IDFC invests Rs35 cr in Gujarat water management firm for clean technology

IDFC invests Rs35 cr in Gujarat water management firm for clean technology

IDFC Private Equity Co. Ltd has invested in Rs35 crore in Ahmedebad-based water management company Doshion Ltd, making the private equity fund a top investor in clean technology.

Luis Miranda, president and chief executive of IDFC Private Equity, said this brings the fund’s total clean technology investment—which he defines as renewable energy, water and natural gas—to about $130 million (Rs510.9 crore).

The fund has invested $22 million in natural gas transmission company Gujarat State Petronet Ltd, $40 million in manufacturer of solar cells and modules Moser Baer Photo Voltaic Inc., and has a pending investment of $60 million in a natural gas company that IDFC Private Equity seeded.

There are a increasing number of private equity investors interested in clean technology, including water management. Many investors, however, have recently found it difficult to find investments in this sector.

In 2005, ICICI Venture did a buyout of water treatment company VA Tech WABAG Ltd, India from its parent VA Tech WABAG GmbH, Austria.

“We as a fund have been very excited about the water sector and we think it is at an inflection point," said Shivani Bhasin, a principal at IDFC private equity who worked on the deal. “For example, in power, 2-3% of total capital expenditure for thermal power projects is on water. In the pharmaceutical industry, with India emerging as an outsourcing hub for drug manufacturing, water management is expected to grow proportionately. With special economic zones (SEZs) coming up, SEZ projects plan to outsource water management services to third parties. Finally, on the municipal side, we think that there is scope for public-private partnerships," Bhasin added.

Bhasin estimates that the global water management market is approximately $375 billion.

Doshion, which was established in 1978 as a resin manufacturer, is engaged in water purification and waste-water and effluent treatment, including installation of water purification systems to after-sales support. The company has completed projects across 40 countries. The investment will be used for acquisitions of niche companies in design and fabrication of water treatment plants and bidding for projects in the water segment.

The investment in Doshion brings IDFC Private Equity’s fund to 50% deployment, and the rest is expected to be invested in the first half of 2008.

Also in early 2008, IDFC Private Equity plans to raise a new fund, which was originally reported to likely near the $1 billion mark.

While Miranda did not confirm these figures, he said that given the current market conditions of high valuations, the fund will be scaled back. He did not disclose the fund size except that it would be larger than the current one.