State Bank of India or SBI, India's largest commercial bank, in a filing with Bombay Stock Exchange, said it has launched the Macquarie-SBI Infrastructure Fund or MSIF in joint venture with Australia's biggest Investment bank Macquarie Group Ltd. with a capital base of $1.037 billion.
The Mumbai-based bank said overseas institutions would invest through the fund and Indian domestic institutions would invest through a domestic entity called the SBI-Macquarie Infrastructure Trust or SMITE. The fund and SMITE will invest together in infrastructure projects in India.
The bank said international investors have committed $887 million to the fund, alongside a direct co-investment commitment of $150 million by SBI. The fund is formed with the main objective of investing in infrastructure projects in India.
MSIF is managed by the SBI and Macquarie joint venture, with the International Finance Corporation of IFC, the private financing arm of the World Bank, as a minority shareholder and cornerstone investor in MSIF. State Bank and Macquarie will hold 45% stake each in the fund, with the remainder owned by IFC, which also committed $150 million. The joint venture will also manage the SMITE.
Investments will be made in traditional infrastructure assets that generate long-term unidentifiable cash flows, and that exhibit essential service characteristics. These include roads, sea ports, airports, power generation, transmission and distribution, gas distribution, telecommunications and logistics businesses. Investments will include greenfield projects as well as established operating businesses, the bank noted.
MSIF intends to raise capital during 2009, and together with Indian domestic institutions, the total capital is anticipated to be between $2 billion and $3 billion, the bank said.
SBI and Macquarie bring a unique combination of local and international expertise to the joint venture. SBI is the largest project finance arranger in Asia and the largest lender in India with a deep knowledge of the country's infrastructure sector.
Macquarie, as a leading operator of infrastructure assets globally, brings to the joint venture its global expertise in financing, development and operation of infrastructure assets.
The bank said an investment pipeline has been identified and is under assessment. The sponsors anticipate further investment opportunities over the next two to three years, which corresponds with the investment period of MSIF.
The head of Macquarie Capital Funds in Asia, Nick van Gilder, said the joint venture would provide unparalleled access for investors to the India's strong underlying economic growth.
AT the BSE, SBI shares are currently trading at Rs.1,144.50, down by Re.0.85 or 0.07% on a volume of 5.15 lakh shares. The bank's scrip touched an intra day high of Rs.1,199 and an intra day low of Rs.1,138.20.
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