April 2008
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Macquarie Group and SBI Plan Infrastructure Fund

Australian securities firm Macquarie Group Ltd., (MQBKY.PK) and state owned State Bank of India plan to raise $2 billion to invest in direct infrastructure opportunities in India.

They join other global banks, including Citigroup Inc., JPMorgan Chase & Co., ICICI Bank Ltd., and the London-based 3i Group Plc in planning to raise funds for investment in India's infrastructure.

Macquarie and SBI signed a memorandum of understanding to set up a company and manage the proposed fund. Macquarie, SBI and The International Finance Corporation as one of the cornerstone investor have planned to contribute a total of $450 million to start the fund.

The fund, which is expected to launch by the end of June, intends to provide equity and equity-like capital for investments in roads, ports, airports and power. It will also look at investment opportunities in infrastructure-related assets and businesses. The fund will also raise further capital from both domestic and international institutional investors.

“Infrastructure opportunities in India are tremendous with India's population expected to grow to almost 1.7 billion by 2050,'' Nick van Gelder, head of the Australian company's Macquarie Capital Funds unit in Asia, said in the statement. “With disposable income levels increasing across India, we anticipate a relentless demand for infrastructure in the coming decades.''

India needs large investment to strengthen its infrastructure to speed up growth to 10% by 2012 from an average of 8.7% since 2003. It is estimated that the South Asian nation may need around $500 billion between 2007 and 2012. According to the Indian government dearth of investment in utilities cuts approximately 2% from the nation's growth.

As the primary sponsors of the fund, Macquarie and SBI will enter into a partnership for the sourcing and execution of direct equity investments in India's infrastructure market, which is expected to experience exponential growth over the coming decades.

With accelerated pace of reform in the development of a legal and regulatory framework, that facilitates investment in infrastructure in India, SBI expects infrastructure spending in India to reach $1 trillion in the next decade.

Macquarie manages 116 infrastructure assets across 25 countries, with 33 funds with equity under management in excess of $49 billion. SBI, India's largest commercial bank by assets, profits, deposits, branches and employees is listed on the Bombay Stock Exchange.

IFC, the private sector arm of the World Bank, has a 50-year track record in India, and currently has total direct commitments of $1.4 billion to Indian projects and businesses.
Source: RTT News

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