Traffic passes DLF Cybercity, a 128-acre integrated business district, in Gurgaon, India. Australia’s Hastings Funds Management  is planning to invest in India to plug the country’s  infrastructure gap.

Dow Jones

Crumbling roads, dilapidated ports and an overstretched energy grid have long dragged on India’s economic growth. But Australia’s Hastings Funds Management sees a turning tide that is giving new opportunities for investors as New Delhi looks to plug the infrastructure gap.

The Melbourne-based infrastructure manager has just struck a partnership with India’s Aditya Birla Group, seeking to extend its reach into the developing economy at a time when the government sees demand for investment in everything from roads to electricity grids topping $1tn.

“A huge infrastructure need is building up,” said Hastings chief executive Andrew Day in an interview from Melbourne, adding that his firm plans to set up an office in Mumbai.

Day didn’t say how much money the new fund was targeting, but Hastings already manages about 7.4bn Australian dollars (US$6.9bn) in infrastructure assets globally. It is eager to tap into the Indian market as it looks to expand its presence in Asia, where so far it has focused on the more developed markets of South Korea and Japan.

The partnership with Aditya Birla will initially offer debt financing through a dedicated India fund for already-built infrastructure, such as airports and toll roads. For now, the two companies say they aren’t looking to finance fresh infrastructure projects through the venture.

Ajay Srinivasan, chief executive of Aditya Birla Financial Services, a unit of the Indian conglomerate, described the alliance as “a powerful combination” that would help India fulfil its urgent infrastructure needs.

The companies have identified as many as 250 already-operating assets that may provide investment opportunities, according to Hastings. Day said it was too early to speculate, however, on how much interest the new fund might attract.

“Until now we had really concentrated on selecting our strategic partner and putting the platform in place,” he said. “Next, we’ll start testing investor appetite.” Day said the fund would aim to provide longer-tenured debt of 10-15 years to Indian infrastructure companies, freeing up local investors to fund newer infrastructure. He said he foresaw sovereign-wealth funds, pension companies and insurance firms in Asia, the US and UK signing up to the new fund.

Foreign investors have begun returning to India as the country emerges from a period of slowing growth blamed by some on government mishandling of areas like bureaucratic reform, infrastructure development and corruption-related issues.

India’s inflation rate has recently come down to more manageable levels, while its chronic current-account deficit has shrunk significantly over the past year. Some investors are betting national elections – which run from early April until mid-May – will see the ruling center-left Congress administration toppled. The local stock market has rallied in anticipation of a better investment climate if the opposition Bharatiya Janata Party wins.

The current government has a five-year plan that runs until the end of 2017 that includes some hefty infrastructure investments. Much of the focus will be on fixing the country’s crumbling ports and overstretched power plants.

Other overseas companies are also looking with renewed enthusiasm at Indian infrastructure.

Earlier this month, a consortium led by United Arab Emirates’ Abu Dhabi National Energy Co agreed to buy two hydroelectric power plants from India’s Jaypee Group for $1.6bn. The company says it is seeking more acquisitions in India as consolidation in the country’s power and utilities industries likely heats up.

 

 

 

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