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L&T Infra Finance to Launch $500-million debt fund

According to reports,  non-banking finance company L&T Infrastructure Finance is launching its maiden debt fund, joining a number of private equity firms that have set up infrastructure dedicated funds in recent months.

The $500-million ( Rs 2,708 crore) debt fund will look to invest in distressed assets, particularly in the roads segment. It will also invest in renewable energy, power and urban infrastructure projects, according to three people with direct knowledge of the developments.

“L&T has started the road show for the new fund and is now approaching investors, including insurance companies to invest in the new investment vehicle,” said one source on condition of anonymity.

In his 2013 Budget speech, finance minister P Chidambaram said the government will be encouraging infrastructure debt funds to raise resources and provide long-term low-cost debt for infrastructure projects through take-out finance and credit enhancement, among others.

“Investing in Indian infrastructure is challenging as well as potentially rewarding. Significant macro-economic demand coupled with lack of last mile liquidity provides attractive opportunities for private equity,” said Karthik Athreya, director of Clearwater Capital Partners.

A number of risk capital firms have launched infrastructure-focused funds over the past six months. In March, the Kotak Mahindra Group announced the first close of its Core Infrastructure India Fund at $90 million ( Rs 490 crore), after receiving commitments from Japan’s Sumitomo Mitsui Banking Corp and an affiliate of Brookfield Asset Management.

Earlier in February, ET had reported that global investment firm Macquarie Capital was raising a $1.1 billion fund that will invest in infrastructure projects in India, Sri Lanka and South-east Asia.

Larsen & Toubro, the $17.5-billion engineering and construction conglomerate, is one of the anchor investors in the new credit fund, and is expected to contribute up to $300 million ( Rs 1,625 crore) to the proposed fund’s corpus.

“This is actually a good performance by L&T Infrastructure Finance. It’s extremely tough raising money in this current environment, and equity hasn’t performed,” said Vikram Hosangady, head of private equity at KPMG.

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