Indian infra sees international activity
In the last week, both foreign and domestic firms have made significant moves dedicated to the Indian infrastructure space. UK headquartered private 3i has participated in the build-operate-and-transfer (BOT) road projects operated by KMC Constructions, injecting Rs 500 crore ($115 million) for an undisclosed stake described as “significant”. The deal is subject to regulatory approvals, and Spark Capital reportedly served as an advisor on the transaction. Since the private equity firm launched a $1.2 billion regional infrastructure fund in 2008 it has made four investments.
BOT is one of the two Public-Private Partnership (PPP) models on which the National Highways Authority of India (NHAI) awards projects. The government has so far awarded 41 projects valued at a total of Rs 24,386 crore ($5.4 billion). The KMC portfolio currently consists of 10 projects constructing a total of 5,000 km of roads in Rajasthan, Orissa, Kerala, Karnataka and Andhra Pradesh.
Goutham Reddy, Managing Director of KMC said of the projects, "Road development is a priority sector and the ongoing focus on highway infrastructure development is essential to sustain India's economic growth... We have made significant inroads toward this focus."
In other infrastructure news, Kotak Mahindra Group announced that it has launched an infrastructure fund targeting $300 million, to be raised from local and international investors. Japanese financial group Sumitomo Mitsui Banking Corp and Canada's Brookfield Asset Management are cornerstone investors, with the entities committing up to 22.5 % of the funds' capital, according to Kotak Mahindra.
Nomura Securities also announced that it is planning to raise $500 million from local investors. The fund is slated to launch in early July and will invest in the building of roads, ports and power utilities.
As a result of the rapid economic growth in India, migration from rural areas to towns are following the building of bigger, better highways and ports. With the further growth in India, the Asia Development Bank (ADB) has aligned with India government to provide financing of $700 million from 2009 to 2013. ADB will make further loans of $315 million to the government of Karnataka for a major revamp of the overburdened state highway system, which will help spur economic growth and job opportunities, the bank explained in a statement.
State highways - which are secondary routes linking to national roads and carry about 40% of all traffic - are especially overloaded with increasing congestion, and as a result growing safety issues. The rebuild of the roads aims to increase both the vehicle load and safety standards of the highway systems.
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