Private equity funds focused on infrastructure projects have jammed their brakes, or are in a wait-and-watch mode, as the Western financial meltdown and the local slowdown are delaying projects or making it difficult for them to identify projects worth putting money into in changed conditions.
Some are waiting for valuations to come down while others are helpless because debt from banks that must match the equity is not being tied up, because banks are wary.
“The markets have come down and the money is rarely available. So we have placed a tight selection mechanism before investing,” said a top official from IDFC, which recently raised $835 million under its India Infrastructure Fund.
IDFC Private Equity has a corpus of $1.3 billion, besides a $ 900 million project equity fund. Domestic and foreign fund houses have collectively raised close to Rs 40-45,000 crore (nearly $10 billion) under their various infrastructure funds during the last 18 months for deployment in India.
Among them, IDFC Project Equity, Citi Group, Blackstone and the government had jointly launched a $ 5 billion (Rs 24,870 crore) infrastructure fund last year. However, Blackstone pulled out this year.
"For the projects, more than half of the portion should come through debt and the remaining through equity. The debt market has dried up and the private equity funds will prefer not to invest if the debt part has finalised and the closure has been signed," said Manu Punnose, who heads the Mumbai-based private equity fund, Subhkam Ventures.
According to a study, out of the total 28 private equity deals for a total of $970 million, only 8 per cent went into projects in power, energy and infrastructure sectors.