Edelweiss to launch $1 billion infrastructure-focused fund
MUMBAI: Financial services-focused Edelweiss group’s Edelweiss Alternative Asset Advisors Ltd (EAAA), an investment manager, on Thursday announced it will soon launch an infrastructure-focused fund—Edelweiss Infrastructure Yield Plus —for which the firm plans to raise as much as ₹6,500 crore (approx $1 billion).
Edelweiss is targeting a base size of ₹2,000 crore for the fund, with a green shoe option to raise up to ₹4,500 crore more.
In November, Mint reported that the Edelweiss group was planning to launch a $1 billion infrastructure-focused fund.
The proposed Edelweiss infrastructure fund will be just the third major infrastructure-focused fund to be raised by a domestic institution in India in the last several years, following IDFC Alternatives and a joint venture between Tata Power Co. Ltd and ICICI Venture Funds Management Co. Ltd.
India’s massive need for investment in infrastructure and the need for infrastructure companies to exit their operating assets to de-leverage their balance sheets is the opportunity that Edelweiss is looking to tap, said Nitin Jain, global chief executive-global asset and wealth management, Edelweiss, in an interview.
“Infrastructure is a large asset class in India and globally. To meet the growing needs of the country, there is significant capital expenditure which has been incurred during the last 10-15 years and will continue to be incurred for the next 20-30 years,” Jain said.
However, historically, the sector has faced huge execution risks, project delays and returns on such under-construction assets were not commensurate with execution risks, he added.
“In the last 5-10 years, a significant amount of investment has gone into building these assets and as per market estimates, we currently have about $700 billion of operating assets, out of which approximately 40% is owned by the private sector. Existing infrastructure and construction companies are seeking to monetize their operating assets to raise/ recycle capital or deleverage their balance sheet,” Jain said. In this situation, Edelweiss sees an opportunity to aggregate good quality operating assets and generate mid-teen returns for invest tors.
“Globally, infrastructure is recognised as a sustainable asset class and a desirable alternative to volatile equity markets and low-yielding fixed income investments. Good quality infrastructure assets can provide longterm, predictable yields to investors,” Jain said.
This is the first time that Edelweiss will invest in equity in the infrastructure sector, despite the group’s long track record of servicing infrastructure companies across its various businesses.
“Over the last decade, we have successfully built various businesses with exposure to the infrastructure space such as equity and debt capital markets, advisory, etc. on the franchise side and capital investment through our credit and distress businesses. Edelweiss did not participate in equity investments in infrastructure previously as most of these opportunities were for under-construction assets with high risk,” Jain said.
The infrastructure fund will primarily look at buying operating assets in the highways, renewable and transmission space with a credible revenue counter-party, low operating costs and long residual life.
“We aim to aggregate good quality assets into a large platform, enhance its value by doing financial and operational improvement and then look to sell the business to a strategic player or a large financial investor or opt for an exit through the InvIT route,” said Jain.