Skip to main content

Roadblocks for PE investments in infrastructure?

In an article for Economic Times, Srivatsa Krishna makes a fervent case for freeing up hurdles in the way of Private Equity investments in India's infrastructure sectors.

The one possible way ahead is for PE funds focused on infrastructure, of which there are now at least 20 large ones globally with combined funds under management of almost $130 billion, to invest in Indian infrastructure in a big way. India, at the highest levels of government, needs to dedicate a small core group to woo these funds into India. PE is one of the few asset classes, which does not face redemption pressures and though there is a shortage of capital around the world, yet there still are a fair amount of PE funds focused on infrastructure looking for good deals.

...However a number of strategic, regulatory and operational reasons are forcing these funds to keep away from Indian infrastructure projects, especially when many of them get an assured 12-14% post-tax return in mature brownfield projects such as railroads in the US or in Australia.

Extremely poor governance, absence of clarity and predictability in bid documents and procedures, constantly shifting and unclear concessions and multiple authorities, lack of viable ‘good’ deal flow, unrealistic valuations expectations of Indian developers, the inability to ‘manage’ a rapacious Indian political system keen on rent-seeking alone, the unwillingness to leave a lot of the potential upside on the table to future uncertain ‘renegotiations’, the absence of a corporate bond market, incomplete contracts and poor quality of contracting, and the enormous execution/construction risks some of which are peculiar to India, ensure that foreign PE firms shy away from large infrastructure projects.

Further there is simply not enough deal flow in the $150-300 million big-ticket equity category, which would attract funds with big muscle that are simply not interested in smaller deals. Given some of these risks mentioned above, most of the larger funds are looking for brownfield investments, even at a lesser rate of return (such as in the low to mid teens).

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

Popular posts from this blog

VC Interview: Shailendra Singh of Sequoia Capital India

In a recent interview to Venture Intelligence, Shailendra Singh discussed some of the firm’s newer investments in the early stage segment including in the online payments space, the progress at a few existing portfolio companies and the active role the firm is playing in helping its portfolio companies scale and succeed in India and globally. Prior to joining the firm in 2006, Singh was a strategy consultant at Bain & Company in New York and before that, an entrepreneur in the digital media industry.

Venture Intelligence: How does Sequoia go about identifying potential early stage investments in India? Is there anything different you are doing today than, say, a couple of years back?

Shailendra Singh: There is a lot more focus on technology investing and early stage investing. In general, as you might remember a few years ago, we were doing primarily growth investing but in the past 18-odd months, we have had a very strong focus on early stage and that’s continuing. In terms of how…

PE investments in 2018 crosses $33-B to set new all-time high

Big Ticket investments in consumer apps Swiggy & Byju’s dominates year-end activity, even as investments in Core Sectors slow down
Private Equity (PE) investments in India rose to their highest ever figure of $33.1 billion in 2018 (across 720 transactions), according to data from Venture Intelligence (http://www.ventureintelligence.com), a research service focused on private company financials, transactions and their valuations. While PE investments have already surpassed the previous high - $24.3 Billion across 734 deals in 2017 - in the first nine months of 2018, the mega investments in Consumer Internet & Mobile startups such as Swiggy and Byjus towards the year-end, helped the 2018 total vault by 36% year-on-year. (Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate.) The year witnessed 81 PE investments worth $100 million or more (accounting for 77% of the total investment value during the period), compared to 47 such transac…

ChrysCapital and Sequoia Capital India grab two awards at APEX’19 PE-VC Awards

Mumbai, India, Feb 27, 2019: ChrysCapital and Sequoia Capital bagged two awards each as part of the “Awards for Private Equity Excellence” (APEX)event organized by Venture Intelligence. 

ChrysCapital bagged the Private Equity Fund Raise of 2018 Award (Closed $850 M Fund VIII within 4 months of launch) and the Private Equity Investor of 2018 Award (for its Exits from LiquidHub with 4x in dollar terms (within 4 years of its $53-M investment), AU Small Finance Bank with 11.5x return,  Torrent Pharma with 2.95x, City Union Bank with 2.83x, L&T Infotech with 2.56x)

Sequoia Capital India won the Early Stage VCInvestor(the firm registered 10x+ exits in Byjus Classes and SCIOInspire) and VC Fund Raise of 2018 (the firm closed an almost $700-M Fund VI).


Award Winners at APEX'19 PE-VC Awards

The event opened with a Fireside Chat with Kiran Reddy, CEO of SPI Group interviewed by his long time friend and colleague Vineeth Vijayraghavan.



Snapshots of the Awards Ceremony: (L-R) Gopal Srinivasan, …