Infrastructure Ancillaries, the opportunity for VC’s and mid market PE funds:

The size and potential of the infrastructure opportunity in India is evident from the number of large Private Equity biggies who are raising or have closed infra focused funds. A look at any research report suggests that the size of the opportunity for private sector investment is anywhere from $50 to 100 billion over the next 4 years.

Despite the obvious opportunity, it hasn’t exactly been easy going for the infrastructure sector over the last few months. Nearly every listed infra company has underperformed Sensex over the last 12 months. Value locked up in real estate land banks, rising interest rates, credit crunch, FCCB redemption issues, etc have all contributed to the sectors lack lustre performance.
However, we believe that the blip is temporary and should soon regain its buoyancy, other than maybe realty linked projects. The government’s infrastructure stimulus package, coupled with monster sized infra PE funds that are being announced – IIFI, Blackstone, Morgan Stanley, etc will all contribute towards the sector’s recovery.
While the story for bulge bracket PE funds such as 3i, Actis, Blackstone, IDFC, etc is fairly obvious, we believe there is a huge opportunity for VC’s and mid market PE’s, who are perhaps not giving it the focus they should. Typical infra projects such as roads, mega power plants, ports, etc obviously will not fit into a VC’s investment mandate; however, there is an emerging ecosystem of infra ancillary companies, many of whom re extremely innovative either in their business model or technology and these are ideal VC investment candidates.
We believe that that any VC funds looking to capitalize on the India growth story should focus on the following types of opportunities –
a. Logistics – Integrated Container Depots, Container Freight Stations, Agri warehousing, etc
b. Waste Management
c. Green Infra enablers – Eg: Neureol Technologies (Remote monitoring of energy infrastructure), InnovLite (LED lighting solutions), Gensol (Carbon Credit Advisory)
d. Social Infrastructure – Innovative Healthcare, Innovative Education
e. Innovative mid sized power projects

Well, the opportunity is real, and some funds are early movers already, as seen in the examples below. We at Viedea are building a database of interesting opportunities across these sectors. Please contact us for more information on our current mandates.

Attero recycling, Delhi- E-Waste Management- DFJ/NEA- $6.3 mn-Aug-08
Doshion, Ahmedabad- Water Management-IDFC PE-$8.5 mn-Nov-07
Emergment Ventures- Carbon Credit Advisory-IDFC PE-$10 mn-Apr-08
Kam Avida, Pune-Waste Management-Peepul -$4.5mn-Aug-08
Pesco Beam Solutions, Chn-Waste Mgmnt and Alt Energy-UTI-$8 mn-Nov-08
Direct Logistics-Freight Forwarding-SIDBI -$3.5 mn-Mar-08
Expressit Logistics-Specialty courier -SIDBI-$2.0 mil-Mar-08
HHV Solar, Bangalore-Solar Energy Equipment-SIDBI, Aureos-$7.0 mn-Mar-08
Natural Bioenergy, Hyd-Biomass-SIDBI, UTI-$4.0 mn-Mar-08
Servomax, Hyd-Power Equipment-Mayfield-$3.75 mn-Mar-08
Tecpro, Delhi-Captive Power-Avigo-$5.0 mn-Jan-08

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About Deepak
Venture Capital and M&A advisor, Entrepreneur, Startup enthusiast..

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