In an interview with CNBC-TV18's Gopika Gopakumar, Managing Partner & CEO, IDFC Alternatives MK Sinha, said, "The strategy for this fund is little different from the first fund. In the first fund, we did invest in the greenfield construction projects. Now we are staying away from that at least in the initial couple of years."
Recently, IDFC bought 74 percent equity in GMR's road project in Tamil Nadu. Sinha added that the company is looking at similar assets and has identified similar opportunities.
Meanwhile, the company is confident of raising USD 1 billion in December via India Infra Fund.
Also Read: Most roads projects have lost viability, says Gammon Infra
Below is the edited transcript of MK Sinha's interview with CNBC-TV18
Q: What were the challenges that you faced in closing a second infrastructure fund, in the given environment?
A: I wouldn't say it's easy, but there is always an opportunity and right now the opportunity is the massive deleveraging that is happening in the Indian infrastructure market. That is the story that we conveyed. Fortunately we have a first fund, we did have a track record to speak off. Most of our investors in second fund are re-ups from our first fund, so that made it a little easier our track record and our story.
Q: How was the second fund different from the first fund?
A: It is same in the mandate, it is going to continue to invest in core infrastructure, but in the strategy it is going to be different. Right now we are going to be investing in existing operating assets that stressed infrastructure developers are going to be shedding to correct their overleveraged position. So, the strategy is little different from the first fund. In the first fund we did invest in the greenfield construction projects.
We are going to stay away from that at least in the initial couple of years, in the second fund. Potentially things will get ironed out in the next few years and then we will come back to investing in greenfield construction infrastructure. Right now we are going to be buying existing operating assets from stressed developers. So, our mantra is good assets from stressed developers.
Q: Have you already identified these operating assets and it is big news because you are buying into operating assets which could be potentially facing some difficulties at this point in time. So, have you identified any of these assets?
A: We just recently bought 74 percent equity in GMR's road project in south India in the state of Tamil Nadu. There are similar assets that we are looking. There is a huge pipeline of these operating assets across the board. There are opportunities we have got them identified. I cannot be talking about them in public.
Q: How much of the problems infrastructure problems back home is because of financing difficulties and how much is it because of policy paralysis because we keep hearing more about policy paralysis issues. So, considering that now the fund has been launched, do you think that this could solve the infrastructure challenges back home?
A: I do not think financing is a problem. The issue is clarity in consistency in policy. There is policy out there. It is not just very clear or consistent. So, if the Government of India has clarity in consistency in its policy then a lot more money can come into Indian infrastructure.
Fundamentally, Indian infrastructure opportunity is a very robust investment opportunity. A lot of money especially of pension funds from the West are looking to buy into long-term annuity assets and India provides the largest opportunity to invest in such assets going forward.
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