US$200 million commitment to IDFC’s India Infrastructure Fund II
CDC, the UK’s development finance institution, is today announcing a major new investment into Indian infrastructure, bringing new capital to key sectors including roads, ports, social infrastructure and power.
CDC is committing US$200 million to the India Infrastructure Fund 2 (IIF2) run by IDFC Alternatives Limited. The commitment from CDC, which is its largest ever to an Indian investment fund, has helped IIF2 reach a first close of US$644m, with the IDFC team targeting a total fund size of US$1billion from a range of institutional investors. The fund will provide long-term, equity investment for both construction and operating infrastructure projects across the country.
The infrastructure gap is acute and widely recognised in India. Despite enjoying two decades of rapid economic growth, the country continues to face significant infrastructure shortages. Under its current five-year development plan, the Indian government estimates that there is an investment shortfall of almost US$1 trillion, half of which must come from the private sector.
CDC is one of the largest investors in Indian private equity funds with over US$680 million invested – and US$1.1bn committed – supporting almost 300 companies in the country. Around 28% of CDC’s Indian investment has been in infrastructure.
“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. Our investment in IDFC’s India Infrastructure Fund 2 will go some way towards meeting the huge demand for new infrastructure and will encourage greater commercial investment in the sector.
“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. Having previously back IDFC’s first infrastructure fund we know that the team has the experience, skills and commitment to make responsible investment that we value highly at CDC.”
CDC backed IDFC’s first India Infrastructure Fund in 2008 by providing US$100m. 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 Private Limited on the eastern cost India. CDC was also an early investor in IDFC Limited, the Sponsor, in 1998 and also backed the IDFC Private Equity Fund II and III.
Hiti Singh added:
“IDFC’s track record has successfully brought essential infrastructure to India, including in some of the poorest states. The first fund created over 4,000 direct jobs as well as indirect employment for many thousands more. By pioneering private equity investment for infrastructure in India they have helped attract more, much-needed capital. CDC’s commitment of US$200 million will help them to build on this success.”