Macquarie-SBI Infrastructure Fund (MSIF), one of the largest in this category in India, run by Macquarie SBI Infrastructure Management Pvt Ltd (MSIT), is in an advanced stage of talks with a shipping port company to make an investment of about Rs 1,000 crore ($200-220 million). According to sources, the deal is likely to be closed in a couple of months.
An Macquarie-SBI spokesperson said, “We do not want to comment on market speculation.”
MSIF is a $1.2-billion fund and MSIT is a joint venture of State Bank of India (SBI), Macquarie, the Australian financial conglomerate, and the International Finance Corporation, the private sector lending arm of the World Bank, for investments in infrastructure projects in India.
Along with the mounting interest in Indian infrastructure, ports and shipping are gaining significance in the backdrop of increased cargo traffic. Major private equity investors in Indian infrastructure are taking rising exposure here.
Ramesh Singhal, CEO, i-maritime Consultancy, an advisory firm in shipping, said, “Profitability in the port sector is higher compared with other sectors in India. Usually, about 50 per cent of revenue can be earned as profit. If the port handles cargo of about 30-40 million tonnes, about Rs 700 crore can be achieved as profit out of Rs 1,400 crore revenue. Also, the land where the port is situated brings high valuation. The land value may be Rs 15 lakh-2 crore per acre.”
3i Group, which manages a $1.2-billion India-focused infrastructure fund, had invested in Krishnapatnam Port and in Mundra Port and SEZ. Gujarat Pipavav Port had also raised funds from IDFC Private Equity, IL&FS and NYLIM Jacob Ballas. Gangavaram Port Ltd had received funds from Warburg Pincus. In March 2010, India Infrastructure Fund, managed by IDFC Project Equity, invested Rs 150 crore in Karaikal Port Pvt Ltd. According to the Planning Commission, the port sector in India requires around $20 bn in investment by 2014. According to industry sources, Dighi Port, Maharashtra’s first greenfield (new) port and Gopalpur Port, located in Orissa, are eying PE investments for expansion.
| PRIVATE EQUITY DEALS IN PORTS: 2005-2010 | |||
| Date | Target | Buyer | Deal value ($ mn) |
| 27-Apr-05 | Gujarat Pipavav Port Ltd | UTI Mutual Fund , New York Life International India Fund I, IL&FS, Infrastructure Fund of India LLC, IDFC | 30.90 |
| 1-Sep-07 | Gujarat Pipavav Port Ltd | IDFC Private Equity Fund II | 15.60 |
| 25-Oct-07 | Mundra Port and Special Economic Zone Ltd | GIC Special Investments, T. Rowe Price, ICICI Bank, IDFC | 120.00 |
| 27-Nov-07 | Mundra Port and Special Economic Zone Ltd | GIC Special Investments Pte Ltd, 3i | 100.00 |
| 5-Sep-08 | Gangavaram Port Ltd | Warburg Pincus India | 35.00 |
| 24-Feb-09 | Krishnapatnam Port Co | 3i India Infrastructure Fund | 161.00 |
| 2-Mar-10 | Karaikal Port Pvt Ltd | IDFC | 15.72 |
| 28-Jun-10 | Ennore Container Terminal | Eredene Capital PLC | 34.65 |
| Source: VCCedge | |||
MSIF has made several major investments. There was the recent $310-million deal in Viom Networks, $125 mn in Moser Baer’s power project, $30 mn in Adhunik Power and a proposed investment of $200 mn in GMR Airports Holding Pvt Ltd. The fund has raised $1 bn and is set to close after raising another $200 mn by this month.
Ganesh Radhakrishnan, advisor, PricewaterhouseCoopers, said, “About 11-12 per cent growth is expected in cargo traffic for the next 15-20 years in India. The Indian growth story, especially in the power sector, will also bring a huge increase in cargo traffic. The mine acquisitions of Coal India abroad and the transporting of coal is expected to boost traffic.” The regulatory environment in India is also favourable for investments, he added.
According to VCCedge data, 2007 witnessed 57 VC/PE deals in infrastructure space worth $5.5 bn, the largest ever since 2005. There were 48 PE deals worth $2.8 bn in infra space took place in 2010.
