ArthVeda, the private equity arm of housing finance company Dewan Housing Finance, is poised to launch a INR2 billion ($40 million; €30 million) infrastructure debt fund, offering institutional investors exposure to refinancing and distressed debt opportunities in the Indian market.
In addition to targeting returns of 25 percent, the fund will invest up to $4 million per deal in unlisted utilitiy companies, roads, national highways, and sewage and water supply projects with annual revenues ranging between $5 million and $10 million.
The fund will be managed by Mumbai-based portfolio manager Lokathan Nadar.
“Local institutional investors are still seeking stable value propositions in infrastructure debt,” Nadar told Private Debt Investor, Infrastructure Investor's sister publication. “It is widely known that many infrastructure projects are maturing and are in dire need of financing.”
Nadar believes the collapse in the country's infrastructure sector by more than 66 percent, to $1.14 billion in 2012, compared to 2011, will provide fund managers with distressed debt and refinancing opportunities.
“The country has been faltering into cost overruns – we are trying to mitigate risk, and extrapolate yields by providing lending streams to infrastructure projects for sub-contractors and project executers.”
The firm is predominantly targeting local pension funds, funds-of-funds, and insurance companies as limited partners, and aims to hold a first close by July. Subsequently, it will launch an offshore infrastructure debt instrument to replicate the first fund and cater to global institutions.
“We are already seeing appetite from offshore investors for the vehicle, and the increase of activity in the use of debt streams signals the growing attractiveness of debt as investors seek high yields,” he added.