Srei Infrastructure Finance Ltd plans to raise $500 million-$1 billion from foreign investors for a dedicated fund to be set up by March next year to invest in Indian infrastructure projects, its chairman said in an interview on Monday.
The company's profits will likely grow at 25-30 percent in the fiscal year ending March 2012, though a slew of rate hikes by the Reserve Bank of India will slow down the momentum of the sector, Hemant Kanoria told Reuters by phone.
The proposed fund will tap foreign wealth to help meet the enormous infrastructure requirements of India's rapidly expanding economy. The government estimates $1.5 trillion of new money is needed in the ten years to 2017, with around half of the money coming from private investors from 2012 onwards.
The fund would join the likes of the Macquarie-SBI Fund, set up by Australia's Macquarie and the State Bank of India, and a fund by British private equity firm 3i investing in infrastructure in Asia's third-largest economy.
"We are looking at about anywhere between 500 million to a billion dollars," Kanoria said. "We should be in a position to finalise it by March 2012."
"The investors will be all foreign investors," he added, without specifying which infrastructure sectors would be targeted for investment. Srei already manages one such fund worth around $200 million, he said.
The full-year results of the infrastructure-focused lender for FY11 are due on Friday. Revenues for this fiscal will likely grow around 30-40%, while Srei's loans will likely grow around 40%, Kanoria said.
Losses from poor infrastructure, from clogged roads to power shortages, shave off an estimated 1-2 percentage points from India's gross domestic product. The government has often missed its own targets for funding and construction as anything from land acquisition hassles to stifling bureaucracy crimp growth.
The sector will also likely suffer some slowdown in momentum as a series of rate hikes by the Reserve Bank of India will raise borrowing costs, Kanoria said.
"Borrowing costs will definitely be moving up," he said. "We don't see a dampening of projects but what has happened is that the speed could have been much faster if the interest rates had not been going up."
"If it was moving at a speed of about 70-75 kilometres per hour, the whole infrastructure bandwagon could have moved at 100 kilometres an hour," he added.
Srei's net profit for the Oct-Dec quarter fell 18.8% percent to Rs 23.15 crore.
The company's net interest margin will likely be maintained at about 3.5-4% for the foreseeable future, Kanoria said.
Srei is looking to expand its operation overseas targeting emerging markets in Africa and Southeast Asia, he said, without specifying individual countries or a timeline for such a move.