Singapore: Infrastructure Development Finance Co (IDFC) plans to list a $1.25 billion infrastructure fund, a source said on Tuesday, 10 June, underlining the country’s need for cash to modernize its power and transport.
A source with direct knowledge of the fund, which would be India’s first listed infrastructure fund, said it has raised over $500 million so far. He said the fund will likely list in India, but declined to give a timeline.
“The fund will buy assets such as ports, roads, airports and oil and gas pipelines that can generate steady, predictable returns for investors,” said the source, who declined to be identified because the fund raising was still ongoing.
Investors are increasingly looking for firms with stable earnings prospects as they seek refuge from recent turmoil in financial markets.
According to India’s five-year economic plan up to 2012, the country needs to attract $500 billion worth of investments to upgrade its infrastructure to achieve a 9% average annual economic growth rate.
Annual growth in the March quarter was 8.8%.
Around 30% of the spending is expected to come from the private sector, with the rest split between the federal and state governments.
IDFC, which is 20% government-owned and finances projects such as highways, ports and gas pipelines, started the India Infrastructure Fund in March 2007, with Citibank as the co-sponsor and anchor investor of the fund.
Owners of infrastructure assets list them as trusts or funds to cash in their initial investments.
Infrastructure funds have grown rapidly in markets such as Britain, South Korea and the United States, attracted by the steady, long-term income streams sought by investors to match pension liabilities.
Other infrastructure funds listed in Asia include Singapore’s CitySpring Infrastructure Trust and Macquarie International Infrastructure Fund, and Australia’s Babcock & Brown Infrastructure Ltd.
IDFC is also partly owned by sovereign wealth fund the Government of Singapore Investment Corp (GIC) and Malaysian state investment firm Khazanah Nasional, Thomson Reuters data shows.
IDFC also has investment banking and asset management units that deal with infrastructure investments.
The firm competes with the likes of US investments banks such as JPMorgan and Goldman Sachs to attract foreign investor money into Indian infrastructure.