Debt markets may be sluggish and banks cautious about lending to capital intensive sectors but the silver lining is that good projects still have it in them to excite investors. Projects with strong underlying cash flows with well managed balance sheets, continue to have access to long term debt, avers Archana Hingorani, Chief Executive Officer and Executive Director, IL&FS Investment Managers Ltd (IIML), in an interaction with Pradeep Pandey.
How do you see the overall investment scenario in India and the Middle East region?
India is poised to gain from the current challenges that the global economy is facing as this is translating into significant value oriented opportunities for investors. Most companies are looking at the revival of the investment cycle and long term institutional money for growth. This situation has been compounded by the lack of patient capital that understands the business fundamentals and market cycles. This gives private equity investors significant opportunities to exploit Value and Growth oriented opportunities. Despite the tumultuous political events in some of the Middle Eastern countries over the past few years, the long-term outlook for the private equity sector remains positive because of the region's robust macroeconomic fundamentals. Rapidly rising population and vast natural resources will spur economic growth in the next few years with Governments having embarked on massive spending programs and announcing record budgets.
Saudi Arabia has announced a US$ 385 billion five-year development plan (2010-14) to improve the standards of living, enhance labour skills, and diversify the production base in the country. Qatar is set to spend up to $150 billion on infrastructure projects over the next 5-6 years as it starts preparing for the FIFA World Cup in 2022. UAE too has planned an ambitious infrastructure spending over the next few years which includes spending US$58 billion on roads and bridge projects, $11 billion on a railway network and US$30 billion on a nuclear energy program. The investment scenario in Middle East has positive indications.
Which are the sectors, you feel, are still lucrative for investment in the present scenario?
The current Indian outlook points to a great investment opportunity in the infrastructure sector. Other areas to focus on are growth private equity, the special situations space and the listed space where pockets of value and opportunity are currently emerging.
In the Middle East, the most promising sectors include renewable, health care, education, consumer goods, oil & gas and SME - those which are likely to benefit from government spending plans. In terms of countries, Saudi Arabia, United Arab Emirates, Qatar and Oman are the most preferred.
Do you have plan for investment in renewable energy?
Over the last few years, there has been a spurt in investment opportunities in renewable energy for PE investors driven by the high cost of fossil fuels, attractive tariffs and the emergence of companies with scalable business plans. Further, policy measures such as open access and renewable purchase obligations have increased the bankability of projects for financial investors. We would closely continue to evaluate investment opportunities in the Renewable Energy sector and show a preference for companies with superior execution capabilities, scalable business models and land/equipment tie ups.
How do you see the investment prospects in energy sector?
The energy sector is the largest component of the US$ 1tn investment envisaged in the 12th five year plan. The sector is attractive from a private equity investment perspective given the large existing demand supply deficit and increasing demand led by the rapid pace of industrialisation and growing per capita income. The sector has faced several challenges in the recent past mainly on account of fuel related issues and the creditworthiness of state electricity boards. However, recent government regulations such as power tariff hikes, coal price pooling and restructuring of state electricity boards have alleviated investor concerns to a large extent.
We like companies with better fuel security and sustainable tariff models which provide revenue visibility. Going forward, we expect to see increased opportunities not only in power generation but also in sectors such as transmission, distribution and allied sectors.
How you see the debt market in the present scenario of tight interest rates?
The debt markets are strained and the banks continue to be cautious on lending to the capital intensive sectors which are under strain. The cost of debt is impacting the cash flows of most, and many companies, which are over leveraged, are seeing significant stress on their balance sheets. Having said that, our experience suggests that good projects with strong underlying cash flows with well managed balance sheets, continue to have access to long term debt as compared to businesses which are riskier in nature.
IL&FS Investment Managers Limited (IIML)
IIML, a subsidiary of Infrastructure Leasing & Financial Services Limited (IL&FS), is one of the oldest and largest private equity fund managers in India, with over $ 3.2 bn under management. Established in 1989, IIML has been an early and in many instances, the first investor across various sectors such as Telecom, City Gas Distribution, Shipyards, Retail, and Media. Funds managed by IIML now span General Purpose Private Equity, Real Estate and Infrastructure. Investors to IIML managed Funds include most of the major Indian Banks & Institutions, and marquee Global Institutional Investors including major U.S. Pension Funds, Endowments and Foundations. IIML is listed on the National Stock Exchange and The Bombay Stock Exchange.
I wish to start pvc / pp electric wire unit in Delhi. What kind of information I can get if I subscribe for your magazine
Pls invite me all auction in gujarat
we are doing business developing for solar power ,thermal power , customer supporting and we have 45 mw splar power on hand needs investors.....
pls call +910842559230