Abu Dhabi Investment Company, the sovereign wealth fund of the United Arab Emirates with an estimated $650-875 billion in assets, is looking to enter the private equity space in India, said sources. The company is in the process of roping in BDO India, part of the world’s fifth-largest accounting network, for its India entry.
According to experts, the firm will set apart $1 billion for India, which will primarily target the infrastructure sector, especially power and renewable energy.
?Being a very large sovereign fund with hundreds of billions of dollars in assets, it would look at longer span of investments of 10-12 years before seeking an exit option, unlike other funds which may look at an exit in 5-6 years. Infrastructure projects, with their long gestation periods, are thus well-suited for such investment,? a source said. The firm is currently in discussions with consultants from BDO ? which has offices in West Asia ? to chalk out a road map for entering the country.
The Abu Dhabi fund?s move comes at a time when stock market volatility has scuppered the plans of many Indian companies to raise capital through public offerings, opening up new opportunities for private equity players. State-run Indian Oil Corporation, for instance, has put on hold its plans to raise Rs 20,000 crore through a follow-on public offering (FPO) owing to the difficult market conditions and the spike in crude oil prices. The FPOs of Steel Authority of India and Oil and Natural Gas Corporation have also been deferred to the next financial year owing to market volatility. Similarly, L&T Finance, which was targeting a Rs 1,500 crore initial public offering (IPO) by February, will now tap the markets in June. ?With interest rates hardening and the capital market being volatile, private equity has become an attractive option for mid-market growth capital,? says Alok Gupta, managing director India and partner, Headland Capital Partners.
The Abu Dhabi Investment Company was founded in 1977 originally to invest on behalf of the Abu Dhabi government. In 2007, the company was given a new mandate, to attract and manage third-party funds, in addition to the investment of government assets. To reflect this strategy, the company adopted ?Invest AD? as a brand name in mid-2009. It is owned by the Abu Dhabi Investment Council.
Private equity firms invested $7.9 billion over 325 deals in India during the 12 months ending December 2010, compared to $4 billion across 290 deals during the previous year, according to an analysis by Venture Intelligence, a research service focused on private equity and M&A activity. Another study said infrastructure (including power), continued to remain one of the key investment themes for PE players in 2010. The sector topped the investment chart accounting for 35.3% of investments with a deal value of $2.87 billion.
The largest investment reported during the year was the $425 million raised by power generation firm Asian Genco from investors including General Atlantic, Goldman Sachs, Morgan Stanley, Everstone and Norwest. Infrastructure fund SBI-Macquarie?s $304 million commitment to independent telecom tower infrastructure firm Viom Networks (formerly Quippo Telecom) was the next largest investment. The third spot was shared by two $300 million investments, one by Blackstone into an unlisted renewable power generation firm of the Moser Baer Group and another by Quadrangle Capital Partners into telecom towers firm Towervision India, Venture Intelligence said.