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3i Looks for Third India Port Stake as Traffic Rises

 3i Group Plc, the London-based private-equity investor that has a $1.2 billion infrastructure fund for India, is looking to make its third investment in a port as the nation’s freight traffic exceeds capacity.

“We like the space,” said Anil Ahuja, managing director of 3i’s India business and co-head of 3i Asia, in a telephone interview from Singapore. “India is amazingly short on port capacity.” He declined to identify the potential targets.

3i has placed a combined $211 million in Krishnapatnam Port Co. on India’s eastern coast and Mundra Port & Special Economic Zone Ltd. in the west to tap capacity in a nation where traffic is forecast by the government to almost double to 1 billion tons by March 2012. As much as 95 percent of the South Asian nation’s global trade is routed by sea and the ports require $20 billion in the next five years, according to India’s Planning Commission.

3i invested $50 million in Mundra in the western state of Gujarat before India’s largest non-state-run cargo terminal sold shares in an initial offering in November 2007. The port had a 46 percent growth in revenue in the year ended March 31 and a profit margin of 36 percent, according to data on the Bloomberg.

“The potential of huge returns is what is attracting investments in the port and infrastructure sector,” said D. H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. “Investors are looking for opportunities that will gain from the expected turnaround in the trade next year with the global economic recovery.”

Among India’s Largest

In February this year 3i Group invested $161 million in Krishnapatnam. The port, still being built on a 12- kilometer (7.4 mile) quay in the southern Andhra Pradesh state, will be among India’s largest, Ahuja said.

“The growth is quite steady and is almost predictable,” he said. “We’ve done two ports and our experience in both has been very good.”

India’s 12 major ports handled 530.4 million tons in the year ended March 31, 2009, up 2 percent from the year earlier, according to the Indian Ports Association. Kandla, the biggest state-owned major port in Gujarat, handled 72.2 million tons.

‘Serious Shortages’

Separately, Ahuja said 3i will make its next investment in a company that may be in the power, airports or roads business. He didn’t provide details.

“We believe there are serious shortages. Capital can be deployed and returns made,” he said.

India’s government aims to spend $500 billion by 2012 to build roads, ports and power supply to boost growth and incomes in Asia’s third-biggest economy.

Source: Bloomberg

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