Mumbai: BNP Paribas SA, France’s largest bank by value, and SREI Infrastructure Finance Ltd, plan to set up a venture to fund public works equipment in India, as demand increases from builders of factories, roads and ports.
The venture will be held equally with unit BNP Paribas Lease, Kolkata-based SREI said on Thursday. BNP Paribas Lease will invest Rs775 crore, of which Rs375 crore will be paid to SREI for transferring the infrastructure equipment and insurance broking businesses to the new unit, SREI chairman, M.S. Verma, said.
India needs to improve infrastructure as lack of roads, ports and electricity generation crimp its growth. The $854 billion (Rs35 trillion) economy loses 2 percentage points from its annual growth because of inadequate power and transportation networks, according to the finance ministry.
The country produces about 8% less electricity than it needs, cutting gross domestic product (GDP) by a 10th, the ministry estimates. “The venture will be win-win for both the companies and the shareholders as the capital infusion will help us both grow our businesses,” Verma said.
SREI shares rose by their daily 20% limit on the Bombay Stock Exchange to close at Rs71.8 on Thursday.
India plans to spend more than $320 billion in the next five years to build roads, ports and other infrastructure as it aims for an annual growth of 10% by 2012, from 9.4% in the year ended 31 March.
“We will benefit from the buying market,” Bertran Gousset, member of the executive committee of BNP Paribas Lease Group, said.