INTERVIEW - Power sector to drive India capital raising

By Tony Munroe and Narayanan Somasundaram

MUMBAI (Reuters) - India's power sector, short of capacity and starved of finance, will drive capital-raising in the country as operators embark on an expansion drive, a top Merrill Lynch banker said.

While India has made progress in expanding its roads and port facilities and improving its airports, development in the power sector has lagged and the country suffers from a peak hour power deficit of more than 10 percent, with blackouts frequent in some areas.

"What we have been lacking is power," said Saurabh Agrawal, who was recently promoted to head of investment banking for DSP Merrill Lynch, the India investment banking unit of Bank of America.

"We will see a lot of issuance coming out of power because that's the segment that's starved for capital," he said in an interview at the firm's offices.

A nearly 90 percent rally in India's stock market from October lows has led capital-hungry Indian companies to revive fund-raising plans.

Last month's decisive election win by the ruling Congress party-led coalition, meanwhile, has fuelled expectations for a kick-start to infrastructure projects in the country. The government has said India needs $500 billion in infrastructure spending in the five years ending in fiscal year 2012.

"The elections have been a game-changer," Agrawal said. "The key driver is we've moved away from coalition politics and back to a two-party system."

So far this year, 11 Indian companies have raised a combined $2.6 billion in equity, and three dozen more, including GVK Power, are looking to raise nearly $10 billion, according to Thomson Reuters data.