September 2009
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PE players see opportunity in infrastructure

A majority of large private equity (PE) players are gearing up to raise fresh funds for investing in the infrastructure sector. According to a survey of the leading PE firms conducted by management consultancy Ernst & Young and industry body Asscoham, 84 per cent of the PE firms said that they found the present environment conducive to raise infrastructure-focused funds.

“Investors are taking a long and hard look at their asset allocations and setting the wheels in motion for a change,” said Kuljit Singh, partner and transactions advisory leader for infrastructure, Ernst & Young. “In this process infrastructure has emerged as an asset class with long-term growth prospect providing relatively stable returns,” he added.

There has been an investment of $2.6 billion in the infrastructure segment in the last three and half years. Out of this, 36 per cent has gone to the power sector, while roads and highways attracted 19.7 per cent of the amount. About a third of the total investment was done in the diversified project portfolio.

“The appetite of PE investors towards infrastructure has increased due to a strong pipeline of ongoing projects, increasing private sector participation and the rise in infrastructure-focused PE funds in India,” said Singh.

“As the sector continues to evolve over the next 5-10 years, it will pave the way for increasing opportunities for various sub-segments requiring large capital commitments,” he said.

The respondent PE firm saw opportunities in urban infrastructure, water, waste water, sewerage system and solid waste management.

Around 80 per cent of the respondents expressed the view that both India and China offered equally attractive opportunities in infrastructure. The funds prefer to exit the investments through initial public offerings

Around 82 per cent of the respondents preferred the initial public offering route for an exit.

Source: Business Standard

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