News analysis: 3i needs second Indian infra fund

To meet its goal of deploying $2bn to $3bn in Indian infrastructure, 3i will likely launch a second fund as its current fund is near 70% invested.

3i Infrastructure, the infrastructure investment arm of listed firm 3i, looks set to start fundraising for a second Indian infrastructure fund in 2011.

The clearest indication on this came from chief executive Michael Queen, during a recent trip to India, where he told the local media that 3i was planning to have between $2 billion and $3 billion invested in Indian infrastructure over the next two years.

Queen told Reuters: “On the infrastructure side, India is the only country in the world where we have a dedicated country fund because the sheer growth opportunity here is more than anywhere else.”

But that first dedicated fund, closed in 2007 with $1.2 billion, is inching closer to being fully invested.
According to a 3i spokeswoman, 3i’s Indian fund will be 70 percent invested after the firm reaches financial close on a $182 million deal to acquire a 16 percent stake in Indian power firm GVK. And while the spokeswoman refused to confirm any timelines for a second Indian fund, or what amount said fund would target, Queen’s statement makes the math straightforward.

With $1.2 billion almost fully deployed, 3i will have to raise a second Indian infrastructure fund of at least the same size for the firm to be able to meet Queen’s proposed investment target over the next two years.

For the betting man, then, the question is not whether 3i will raise a second Indian infrastructure fund in 2011, as all signs are already pointing in that direction. The only missing piece of the puzzle is when in 2011 the firm will start raising it.