By Netty Ismail, Bloomberg
SINGAPORE: AMP Capital Investors, the fund management unit of Australia’s biggest life insurer, may raise as much as $500 million (Rs2,215 crore) to invest in Asian power and port projects, with more than half destined for India.
AMP Capital may raise $400 million to $500 million for its next fund “which will concentrate substantially on Indian infrastructure,” said Singapore-based Krishan Sehgal, who oversees the firm’s investments in Asia, in an interview.
AMP Capital, Citigroup Inc., Blackstone Group Holdings LP and other private-equity investors are flocking to India as the government seeks to build and modernize $320 billion worth of airports, power plants, ports and other infrastructure by 2012. India’s economy grew 9 % to $854 billion last year, a pace second to China among the world’s major economies.
“With the need for infrastructure and the size of the Indian economy, how it is growing, you clearly see an opportunity there,” Sehgal, who travels to India every month, said.
The fund management unit of AMP Ltd. will start raising the money once it has finished investing $102 million from an existing fund that focuses on Indian infrastructure projects, Sehgal said.
Blackstone’s $5 Billion Fund
AMP Capital has invested almost 60 % of that money and will spend the rest in the next few months, he said. The fund, which has invested in four projects, including Gujarat Pipavav port in Western India, has notched up an internal rate of return of 30 %, he said.
Blackstone, manager of the world’s biggest buyout fund, and New York-based Citigroup this month signed an agreement to start a $5 billion fund to invest in Indian infrastructure projects.
Reducing bottlenecks may encourage companies such as Intel Corp., the world’s largest computer chip-maker, and Ford Motor Co. to invest more. Manufacturing makes up 17 % of India’s $854 billion economy, half the ratio in China. The Finance Ministry estimates inadequate power and transport networks shave 2 percentage points off annual economic growth.
The government will need overseas and non-state funding as India is bound by law to cut its budget deficit by 0.3 % of gross domestic product each year until 2009, constraining its ability to spend on infrastructure after spending almost half the federal budget on defense, subsidies and interest payments.
Foreign investors poured about $60 billion into China in 2006 alone, compared with a total of $50 billion in India since 1991, when the South Asian nation began opening its economy.
Finance Minister P Chidambaram is scheduled to present his budget for the year starting 1 April in New Delhi today.
Prime Minister Manmohan Singh wants to sustain growth of over 9 % in the next decade to eradicate poverty. The World Bank estimates a third of India’s 1.1 billion people live on less than $1 a day.
AMP Capital will continue to invest in ports as container volumes grow, Sehgal said. The fund will also focus on power generation, seeking to capitalize on surging demand for electricity, he said. India produces about 8 % less electricity than it needs, cutting gross domestic product by a 10th, according to the finance ministry.
“This is understated because less than 50 % of the households, including the villages, are connected to electricity,” Sehgal said. “Once everybody gets electricity, you can imagine how the demand for electricity will continue to increase.”