Publications

Investors - MARCH 1, 2017

Lone Star forms $550m infrastructure JV with India’s IL&FS

by Jody Barhanovich

Lone Star Funds has joined Indian infrastructure financing and developmental organization IL&FS on a joint venture to invest in stressed infrastructure projects in India. The joint venture will have a $550 million of capital pool, leading to an asset purchase of up to $2.5 billion, the companies said in a statement.

The venture will look to invest capital in struggling infrastructure assets to promote a revival of Indian infrastructure. The companies are hoping their partnership will help enable not only the recovery of struggling infrastructure projects but the launching of renewed projects. Stressed assets across sectors now stand at more than 12 percent of the total loans in the banking system.

“The India infrastructure sector is poised for revival as the evolving framework is becoming more conducive for resolving stressed assets,” Ravi Parthasarathy, chairman of IL&FS, said in a statement. “The collaboration with Lone Star, a firm with global asset turnaround experience that has invested capital in a range of industries, is strategic and presents the potential to attract sizeable foreign direct investment into India which supports the initiatives of the GOI and RBI.”

Lone Star has raised $70 billion globally and has closed more than 1,350 transactions with an aggregate purchase price of $180 billion.

IL&FS’ Indian infrastructure projects portfolio is worth a combined $25 billion. It assists with infrastructure projects from “concept to execution,” according to its website, with experience in areas including project management, project engineering, finance, risk management and environmental-social management.

India’s construction and infrastructure industry is forecast to have strong and stable growth, driven by sizable government-led development plans in the transportation, power and water infrastructure sectors, according to a report by Global Information.

India’s construction industry is predicted to expand 6.7 percent in 2017 and average 6.5 percent growth in real terms throughout our forecast period to 2025, according to Global Information. Growth in the transport, energy and utilities sectors will be supported by Prime Minister Narendra Modi’s development plans, including five Industrial Corridors, the 100 Smart Cities Mission, and the Atal Mission for Rejuvenation and Urban Transformation. Large-scale construction projects will continue to suffer delays, however, because of a cumbersome land acquisition process and financing and bureaucratic difficulties, although the report has positive expectations of moves by state governments to adopt or discuss land reform.

Additional recent participants in India’s distressed assets market have included Piramal Group along with Bain Capital, State Bank of India and Brookfield Asset Management, Kotak Mahindra and Canada Pension Plan Investment Board, and Ambit Holdings and JC Flowers & Co., among others.

Forgot your username or password?