L&T Infra Finance Private Equity, which is in the process of raising a total of Rs 3,750 crore in an overseas fund and a domestic fund, plans to launch a real estate fund, too. The first two funds will focus on infrastructure assets such as power, roads and renewable energy.
The infrastructure financing non-banking financial company's latest move comes on the back of building a Rs 14,800-crore loan book in the past eight years.
In 2002-12, private spending in infrastructure was to the tune of Rs 9.3-lakh crore. On a debt-equity ratio of 70:30, currently, Rs 2.8-lakh crore worth of risk capital is at work. These assets are largely operational and form a pipeline for capital recycling through replacement of investors.
"We are overwhelmed with the opportunity there; we have a good pipeline for investments," says Suneet K Maheshwari, group executive vice-president of L& T Finance Holdings and director - L&T Infra Finance, overseeing the PE initiative.
Private fund managers usually operate in three areas - private equity, infrastructure and real estate. L&T Infra's strategy is to first get into infrastructure, which offers the best opportunity, and then to the next big opportunity - real estate.
The company plans to start the process of raising the real estate fund after the closure of first two funds. The size of the real-estate fund is still not known. For the domestic fund, it has already raised Rs 500 crore from the first round of subscribers and it is doing the second round of subscription for Rs 250 crore. After that, it wants to get into overseas fund-raising for Rs 3,000 crore. Both the funds are going to be for 10 years.
The firm has already got the core team of about a dozen members in place, which will be further increased once the fund-raising is over. "We have made two initial commitments so far. We will start doing more once we have the size of the fund in sight," says Maheshwari.
In July Piramal Enterprises committed $1 billion in a tie-up with Dutch pension fund APG Asset Management for investment in the infrastructure sector. L&T, along with other home-grown private fund managers IL&FS, and IDFC Alternatives, is looking to raise about $2.5 billion over the next six-to-eight months.
Besides, another $2.5 billion is expected to be dedicated for India out of the estimated $7.5 billion currently getting raised by global fund managers such as Morgan Stanley Infrastructure, KKR & Co and J P Morgan Chase & Co for their global infrastructure investment funds. When contacted, Morgan Stanley declined to comment.