Infrastructure in India is increasingly being viewed as a potential sector of growth and investment. Opportunities are aplenty in related segments such as power, civil aviation, roads and highways etc. Earlier this year, Dr Manmohan Singh, the Hon'ble Prime Minister of India, during a conference on 'Building Infrastructure: Challenges and Opportunities' organised by the Planning Commission in New Delhi, on March 23, 2010, had indicated of a 10 per cent growth target per annum being set for the 12th Five-Year Plan (2012-17). "In effect the investment in infrastructure should be doubled to US$ 1 trillion in the 12th Five Year Plan as against the target of US$ 439.46 billion in the 11th Plan", he remarked.

India's infrastructure sector output grew 5.1 per cent in April 2010 from a year earlier, according to data released by the Central Statistical Organisation. During the 2009-10 fiscal year (April-March), core sector output rose to 5.5 per cent from 3 per cent a year ago. The infrastructure sector itself accounts for 26.7 per cent of India's industrial output. As per the latest SIA newsletter (April 2010) released by DIPP, foreign direct investment (FDI) inflows into some of the promising sectors such as power, constructive activities including roads and highways and ports have been approximately US$ 1.44 billion, US$ 3 billion and US$ .06 billion, respectively for the period from for the financial year 2009-10.

The Planning Commission of India in a recently released report, 'Monitorable Targets & Milestones for 2010-11', has indicated several opportunities in the infrastructure sector consisting of ample scope for investment and growth. For example, in the civil aviation sector, a target of US$ 562.20 million for investment for 2010-11 into public private partnerships (PPP) airport projects such as CSI Airport, Mumbai, IGI Airport Delhi, Hyderabad Airport and Bengaluru Airport has been planned. In-principle approval has already been given to greenfield airports such as Gulbarga and Bijapur, Shimoga and Hassan airports in Karnataka, Kannur International Airport in Kerala etc., by the Secretary, Civil Aviation, according to the Planning Commission brief on civil aviation in the report. Similarly, 20,359 MW capacity addition has been planned in the power sector for the current financial year 2010-11.

Several such infrastructure projects related to roads, highways, ports etc., are either being deliberated upon or are already underway in different stages of completion. Some major projects that have recently received approvals are listed below:

The Cabinet Committee on Infrastructure (CCI) has accorded approval to four highway projects worth Rs 2,536.16 crore (US$ 541.3 million). The highway projects would span five states which include Bihar, Gujarat, Madhya Pradesh, Uttar Pradesh and West Bengal.

The National Highway Authority of India (NHAI) has awarded Ashoka Buildcon Ltd (ABL)—a build, operate and transfer (BOT) operator—two infrastructure projects, collectively worth Rs 1,389 crore (US$ 295.4 million).

PE investments in Indian infrastructure

Investors are looking towards becoming a part of the India's growth story, largely attributed to the emerging investment opportunities in the infrastructure sector. A huge chunk of these investments comes from the private equity investors.

According to data released by PE research firm, 'Venture Intelligence', there have been 19 deals in this sector at an approximate investment of US$ 1.1 billion so far in 2010 till the month of May,. PEs had struck 14 deals worth US$ 255 million in the same period last year.

Private equity funds have risen over US$ 4.25 billion during the last three years for investment in the infrastructure sector, according to industry estimates. Global investors like 3i and JP Morgan and domestic players like the PE fund promoted by State Bank of India are investing into the sector; GMR Energy received a US$ 200-million investment from the Singapore government-owned Temasek Holdings.

PE investors are investing heavily in projects, for instance, Singapore-based utility firm Sembcorp has picked up 49 per cent stake in Gayatri Projects' 1,320-mega watt, coal-based power project in Andhra Pradesh, for US$ 234 million; Similarly Actis has invested money worth US$ 78 million in TRIL Roads, a Tata Realty company. All this reflects a healthy trend.

Significantly, infrastructure projects have longer gestation periods giving such investors to stay connected with an invested project for a long time span. However, these investors can avail various exit options available in hand, such as selling whole or a part of their stake in the project to another strategic investor.

Infrastructure funds

Government initiatives such as setting up or enhancing the facility of separate infrastructure funds dedicated to the sector are being carved out and incentives are being given to ensure active participation of investors for the development of the sector.

India has already doubled its target for infrastructure spending to US$ 1 trillion in the five years starting since the year 2012. The country is also planning to set up a Rs-500 billion (US$ 11 billion) debt fund to build ports, roads and bridges that will help drive economic growth.

The central government is concretising plans to set up a US$ 1 billion sovereign-backed fund to bolster trade and investment by domestic power utilities in South Asia. The Commerce Ministry has sought the help of Export-Import Bank of India (EXIM) and the Export Credit Guarantee Corporation of India (ECGC) to structure the specific modalities. The fund is aimed at developing a South Asian regional energy grid, with a focus on renewable sectors such as hydro, solar and wind.

The state governments are also playing an active role in infrastructure development. For instance, a Kerala Local Government Development Fund (KLGDF), recently launched by the Kerala Government, has been designed to provide financial assistance and expert guidance to civic bodies for executing infrastructure development projects.

The state of Karnataka, similarly, has sustained its focus on infrastructure growth and development in the State, urban infrastructure in particular.

The Global Investor Meet in Karnataka, held on 3rd and 4th of June this year, saw 361 memoranda of understanding (MOUs) being signed with major investments promised in the infrastructure sector. The key proposals include the following:

Brahmani Industries Karnataka Ltd, which proposes to invest US$ 7.71 billion to set up a 6-million-tonne-per-year (mtpa) integrated steel plant with a captive power plant in Bellary;

ArcelorMittal, the world's largest steel company, plans to invest US$ 6.42 billion in and around Bellary in Karnataka;

JSW Steel plans to invest US$ 3.24 billion on capacity expansion and a captive power plant in Bellary;

Jindal Saw Pipes plans to set up a steel plant at US$ 28 million in Bellary;

Bhushan Steel is also setting up a 6 mtpa (million tones per annum) integrated facility at an investment of US$ 6 billion in Bellary; The existing investment offerings of the State of Karnataka, a partner of OIFC, are appended in the table below along with the nodal points of contact: