IDFC eyes $450 mn via second core fund float

Infrastructure Development Finance Corporation (IDFC) expects to raise $450 million through its second infrastructure equity fund that closes this month.

The corporation is also set to raise $200 million in external commercial borrowings (ECBs) from International Finance Corporation (IFC) and Asian Development Bank (ADB).

In addition, IDFC is poised to float another equity fund, which will invest in listed companies in the infrastructure domain.

"With this fund, our committed equity funds for infrastructure funding would cross $1 billion," Rajiv B Lall, managing director and CEO of IDFC, said at the launch of the India infrastructure report 2006.

The fund, to be raised from institutional investors, will have a lock-in of two years only. IDFC has hired Nishid Shah, ex-ceo of Birla Sun Life, to manage its new equity fund.

IDFC's first private equity fund had raised $220 million in 2004. The corporation has already got the RBI approval to raise about $150 million from World Bank's private lending arm IFC.

"We have received approval for raising ECB of $150 million from IFC," Lall said, adding, the amount would be raised next month. "We have also applied for another $50 million in ECBs from ADB," he added.

Lall commented on the lack of absorptive capacity as an impediment to increased lending in infrastructure. "How much can you lend if there is lack of absorptive capacity?" Lall asked.

"We would like to be part of the Mumbai renewal plan," Lall said when asked on the future projects that IDFC would look at.

IDFC's financing in infrastructure is focused on gas and electricity distribution, while it is also working in the areas of solid waste management and various public-private partnership projects, including urban transportation.

IDFC is sitting on unrealised gains of Rs 250 crore from the six-seven equity investments it has made over the last four years, and this works out to an annualised internal rate of return of 35 per cent.

It has a less than 10 per cent stake in GMR's project to modernise the Delhi airport.

The corporation has 12 per cent stake in its second equity fund of $450 million, while it owns 8 per cent in its first equity fund.