Baer Capital Partners, a Dubai-based funds management company, plans to raise $500 million to invest in real estate and infrastructure in India, the world's fastest growing major economy after China.
The firm will begin investing in India in the second quarter of next year after tapping investors outside India in early 2008, Alok Sama, president of Baer Capital, said in an interview in Mumbai.
“It's critical for India's economic development that infrastructure is increased sharply,'' said Pauli Laursen, who manages $800 million at Sydinvest Asset Management at Aabenraa in Denmark and holds shares of Indian companies including Larsen & Toubro Ltd. and Bharat Heavy Electricals Ltd. “India needs money from all over for its infrastructure.''
India requires half a trillion dollars of investment in infrastructure including roads and power plants during the next five years as it aims to lift growth in its $906 billion economy to 10 percent by 2012. Baer Capital joins JPMorgan Chase & Co., 3i Group, Blackstone Group and Citigroup Inc. in planning to invest funds from overseas in Indian companies building roads, ports and electricity plants.
“The experience of China would suggest 10 percent growth can be sustained for periods longer than believed,'' Sama said in an interview last week.
Sama controls Baer Capital along with Michael Baer, a former board member of Swiss private bank Julius Baer Holding AG, and Brij Raj Singh, a former managing director at Merrill Lynch & Co.
The firm plans initial investments in companies that provide infrastructure services, including contractors and suppliers of equipment such as cranes and earth moving equipment. These will be in demand as developers build more highways, power plants, bridges and townships, Sama said in an interview in Mumbai last week.
Baer Capital has already invested about a third of a $200 million private equity fund in power transmission services and an art auction house. Sama, who helped Morgan Stanley set up its investment banking in India, said the private equity fund would also invest in a developer, infrastructure services and a software testing company.
Just 2 percent of the 3.4 million kilometers of roads in India are highways. The nation is constructing more highways to reduce transport time and costs.
Investor appetite for companies in the power industry has also increased, amid growing demand for electricity. Reliance Energy Ltd., an electricity generator and distributor, engineering company Larsen & Toubro Ltd. and power-equipment maker Bharat Heavy Electricals are the top three performers on the Bombay Stock Exchange's Sensex index this year.
Sama said the subprime crisis crimping global credit markets won't stop the flow of global funds into India.
“Fund raising will probably slow down, but at the margin India should experience a disproportionate share of flows into emerging markets,'' Sama said.
India's economy has the potential to grow as much as 12 percent a year and a worst-case scenario would be for 6 percent annual growth, he added.
Finance Minister P. Chidambaram forecasts the Indian economy to grow 9 percent in the year to March 31.
Source: Bloomberg