Macquarie Group and top Indian lender State Bank of India are drawing up plans to raise $1 billion to $1.5 billion for their second fund to invest in infrastructure assets and companies in India, two sources with direct knowledge of the matter said.
The first fund, SBI Macquarie Infrastructure Trust, which closed in March after raising $1.2 billion, is down to its last $500 million with some deals in the pipeline, pushing the sponsors to look at a second fund, the sources said.
The sources declined to be identified as they are not authorised to speak to the media and a spokeswoman for the fund declined to comment.
Macquarie and SBI hope to get the paperwork complete and be ready for launch over the next two months, although given global uncertainty and weak investor appetite, the sources expect a launch in the first quarter of 2012.
"We need to be ready to move in at the first opportunity. The infrastructure opportunity in India is nothing but large. It is prudent to have extra dry powder," one source said.
India wants infrastructure investment of $1 trillion over the five years starting in April 2012 as it aims to boost economic growth and raise living standards. India's infrastructure ranks 89th out of 133 countries, a World Economic Forum report found.
Like the first fund, the second will invest in core infrastructure assets including roads, utilities, telecoms, ports, airports and companies servicing those sectors.
The plan for a second fund in India is consistent with Macquarie's tradition of raising multiple funds for sectors and geographies, one source said.
Private equity makes up a modest share of infrastructure funding in India although 3i, IDFC and Actis have all set up Indian infrastructure funds.
Blackstone Group said last year it expected to invest about $1 billion to $1.5 billion in Indian infrastructure. ICICI Venture, a unit of No.2 Indian lender ICICI Bank, is raising $1 billion for a sector fund, while a unit of Kotak Mahindra Bank is raising $350 million for an infrastructure fund.
SBI-Macquarie has made five investments including buying stakes in telecoms tower firm Viom Networks and GMR Airports Holding Ltd, a unit of GMR Infrastructure.
Demand for private equity in core sectors has been growing in India as high interest rates and frozen equity markets shut off other sources of funds.