Mumbai:London-headquartered private equity investor 3i Group Plc. is taking the growth, minority stakes and investment route as an entry strategy into the Indian market. This is complemented by a dedicated focus on infrastructure. The company has just committed $500 million (Rs1,975 crore) for a proposed $1 billion India infrastructure fund, announced last April in partnership with the government-backed India Infrastructure Finance Co. Ltd (IIFCL). The balance $500 million will be raised from third-party investors. With well over $500 million invested in the country so far, the firm’s long-term plan is to mark its presence in leveraged buyout and venture capital deals as well.
Asia is a key market for 3i and accounted for 9% of its total assets under management for the fiscal year ended March 2007. India is its fastest growing market in the region. In three to four years, the company expects its Asia exposure to grow to 15-20% and to emphasize its focus on India, Chris Rowlands, managing partner, Asia, has moved base recently from London to 3i’s regional headquarters in Singapore. 3i chairman Baroness Sarah Hogg was in India this week, her first visit here, to flag off the firm’s debut infrastructure investment—$227 million in Adani Power Ltd. Hogg, flanked by Anil Ahuja, managing director and co-head, Asia, and Chris Rowlands spoke to Mint about the firm’s plans ahead. Edited excerpts:
Globally, 3i’s investment activities span buyouts, growth, venture and infrastructure. What is the mandate for India?
Hogg: We’ll focus on growth capital and infrastructure. We’re extremely experienced in the growth capital field. Infrastructure now for us is a big focus with the raising of our infrastructure fund. From our point of view, it is very important in terms of our own priorities but also extremely important in terms of how
we see partnership with government. Again, we are very experienced in that (partnership with government) and we see this as a true, we hope, partnership of great importance to the development of infrastructure in India.
Asia focus: 3i chairman Sarah Hogg (centre) with Chris Rowlands, managing partner, Asia (right), and Anil Ahuja, managing director and co-head, Asia. 3i aspires to invest $700-800 mn in Asia every year.
Rowlands: All of the group’s business lines have potential across Asia. For now, I think growth capital is a phenomenal opportunity for 3i. Over the next three years, I’m sure we will establish buyout capabilities but we’re in no hurry to do that.
Are more India-dedicated funds in the pipeline, after infrastructure?
Hogg: I don’t think we have to have a template. Way back, we used to have UK-specific funds; we don’t any more. We’ve had European buyout funds. Indian infrastructure seemed like such an excellent opportunity. We don’t have to follow any particular rule, our fund-raising is market-driven. Our aspiration for infrastructure is over $1 billion, we would have that invested in the next two-three years, which means the value of projects would be at least $5-7 billion.
Rowlands: At the moment, this is the 3i balancesheet being deployed in India. The infrastructure fund is our first third-party fund in Asia. The group is ambitious about growing its assets under management and third party funds globally. Asia or India will not be excluded from that strategy when and if it makes sense from a market perspective.
Any plans to expand the India team further?
Ahuja: We already have 12 professionals in Mumbai and it is most experienced in India. This includes five people who can run the business.
Asia was 9% of your assets under management in 2006-2007. How do you see that growing?
Rowlands: We invested half a billion across the region last year. That built up to 9% of the group’s assets under management. We aspire to invest $700-800 million across the region per annum.
Asia’s importance in the 3i scheme of things is evident from the fact that I am now based in the region (in Singapore). This is the first time that a senior member of the group will be working full time outside London. In three-four years, we would be comfortable if assets under management in Asia accounted for 15-20%.
Despite the emphasis on Asia, the board and managing committee is still all Anglo-Saxon white male (three of 18 are women). How critical is it to diversify to have Asian representation?
Hogg: Boards adjust slowly. When I became chairman, we were an entirely UK board and we were only just beginning at that time to make the board match up to that stage of the business we had built up for the preceding 10-15 years. So one is always in a process of catch up in terms of appointment of boards. But our intent to diversify the board was made very explicit from 2002 onwards to reflect our investments and that will certainly continue. It is important to have that integration of senior management and board and for it to match the profile of our investments.
Several buyout shops have entered India in recent months. What is your view on the competition?
Rowlands: There’s competition here but doing what? We want to put capital to work and (in) many of the markets in which we’ve been involved, even in Europe, (we) have started as minority investing, growth capital markets. Buyouts have come much later. What you need is a mature and corporate landscape. I anticipate that this market will be quite a big opportunity for buyouts. We wont sit back and watch it go by. The second thing is, and that’s why infrastructure is so important, the administration has stated that it will not privatize assets in India. That’s another potential area for buyouts but not really available in this market at this point.