Asked to think of the leading pioneers in private equity investment in Indian infrastructure, many people familiar with the market would name Luis Miranda. Therefore, the recent announcement by Miranda that he would be stepping down as president and chief executive of Mumbai-based fund manager IDFC Private Equity by the beginning of November was widely viewed as momentous.
When you take note of India’s staggering infrastructure ambitions today – and the increasing number of deal and project completions in the sector – it’s easy to forget that when Miranda launched IDFC Private Equity eight years ago, scepticism regarding Indian infrastructure was rife.
“In 2002, there were probably about three people in total who believed it would work,” recalls Miranda. There was a general pessimism about Indian infrastructure, including from international LPs. There were plenty of people who said they would never invest in a domestic infrastructure fund. Today, it’s the biggest investment opportunity in the country. All the large private equity deals and IPOs are all related to infrastructure.”
Miranda believes that IDFC Private Equity’s “biggest contribution was to create a private equity model for infrastructure in India”. At the outset, he says, IDFC benefitted from the lack of competition. Just eight years on, the competitive environment is very different, he says. “Today the challenge is that everyone wants to be an Indian infrastructure developer or investor. And it’s not easy. There are a lot of challenges in terms of execution risk and I think a lot of players that want to be developers underestimate the challenges. There’s a herd mentality where you think you can succeed just because others have.”
Why has he chosen now to step down from the pinnacle? The simple answer is that now is as good a time as any. “There’s never a good time to leave a private equity firm,” he says. “There’s always fund commitments being made, capital being invested, new funds being launched. It’s an endless cycle. But IDFC is an experienced team with very competent partners capable of running it. I believe that it’s time for new leadership.”
Once he has relinquished his current role, Miranda will for an unspecified period be a non-executive chairman. It is expected that he will support investor and portfolio company relationships and provide advice to the investment team. However, he says that “the role has not been finalised in terms of all the details but it’s to ensure a smooth transition”.
Reflecting on a landmark achievement, he points to IDFC Private Equity’s participation in a consortium that restructured and modernised Indira Gandhi International Airport in Delhi alongside Indian developer GMR Group, German airport operator Fraport and Malaysian Airports Company Berhad, the Malaysian airports operator.
“A lot of people asked us ‘why is a private equity fund in a bid like this?’” says Miranda. “We knew little about airports at the outset but we figured that by being involved in all the decisions related to the bid, we would learn a lot about the airport business.” Thanks partly to its impressive new Terminal 3, the airport is now South Asia’s largest transport hub.
Delhi Airport may be seen as a symbol of how far Indian infrastructure has come in the eight years since IDFC Private Equity was formed. How does Miranda summarise that period? “We were part of the infrastructure revolution,” he concludes.