According to Jayesh Desai, Co-Head of Structured Investment Group (SIG), Piramal Enterprises Limited over USD 150 billion of equity and mezzanine funding is required to meet government target investment of USD 1 trillion until 2017; and this is the gap which the new strategic alliance between Piramal Enterprises and APG Asset Management seeks to bridge with a target investment of USD 1 billion over the next 3 years. PIL and APG Asset Management strategic alliance recently announced a target investment of USD 1 billion, one of the largest private sector commitments to the infrastructure sector in India and one of the single largest commitments to date by a foreign investor to the infrastructure sector in India. PEL and APG have each initially committed USD 375 million for investments under the strategic alliance.
According to Dick Sluimers, CEO of APG this strategic pool of capital will focus on operational and near completion projects with limited execution risks and high visibility of cash flows coming from a portfolio of projects. The access to this source of capital will enable infrastrucutre players in India to retain their equity interest in the assets, while raising long term capital to help them complete their on-going infrastructure projects and enhance shareholder value.
Hans-Martin Aerts, Head of Infrastructure Asia, APG said, “We believe that the infrastructure sector in India is at an inflection point. Given the strong push of the new government on sector revival through conducive policy measures, the funding from this strategic alliance will help infrastructure companies to recycle capital and contribute significantly to the further development of India’s infrastructure sector.”
Desai further said, “Mezzanine investments for infrastructure sector in India offers a compelling investment proposition as it addresses the void in the capital stack, which currently exists in the market place. This is due to the constraints of commercial banks in India to provide only senior secured lending at asset level where there is limited headroom, especially in cases where there has been delay in project execution”.