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Piramal, Dutch APG Tie Up For $1 Bn Infra Investment

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Piramal Enterprises and the the Dutch pension fund asset manager APG Asset Management on Wednesday (30 July) announced a strategic alliance for investing in rupee denominated mezzanine instruments issued by  infrastructure companies in India with a target investment of US$ one billion over the next three years. PEL and APG have each initially committed US$375 million for investments under this strategic alliance.

This will be one of the single largest commitments to date by a foreign investor to the infrastructure sector in India. The partners will focus on operational and near completion projects with limited execution risks and high visibility of cash flows coming from a portfolio of projects. The access to this source of capital will enable infrastructure players in India to retain their equity interest in the assets, while raising long term capital to help them complete their on-going infrastructure projects and enhance shareholder value, said a press release.

APG Asset Management manages pension assets of €375 billion as at the end of June 2014. It represents over 30 per cent of all collective pension schemes in the Netherlands.

Piramal Enterprises, which sold its pharmaceutical formulation business for about Rs.18,500 crore to multinational drug firm Abbott in 2010, is now looking at big investments in high growth sectors like infrastructure, knowledge management and financial services. It  has done two structured investments last year, Rs 425 crore in Navyuga Road projects and Rs 500 crore in Green Infra.

Piramal Enterprises also had started another joint venture reaI estate fund in February, with Canada Pension Plan Investment Board (CPPIB). The $500 million fund, with equal investment from both the parties, plans to offer project-level debt to local developers for residential projects in Mumbai, Delhi NCR, Bangalore, Pune and Chennai.  Indiareit, a private real estate fund run by Ajay Piramal, was acquired by Piramal Enterprises in 2011. Currently it has Rs 5,000 crore under management and has exited a few projects fetching over Rs1060 crore.

“This is an opportune time to be creating an aligned pool of capital to target what we believe to be very compelling funding opportunities in the infrastructure sector in India", said Ajay Piramal, Chairman of PEL.

Dick Sluimers, CEO of APG said "In PEL, we found an aligned partner with the requisite expertise and industry knowledge to add value through active ownership, which is why we have teamed up with PEL for this strategic alliance in India. The strategy of the alliance to focus on mezzanine investments in infrastructure projects in India ticks the right boxes for our pension fund clients in terms of risk-return profile and high cash flow visibility.”

Over $150 billion of equity and mezzanine funding is required to meet government target investment of $1 trillion until 2017, and this is the gap which our strategic alliance seeks to bridge, says Jayesh Desai, co-Head of Structured Investment Group (SIG), PEL.

Macquarie Capital acted as the sole financial advisor for the transaction.

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