Infrastructure in India: TATA Group’s Australian offering

The 100-year-old TATA Group of India, the big conglomerate controlled by charitable trusts, has launched an infrastructure fund to complement its real estate fund, which has raised US$750 million, including some from Australia.

The infrastructure fund, being marketed in Australia by IAI Management, is seeking US$1 billion to invest mainly in a range of power projects, roads, metro developments and airports in India. The investments will be a mix of brown-field assets, developed by third parties, and other developments instituted by TATA itself.

TATA, a closely held holding company which is 66 per cent owned by 14 charitable trusts, oversees more than 100 operating companies. The company was recently in the news in Australia by winning a big systems integration contract with super fund administrator SuperPartners.

It launched TATA Realty and Infrastructure Ltd (TRIL) in 2006. The undisclosed Australian investor in its real estate fund was placed by Macquarie Bank.

Phillie Karkaria, TRIL executive director, said on a visit to Australia last week, that the infrastructure fund had an investment horizon of 10 years, with three one-year extensions. For investors, there was no lock-up period and various exit mechanisms were possible before the expiry of the fund.

The fund would be leveraged at two- to three times, depending on the individual projects, invested through a Mauritius domicile, as with the real estate fund.

Karkaria said there was a massive need for infrastructure in India, where the economic figures indicated continued strong positive growth ahead and with the Government being prepared to spend US$500 million over the next five years on projects such as power generation and roads.
Raj Mundul, a director of IAI Management representing TRIL in Australia, said the Australian market was well accustomed to investing in infrastructure and was also increasingly looking for opportunities offshore.