (the fund size has a revised equity ceiling of $1.25 billion as against the $2 billion originally) and Blackstone which pulled out of the above mentioned India Infrastructure Fund is looking to come up with its own standalone infrastructure fund for India.
Last year, UK-based 3i (which scooped $1.2 billion) was the first to raise a billion dollar infra fund dedicated for India.The interest in infrastructure sector stems from a Planning Commission report which projected that India requires infrastructure investments to the tune of $450-500 billion by 2012.
With the new fund SBI could well be on its way to challenge the dominance of ICICI(which operates through ICICI Venture Funds) in the PE business in the country. SBI already has a $100 million VC fund with Soft Bank of Japan since 2006. It had earlier bought a 20% stake in Mumbai-based Sage Capital Fund Management’s $250 million special situations fund and had also indicated plans to float a real estate fund.
In January 2009, SBI Chairman O P Bhatt had also announced that the country’s biggest lender, has entered into an agreement with the state government of Gujarat to create a Rs 5,000 crore ($1 billion) infrastructure fund to invest in Gujarat. SBI has not come up with any additional information on this proposed fund.