For a number of years, the view has been widely expressed that India's dilapidated infrastructure is one of the main blocks to the country's ability to attract foreign investment. But the closing of two funds last month suggest that, for some at least, this supposed repellent is actually proving to be something of a magnet.
After all, if infrastructure problems need fixing, then who better to perform the task than the world's canniest investment groups?
In February, two GP heavyweights stepped up to the plate. First, the Indian finance ministry revealed that Blackstone Group was joining forces with Citigroup and India's Infrastructure Development Finance Company (IDFC) to launch a $5 billion fund to target investment opportunities in roads, utilities and airports.
The three groups are reported to be committing a combined $250 million of their own capital to the project, with the rest to be sourced from foreign and local investors. Equity investments will account for around $2 billion of the $5 billion total, the remaining $3 billion will be debt.
India's finance minister Palaniappan Chidambaram said of the fund: “This initiative is an important milestone in our search for innovative solutions to meet the vast challenge of financing the development of India's burgeoning infrastructure sector.”
Following shortly after news emerged of Blackstone's effort, London-listed 3i said it would float a listed £1.3 billion (€1.9 billion; $2.5 billion) fund to invest in infrastructure in Europe, the US and Asia. In terms of the Asian element of the strategy, 3i revealed that India would be of particular interest.
Neither Blackstone nor 3i have been dissuaded from seeking to exploit opportunities in India by its backward infrastructure – both firms having opened offices in Mumbai in 2005, headed by Akhil Gupta and Anil Ahuja respectively.
Rival firms that do still have reservations about setting down roots in the country may take comfort from the fact that two such luminous private equity groups are quite literally paving the way for their arrival.
MKS LOSES PARTNER TO KKR
MKS Partners, a Japanese private equity firm, has lost one of its partners to Kohlberg Kravis Roberts (KKR). Naohiko Kitsuta was in charge of leading buyouts in the consumer services and retail sectors at MKS, and will become a managing director at KKR. Kitsuta was previously at Boston Consulting Group in Tokyo.
TENFOLD INCREASE FOR VIETCOMBANK FUND
Vietcombank Fund Management, a joint venture between Bank for Foreign Trade of Vietnam and Singapore-based Viet Capital Holding, has raised $120 million (€91 million) for a second fund, one year after it closed its first fund on $12.5 million (€9.5 million). The new fund will invest in pre-IPO opportunities and the privatisations of large public companies.
WARBURG PINCUS KOREA HEAD FACES JAIL
A Korean court has sentenced Hwang Sung-jin, the Korean head of Warburg Pincus, to four years in prison for insider trading. The charges resulted from an allegation that in 2004 the US private equity firm improperly disposed of its shares in LG Card before a crash in the company's share price. The court also fined two Warburg affiliates $28 million each.
CDC COMMITS $20M TO LOMBARD
CDC Group, a UK governmentbacked fund of funds, has committed $20 million to Lombard Asia III. The fund had already attracted support from Calpers, Asian Development Bank and two Malaysian pension funds at its first close of $153.5 million last February. The fund has raised about $200 million so far to provide expansion capital, and has a target of between $300 million and $500 million.
FIRST CLOSE FOR ABRAAJ INFRASTRUCTURE FUND
Abraaj Capital, a Dubai-based private equity firm, has raised $500 million at the first close of its $2 billion infrastructure and growth capital fund. The fund is co-sponsored by Deutsche Bank and Ithmaar Bank, a Bahrain-based investment bank. Abraaj recently named David Donaldson as its new chief financial officer, and promoted Jonathan Hall and Omar Lodhi to executive directors.
CARLYLE, PROVIDENCE IN AUSTRALIAN MEDIA DEAL
The Carlyle Group and Providence Equity Partners have bought Independent News & Media's listed Australian media business for A$3.8 billion ($3 billion; €2.3 billion). The two buyout firms are investing in APN News & Media alongside existing 42 percent shareholder Independent News & Media, a listed Irish publishing company. Upon completion of the deal, Independent News & Media will hold a smaller 35 percent stake, while Providence will control 37.5 percent, and Carlyle 27.5 percent.
ORCHID FIRM BLOOMS IN HONG KONG
Orchid Asia, a growth capital firm, has made three times its investment from the flotation of Wuyi International Pharmaceutical Company on the Hong Kong Stock Exchange. Orchid invested $18 million for a 9.5 percent stake in Wuyi, which makes branded prescription and over-the-counter pharmaceuticals, in 2006. The investment was made from Orchid Asia III, a $181 million fund, more than half of which has now been invested.
BAIN VENTURES INTO CHINA REAL ESTATE
Bain Capital has made an initial investment of $60 million for a minority stake in the Jinsheng Group, a mall operator and real estate developer based in Nanjing. Bain has made the investment with CBL & Associates, a US mall developer headquartered in Nashville. Both investors have been granted a three-year warrant in the business for an additional combined $7.5 million investment.
$8.5M FOR INDIAN MOBILE COMPANY
SIDBI Venture Capital and Clearstone Venture are investing a combined $6.5 million in mobile device manufacturer DGB Microsystems. India-based SIDBI has invested $1.5 million and Clearstone has invested $5 million. SIDBI is currently investing from its second fund, a $110 million vehicle that closed in May 2005.
BLACKSTONE BACKS INDIAN MEDIA FIRM
The Blackstone Group is buying a $465 million (€360 million) stake in Ushodaya Enterprises, an Indian media company. The private equity firm is investing $275 million of equity, backed up by $190 million of bank finance. Ushodaya Enterprises is the third-largest newspaper publisher and the fourth-largest private television broadcasting network in India. The acquisition is Blackstone's fourth investment in the media sector.
CARLYLE TAKES STAKE IN LISTED BPO FIRM
The Carlyle Group has bought a 27.7 percent stake in Allsec Technologies, an India-listed business process outsourcing company, for $25.4 million. The investment is Carlyle's second Indian deal from the $668 million Carlyle Asia Growth Partners III fund. Carlyle first invested in Allsec in August 2006 when it purchased 3 million shares in a deal worth $17 million.
OPIC SPONSORS THREE JORDAN FUNDS
The Overseas Private Investment Corporation (OPIC), a US government-backed investment agency, is sponsoring three private equity funds looking to make investments in Jordan. OPIC is committing $50 million (€38.1 million) to Jordan Fund II, which is managed by Middle Eastern private equity firm Foursan, and which has a $150 million (€114.3 million) target. OPIC is investing another $50 million in the EuroMENA fund, which is managed by global private equity and corporate finance advisory firm Capital Trust Group, and which has a $113 million target. OPIC will commit a further $100 million to the Emerging Markets Housing Fund, which is managed by the Luxembourg-based Emerging Markets Housing Fund Management Company, and which has a target of $300 million.
VCS BACK NZ BIOTECH COMPANY
Venture capital investment in New Zealand biotech companies is accelerating. CoDa Therapeutics has raised $20 million (€15.2 million) in an initial financing round from US-based venture capital firm Domain Associates and Australia-based GBS Ventures. The company received an initial investment of $10 million (€7.6 million) in October, while negotiations on an additional $10 million were concluded last month. Another New Zealand-based biotech company, Proacta, has raised $35 million (€26.6 million) in a second financing round. New investors include US-based firms Clarus Ventures and Delphi Ventures.