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CDC commits $200 mn to IDFC’s infra fund

According to reports, In its largest ever commitment to an Indian investment fund, the UK government’s development finance institution CDC Group Plc on Friday pledged $200 million (around Rs.1,200 crore) to the India Infrastructure Fund II (IIF2) run by IDFC Alternatives Ltd, bringing new capital to the country’s roads, ports, social infrastructure and power. The commitment has helped IIF2 reach its first close of $644 million.

IDFC Alternatives is targeting $1billion for the fund from a range of institutional investors. The infrastructure fund will provide long-term equity investment for both construction and operating infrastructure projects across India.

CDC is one of the largest investors in Indian private equity funds with at least $680 million invested and $1.1 billion committed, supporting almost 300 companies in the country. Around 28% of CDC’s Indian investment has been in infrastructure.
The infrastructure gap is acute and widely recognized in India. Under its current five-year development plan, the Indian government estimates that there is an investment shortfall of almost $1 trillion, half of which must come from the private sector.

“Poor infrastructure is one of the biggest obstacles to development and economic growth in India. The level of historic infrastructure investment has failed to keep up with the pace of economic growth and industrial expansion,” said Hiti Singh, CDC’s portfolio director, Asia Funds, in a statement.

“Despite the current economic difficulties in India and the many challenges that face infrastructure projects, we remain committed to providing long-term investment to the sector.”

CDC backed IDFC’s first India Infrastructure Fund in 2008 by providing $100 million. The fund has subsequently made 15 investments across the country in businesses including the wind power operator Mytrah Energy, the Vijaywada toll road connecting Kolkata and Chennai and in Karaikal Port Pvt. Ltd on the eastern coast of India. CDC was also an early investor in Infrastructure Development Finance Co. Ltd in 1998 and also backed the IDFC Private Equity Fund II and III.

Addressing a seminar of bankers in Mumbai on Friday, Reserve Bank of India governor Raghuram Rajan said India needs to improve the quality of its infrastructure, especially the logistical support and power that industry and services need. “Grand plans are on the anvil, such as the Delhi-Mumbai Industrial Corridor. We need to complete such projects on time, and within budget,” he said.

For multi-national companies wanting to set up facilities in India, especially manufacturing businesses, infrastructure is one of the key challenges, Tim Hanley, global leader, manufacturing at Deloitte told Mint in an interview on 11 November.

“Infrastructure is a real inhibitor to growth. It is on top of everybody’s list. Projects in infrastructure which have not taken place in India have put the brakes on some investments in the country since foreign MNCs have looked at other markets that do not face these challenges,” Hanley said.

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