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SBI cash for core growth

Mumbai, April 6: The State Bank of India (SBI) and Australia’s Macquarie Group have launched an infrastructure fund that will invest in traditional assets such as roads, ports, airports and power plants. The duo have already raised $1.037 billion.

International investors have committed $887 million to the fund, while the SBI has committed $150 million, bringing the total capital raised to $1.037 billion.

The fund will continue to raise capital during 2009, and together with Indian domestic institutions, the total capital is expected to be between $2 billion and $3 billion.

Foreign institutions will invest through Macquarie-SBI Infrastructure Fund (MSIF) and Indian domestic institutions will invest through an entity called the SBI-Macquarie Infrastructure Trust (SMIT).

MSIF is managed by the joint venture between the SBI and Macquarie, with the International Finance Corporation (IFC), a member of World Bank Group, a minority shareholder. SMIT will also be managed by the joint venture.

The SBI, Macquarie and the IFC have committed $150 million each to bring in a total of $450 million sponsor commitments.

The SBI said the joint venture was a win-win combination and had a mix of local and international expertise.

While the SBI has a knowledge of the country’s infrastructure sector, Macquarie is a leading owner and operator of infrastructure assets globally and it will bring its global expertise in the financing, development and operation of infrastructure assets to the joint venture.

Investments will be made in traditional infrastructure assets that generate long term identifiable cash flows, and that exhibit essential service characteristics. Apart from roads, sea ports and airports, the other sectors that will be targeted include power transmission and distribution, gas distribution, telecommunications and logistics.

Investments will include greenfield projects as well as established businesses.

According to the SBI, an investment pipeline has been identified and is under assessment.

The sponsors expect further investment opportunities over the next two to three years, which correspond with the investment period of MSIF.

R. Sridharan, managing director of the SBI, quoted estimates which said the country would need close to $500 billion in infrastructure investments in the next five years.

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