Private Equity News & Analysis

Report: Blackstone balks at India infrastructure initiative

The global alternatives manager has reportedly pulled out of the $5bn India Infrastructure Fund, the other backers of which include IDFC and Citigroup, because it was unhappy with the small equity portion it was allocated.

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The Blackstone Group has pulled out from the $5 billion India Infrastructure Fund as it was allocated just $35 million, or 3.5 percent, of the total equity component of $1 billion, according to a report in Indian newspaper Mint.

India Infrastructure Fund is a joint venture between India Infrastructure Finance Company, India’s Infrastructure Development Finance Company, Citigroup and Blackstone. When the initiative was announced early last year, the plan was to set up a $5 billion fund comprising $2 billion in equity and $3 billion in debt.

However, the equity component of the fund was reduced to $1 billion last year, according to Akhil Gupta, senior managing director at Blackstone and head of its India operations. “That [$2 billion] was the right size and that’s the bold thinking we should have had. We could have added huge amount of value,” the paper reported him as saying.

“They gave us $35 million. Each deal is much bigger than $35 million. So why would we invest $35 million and sit on the investment committee of every single project?” Gupta asked.

IDFC Project Equity and Citigroup have both invested $100 million into the fund, according to the report. It quoted MK Sinha, president and chief executive of IDFC Project Equity, as saying that in order for the “economics to be meaningful”, there was space only for two sponsors and therefore Blackstone pulled out.

According to the initial plan IDFC, Citi and Blackstone were to commit a total of $250 million to the fund. By October this year, the fund had raised $900 million, a market source said.

The equity financing for the fund is being managed by IDFC, while the debt is being channelled through India Infrastructure Finance Company. The fund is managed by IDFC Project Equity, a subsidiary of IDFC which mobilises and manages third party funds to invest in asset level equity, quasi-equity and convertibles.

The India Infrastructure Fund broadly focuses on the energy, transport infrastructure and telecom infrastructure sectors.

Blackstone did not respond to a request for comment. IDFC Project Equity could not be reached by press time.