India still attractive for Babcock & Brown

India still attractive for Babcock & Brown

New Delhi: Despite a global credit crunch, Australian private equity firm Babcock and Brown Infrastructure is optimistic about opportunities in India and has bid for 14 highway projects through ventures with Hyderabad-based Nagarjuna Construction Co. Ltd.

The firm, which invests in public works globally, has already closed a $400 million (Rs1,948 crore) emerging markets fund aimed at China and India and is actively scouting investment opportunities in companies formed to carry out specific projects.

The firm may eventually increase the size of the fund to as much as $1 billion, said Manikkan Sangameshwaran, managing director of Babcock and Brown India Pvt. Ltd. He outlined the plans as companies worldwide battle a liquidity crisis amid turmoil on the financial markets.

Babcock and Brown, which manages assets valued at some $74 billion across 12 listed and seven unlisted funds globally, recently hired several key members of Dutch bank ABN Amro Bank NV’s India team. The 14 projects are currently at a stage called request for qualifications and the company is awaiting the announcement of shortlists of pre-qualified bidders.

Apart from highways, Babcock and Brown is also looking at investment opportunities in power as well as airports and ports, Sangameshwaran said.

Babcock and Brown is the latest overseas investor targeting the Indian infrastructure market. Companies such as Macquarie Group Ltd and 3i Group Plc. have announced India-specific funds while a number of others invest in India as part of their emerging markets funds.

With the so-called public-private partnerships seen as the main means of financing for most infrastructure projects, the Planning Commission estimates that the private sector would contribute almost a third of all infrastructure spending over the next five years.

While there are no independent numbers on the unlisted infrastructure funds active in India, a recent report in trade magazine Asian Investor said nearly $18 billion has been “raised globally for investments into infrastructure funds aimed primarily at Asia, with India receiving the lion’s share".

According to private equity and venture capital research service Venture Intelligence, nearly 32% of the $6.7 billion in private equity deployed in the country in the first half of 2008 went into the infrastructure and affiliated sectors. This compares with some 37% of nearly $14.3 billion deployed in 2007.

“There are two parts to the story. On the one hand, there was a lot of hype around these funds that were announced, but not all of them have been capitalized to the extent they were announced," said Vinayak Chatterjee, founder and chairman of project management consultancy Feedback Ventures. “On the other hand, there are not enough bankable projects even for the amount that has been raised."

Babcock and Brown’s Sangameshwaran said the company’s philosophy was to look at sectors that fulfilled certain basic criteria of infrastructure projects, such as essential services, and thus less susceptible to downturns.

“Globally we like to hold the majority stake in our projects. Here, we are looking hold anything between 26% and 51% of the projects," he said.

Sanat Vallikappen contributed to this story.