IDFC and IDFC Project Equity--which manages the India Infrastructure Fund (IIF)-- have picked up 20% stake in GMR Kamalanga Energy Ltd, an SPV under GMR Group’s energy holding company.
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While IIF will hold 15% in the SPV, IDFC will pick up 5%. GMR’s Kamalanga project—a 1,050 MW captive thermal power plant in Dhenkanal district of Orissa—is estimated to cost Rs 4,540 crores ($953 million).
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According to an earlier filing with the BSE, the company said that the project will have an equity component of Rs 1,135 crore, of which 20% or Rs 227 crore will be funded by IDFC. This works out to be an investment of around Rs 170 crore from IIF into the project. However, Aditya Aggarwal, investment manager, IIF, says, "this might not be true for transactions which happen at a premium."
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The project by GMR Energy, a subsidiary of GMR Infrastructure, has also made a loan agreement with a consortium of 13 banks, led by IDFC, for Rs 3,405 crore or $715 million.
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The project achieved financial closure in May 2009 and has commenced construction with commissioning being scheduled in August 2012.
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Aggarwal, who led the deal, from IIF said, “we continue to be selectively bullish on opportunities in the Indian power sector.” The two central themes for IIF's investment this year would be power generation and transportation which includes roads highways. He said, the investment pipeline looks healthy to him and that they would invest about 30-40% of the fund on the power generation side, 20% on transportation and the remaining 20% across urban infrastructure.
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IIF's strategy is a little different from a conventional PE player in that it provides "patient capital for about 10-15 years." Aggarwal agrees that deals are taking longer to close and, with a run up in the public equities, the valuations are getting on the higher side as well.
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IDFC Project Equity, which raised a record $900 million for project equity investments in the Indian infrastructure sector, has earlier invested Rs 350 crore in Essar Power Ltd and $50 million in two special purpose vehicles (SPVs) floated by Nashik-based Ashoka Buildcon Ltd among its disclosed portfolio.