ICICI Bank plans $2 billion fund for infrastructure projects

ICICI Bank plans $2 billion fund for infrastructure projects

India’s most valuable bank, ICICI Bank Ltd, is seeking $2 billion (Rs8,200 crore) from overseas investors to tap demand for roads, ports and power in the fastest growing economy after China, following similar funds created by Citigroup Inc. and Blackstone Group LP.

The fund-raising will probably be completed in about three months, Chanda Kochhar, deputy managing director at the Mumbai-based bank, said on Friday.“There’s a lot of demand for funds from sectors like power, airports, roads and telecoms," Kochhar said. The fund will have a lifetime of more than 10 years, she added.

The Union government plans to build $320 billion of infrastructure projects to ease bottlenecks that are constraining growth. Gross domestic product (GDP) has expanded at a record 8.6% average pace since 2003—faster than any of the world’s 20 biggest economies, except China.

Citigroup, buyout firm Blackstone and Infrastructure Development Finance Co. Ltd in February agreed to put $250 million each into an infrastructure fund that will invest $2 billion in companies.

In August, Europe’s biggest publicly-traded buyout and venture capital firm 3i Group Plc. said it will invest a minimum of $250 million in an infrastructure fund that is set to raise $1 billion.

“India’s infrastructure story is just beginning and it has strong appetite for funds," said T. P. Raman, who oversees assets equivalent to $2.5 billion as managing director of Chennai-based Sundaram BNP Paribas Asset Management Co. Ltd.

ICICI’s latest fund will only be available overseas because domestic investors have other ways to invest in infrastructure projects, Kochhar said. The fund does not promise or target any rate of return and it has not decided on how much it will leverage, she added.

“We would initially begin with investments from the fund and later decide whether to leverage or not," Kochhar said. “The advantage is, ICICI has expertise in project lending since it was a term lender before becoming a bank."

Inadequate levels of infrastructure investment are estimated to be holding back India’s economic growth by as much as 2% a year, 3i said when it announced its fundraising plans on 23 August.

Highways, which move almost 80% of goods in India, account for only about 2% of the country’s 3.32 million km of roads. It takes an average 85 hours to unload and reload a ship at India’s major ports—10 times longer than in Hong Kong or Singapore, according to government figures.