Private equity looks to pounce on cut-price India infrastructure

MUMBAI, May 16 (Reuters) – Private equity investment in Indian infrastructure is poised to pick up following a lengthy dry patch as debt-stressed operators of toll roads and other projects come under pressure from banks to offload assets to strengthen balance sheets.
This time, would-be investors such as KKR, the Blackstone Group and Macquarie Group are looking at buying into completed projects, a relatively safe bet, tempted by valuation expectations that have fallen roughly 25-30 percent over the past two years, fund managers and bankers said.
A previous wave of private equity investment in Indian infrastructure was often in early stage projects, many of which were bogged down by delays, eroding prospects for returns. Adding to their woes, developers are saddled with outstanding bank loans of roughly $200 billion.
“Quite a number of infrastructure projects were excessively geared when they were built … they are struggling to meet their debt obligations today. This is the opportunity for us,” said Suresh Goyal, CEO of SBI Macquarie Infrastructure Fund.
The $1.2 billion fund, run by State Bank of India and Australia’s Macquarie, in February bought a controlling stake in a road from debt-laden GMR Infrastructure.
“Many sponsors or developers do not want to and in some cases cannot support these projects and are therefore looking to sell. Many of these projects are good quality assets which comfortably fit our investment mandate,” he said.
Among potential deals, NCC Ltd, which is backed by Blackstone, is in talks to sell its 51 percent stake in a 78-km (48-mile) toll road in the northern state of Uttar Pradesh to Morgan Stanley’s infrastructure fund, sources with direct knowledge of the matter said.
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