Piramal, Dutch APG tie up for $1 bln infra investment

MUMBAI Wed Jul 30, 2014 10:06am IST

A labourer cuts an iron rod at the construction site of a flyover on the outskirts of Ahmedabad June 24, 2014. REUTERS/Amit Dave/Files

A labourer cuts an iron rod at the construction site of a flyover on the outskirts of Ahmedabad June 24, 2014.

Credit: Reuters/Amit Dave/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - Piramal Enterprises Ltd (PIRA.NS) has tied up with Dutch pension fund APG Asset Management to invest $1 billion in Indian infrastructure companies over three years, in a move that would help indebted firms access funds to complete projects.

A sluggish economy and stalled bureaucratic decision-making for the past two years thwarted capital investment and dented earnings, making it tough for infrastructure companies to raise funds and launch or complete road and power projects.

Piramal, controlled by billionaire Ajay Piramal, and APG will invest in local infrastructure companies through rupee-denominated mezzanine instruments, the two sides said in a statement on Wednesday.

Mezzanine debt, commonly used by private equity firms, comes between senior debt and equities.

Piramal and APG have each initially committed $375 million for investments under the alliance, the companies said.

Many Indian infrastructure companies borrowed heavily in the past few years when the economy was one of the fastest growing in the world, but were squeezed by a slowdown in growth last year and a slide in the rupee to record lows.

"This was always the missing element in the capital stack," Jayesh Desai, co-head of structured investment group at Piramal told Reuters, referring to long-term capital to fund infrastructure building in Asia's third-largest economy.

India has ambitious plans to fix its creaky infrastructure with an aim to spend $1 trillion on the sector by 2017, half from private sources.

"We thought that there was a clear-cut market need for long-term money, which would basically not be permanent equity," he said. "We could look at projects also but largely the idea is to look at companies."

Desai said APG had been a investor in Indian infrastructure through its funds. The alliance with Piramal marks the Dutch pension fund's first direct investment in domestic infrastructure companies, he said.

Led by one of India's 50 richest people, Piramal has evolved from a textiles manufacturer in the mid-1980s into a group with interests in pharmaceuticals, glass, financial services and real estate.

Macquarie Capital acted as the sole financial advisor for the Piramal and APG deal.

(Reporting by Sumeet Chatterjee and Devidutta Tripathy; Editing by Christopher Cushing)

FILED UNDER:

Banking

REUTERS SHOWCASE

Tobacco Control

Tobacco Control

India moves toward ban on loose cigarettes to deter smoking   Full Article 

Pressure on RBI

Pressure on RBI

Exclusive - RBI under pressure to cut rates as growth slips  Full Article 

Asset Sale Dates

Asset Sale Dates

India yet to decide on dates for key asset sales - official   Full Article 

Women on Boards

Women on Boards

Germany to introduce legal quotas for women on company boards  Full Article 

OPEC Oil Talks

OPEC Oil Talks

Saudi, Russia pre-OPEC talks yield no oil output cut  Full Article 

India-U.S. Trade

India-U.S. Trade

India, U.S. hold first trade dialogue in four years  Full Article 

SAARC Summit

SAARC Summit

China looms over SAARC summit in the Himalayas  Full Article 

Microsoft in China

Microsoft in China

Microsoft to pay China $140 million for 'tax evasion'   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage