IL&FS seeks $1bn for infrastructure – Exclusive

The Mumbai-based firm is raising a $500m fund and seeking co-investors to deploy matching capital into assets and infrastructure holding companies.

Mumbai-based Infrastructure Leasing & Financial Services Investment Managers (IL&FS) is seeking to raise $1 billion to invest in infrastructure in India.

The $1 billion pool will be comprised of a $500 million IL&FS India Infrastructure Fund with matching co-investments by investors in the fund, IL&FS Investment Managers chief executive officer Archana Hingorani told Private Equity International.

The fundraising began in September last year for the vehicle that will target investments in both existing assets and brownfield holding companies. It is expected to hold a first close in September this year.

One of the strongest investment themes today is the Indian infrastructure sector, said IL&FS Investment Management senior managing partner Krishna Kumar, who oversees its infrastructure investments.

Kumar emphasised the road sector, noting that “discounting rates on operating toll roads hover between 15 to 18 percent. If one can conclude some good acquisition opportunities with ticket sizes ranging between $75-100 million, this sector could alone see $300-500million of commitments over the next one to two years from a portfolio perspective.”

The fund is evaluating a few assets but has yet to commit capital, Kumar said.

IL&FS has been investing in infrastructure since 1998, deploying $580 million into 37 investments. In the infrastructure space it has completed 22 exits, five of which were through initial public offerings and the remainder to strategic buyers or trade sales.

The India Infrastructure Fund follows three earlier infrastructure-focused funds: IL&FS’ 2000-vintage, $16 million, India Project Development fund, which is now fully divested having made seven investments; the Pan Asia Project Development Fund launched in 2006 that raised $45 million and is now fully invested in seven transactions, of which it has exited three; and the Standard Chartered IL&FS Asia Infrastructure Growth Fund that raised $658 million in 2008, has invested in nine transactions and exited three.

In addition to its dedicated funds, the firm has invested in local infrastructure through other vehicles including its AIG Indian Sectoral Equity Fund, a growth vehicle launched in 1996, where five of its six investments were in the infrastructure sector. That fund is now fully divested.