* Pair to invest over 3 years via mezzanine instrument
* Each initially commit $375 mln for investments
(Adds comments from Piramal executive, details)
MUMBAI, July 30 India's Piramal Enterprises Ltd
has tied up with Dutch pension fund APG Asset
Management to invest $1 billion in Indian infrastructure
companies over three years, in a move that would help indebted
firms access funds to complete projects.
A sluggish economy and stalled bureaucratic decision-making
for the past two years thwarted capital investment and dented
earnings, making it tough for infrastructure companies to raise
funds and launch or complete road and power projects.
Piramal, controlled by Indian billionaire Ajay Piramal, and
APG will invest in local infrastructure companies through
rupee-denominated mezzanine instruments, the two sides said in a
statement on Wednesday.
Mezzanine debt, commonly used by private equity firms, comes
between senior debt and equities.
Piramal and APG have each initially committed $375 million
for investments under the alliance, the companies said.
Many Indian infrastructure companies borrowed heavily in the
past few years when the economy was one of the fastest growing
in the world, but were squeezed by a slowdown in growth last
year and a slide in the rupee to record lows.
"This was always the missing element in the capital stack,"
Jayesh Desai, co-head of structured investment group at Piramal
told Reuters, referring to long-term capital to fund
infrastructure building in Asia's third-largest economy.
India has ambitious plans to fix its creaky infrastructure
with an aim to spend $1 trillion on the sector by 2017, half
from private sources.
"We thought that there was a clear-cut market need for
long-term money, which would basically not be permanent equity,"
he said. "We could look at projects also but largely the idea is
to look at companies."
Desai said APG had been a investor in Indian infrastructure
through its funds. The alliance with Piramal marks the Dutch
pension fund's first direct investment in domestic
infrastructure companies, he said.
Led by one of India's 50 richest people, Piramal has evolved
from a textiles manufacturer in the mid-1980s into a group with
interests in pharmaceuticals, glass, financial services and real
Macquarie Capital acted as the sole financial advisor for
the Piramal and APG deal.
(Reporting by Sumeet Chatterjee and Devidutta Tripathy; Editing
by Christopher Cushing)