Industry Q&A: Luis Miranda

Q: Which aspects of infrastructure are you most active in?

A: We look at everything in India that's a bottleneck for growth, so we look at the hard infrastructure, which is roads, ports, airports, power and telecoms. We look at soft infrastructure, which includes health, education and tourism. And we also look at a third category, which is companies that enable infrastructure, like companies that make equipment for the solar industry or equipment for the wind industry.

Q: Do you prefer to enter projects as the sole investor or do you like co-investing with other groups?

A: We believe that two heads are better than one, but the challenge sometimes is deal size, so a lot depends on how large the deal is, the amount that we would like to put into it, and how we can bring out LPs into the mix. We've done deals where we've co-invested with our LPs; we've done deals where we've co-invested with other funds; but a lot of our deals we are the only investor, so we run the gamut.

Q: There is a vast amount of infrastructure needed in India, so how do you decide which subsectors or deals are most commercially viable?

A: The challenge is finding deals that are bankable. Right now, we are looking at the power sector, because that is less focused on the external economy. But that presents other issues as well, like valuation expectation.

But in general, we look at deals across the sector, and there are some parts of that which are too underdeveloped to be commercially viable. In those situations though, the government is actually stepping in with what they call viability gap funding, where they will provide part of the cost for the project to make it worthwhile. So for example in the Bangalore and Hyderbad airports, they were the first airports being developed to world-class standards, so the government did provide some viability gap funding for those two.

Q: How much do you work as educator or advisor to the government to help put these types of measures in place, enabling infrastructure to grow as a sector of opportunity?

A: As part of the IDFC group, we're in a very interesting position. You've got a variety of other arms of IDFC involved. You've got the investment bank, you've got the project finance shop, which is our parent company, we have a project and equity arm, and we also have a policy arm, which has done a lot of work with the government. The Civil Aviation Policy was re-written by IDFC, the whole roads development scheme was done by IDFC, port privatization was done by IDFC, and the telecoms licensing issues were done by IDFC. So, of any of the infrastructure firms in the country, we've played the largest role in terms of policy work and helping facilitate the private sector investment into infrastructure.

Q: Do you enjoy that side of things?

A: I think it's very important to be involved in the policy side. For example, on education, we're actually involved a lot with the government in terms of the whole vocational skilling part, and working with various different committees. It's not just the private equity part, but the entire IDFC family that's involved in this exercise, and through that we have touch points that with different ministries, with different trade associations and those types of organizations.

Q: What's ahead for IDFC?

A: The big challenge is always staying ahead of the pack. When we started in 2002, nobody believed in infrastructure; it was one of those sectors people said didn't make sense to invest in. I think one of our biggest achievements is proving to people that India has a growth equity model in infrastructure in many situations. The downside of that is a lot more people have come into the space. For us, to stay ahead of the pack, we just have to keep running faster. We are continuing to look at new things, look at how to leverage the larger IDFC network to be able to have better deal access and deal closure. It's getting tougher, but that's a good thing for India.

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• Topics
• South Asia
• People
• Luis Miranda
• IDFC Private Equity