India's UTI launches infrastructure fund

UTI Asset Management Company has partnered with HSH Nordbank and Kuwait's Noor Financial Investment Company to launch a $500 million infrastructure fund.

The fund, India Infrastructure Development Fund (IIDF), will make private equity investments in infrastructure projects in India, including those which are being offered to private developers under the public-private partnership (PPP) model. India has been promoting the PPP model, a collaborative model between private developers and the government, to address its infrastructure gap, specifically in the areas of roads, ports, airports and power generation.

IIDF has already made its first investment in a city gas distribution project, Sabarmati Gas. The company distributes gas in the city of Gandhinagar and in the districts of Mehsana and Sabarkantha in the state of Gujarat. It also supplies natural gas to industrial units.

UTI AMC has set up the fund to channel funds from offshore investors, but the fund also has the option of raising domestic money.

"A significant number of PPP projects across various infrastructure sectors are being offered to private developers," UK Sinha, chairman and managing director of UTI AMC, said in a written statement commenting on the fund launch. "Recognising this potential, UTI AMC has decided to set up this fund."

UTI AMC is the investment management arm of UTI mutual fund. As of June 30, 2009, UTI MF had average assets under management of Rs680 billion ($14 billion) raised from 78 domestic schemes and more than 9 million investor accounts. The sponsors of UTI MF are all government-controlled entities, namely State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India.

HSH Nordbank is a German commercial bank with twin headquarters in the cities of Hamburg and Kiel. It has a presence across Europe and an office in New York. In Asia it is present in Hong Kong, Mumbai, Shanghai and Singapore. Its major shareholders are the state of Schleswig-Holstein and the Free and Hanseatic City of Hamburg.  

HSH Nordbank has a track record in financing for the transport sector, especially within shipping, aviation and transport-related infrastructure projects. It is also the largest financier of ships in the world. HSH is already involved in infrastructure financing in India as a participant in the debt financing for the Delhi Airport modernisation project which is currently being undertaken by Hyderabad's GMR Group.

Noor is the financial arm of NIG Group, a conglomerate in the Middle East. Noor is also a shareholder in a number of companies in Kuwait, including Kuwait Finance House which is the second-largest Islamic bank in the world.