The Covid-19 pandemic has resulted in challenging times for India. However, foreign investors continue to pin their hopes on the country’s recovery and growth thereafter. The investment outlook seems to be sanguine in the long term as the government unveils a healthy pipeline of infrastructure projects. In an interview with Indian Infrastructure, Deep Gupta, managing director, Macquarie Infrastructure and Real Assets (India) (MIRA), talks about the company’s current investments in the country, emerging opportunities in the infrastructure sector, expectations from the government and the future outlook…
What is MIRA’s current portfolio size in India?
MIRA’s total investment in India over the past 10 years stands at around $2.5 billion spread across 13 investments in 61 assets. MIRA is one of the largest investors in India’s infrastructure space. Globally, MIRA manages around US$132 billion in asset. Given our role as a manager of critical infrastructure and other real assets, our assets have a direct impact on the people that rely on the essential services these businesses provide every day. This puts MIRA in a privileged position with a lot of responsibility.
What has been the impact of Covid-19 on our organisation’s investment strategies in India? Are there any new geographies and/or sectors being explored?
Our assets provide essential services and so our priority has been to keep our assets operational, while maintaining safety of our employees, contractors, customers and communities. Given our global portfolio, learnings from assets in other countries were implemented in India well in advance. For example, we learnt from the experience of our Korea assets and implemented revised standard operating procedures for our toll plazas and toll booths in India to ensure its smooth operation.
The Covid-19 pandemic has impacted infrastructure sectors differently. The transport sector, in particular airports, has been severely impacted given travel restrictions. However, sectors such as data centres and renewable energy have not been affected. The renewable energy sector, for instance, requires less customer interaction and fewer staff members, whilst demand remains strong. Data centres have benefited from the work, learn and entertain from home environment. These sectors have exhibited robust performance in the past few years.
MIRA is open to investing in different sectors and evaluates each opportunity based on its merits. Any opportunity has to fit in with the mandate of the respective fund from which it will invest as well as align with the MIRA’s philosophy of driving improvements across operations, financials and ESG at an asset.
What has been the experience with regard to the toll-operate-transfer (TOT) bundle being managed by MIRA?
TOT has provided MIRA with an opportunity to make substantive improvements in the operations and quality of the road assets.
We acquired the first TOT bundle in August 2018. The experience of ownership during the two years of operations has been enriching. Over its ownership, MIRA has implemented sustainability, diversity and safety initiatives, which have always been its focus areas. Our TOT business operates one shift of toll plaza through women at three of our toll plazas. Also, the TOT program also acutely emphasises on safety with a dedicated 24×7 live monitoring of roads for improved compliance, identification of accident spots, etc.
What are the expectations from the government for attracting foreign investments?
The first and foremost factor that a long term institutional investor requires is consistency with respect to policy and regulation. There has been a significant improvement on this front in the country. The second factor at play is the contractual framework. The expectation of investors is that once a contract is signed, it is held and followed.
What are your return expectations in light of the pandemic? What were the investments made, if any, since the nationwide lockdown began?
An asset manager looks at opportunities over a period of time. Some sectors have been impacted by the pandemic while others have not. The question comes down to the assumptions being made for investing in assets.
In the current environment, the validity of the assumptions will be tested. A lot of capital has flowed into the infrastructure sector in India over the years and it continues to be available for investing and to date, we have not seen the threshold of return expectations really change.
What are the preferred routes for infrastructure investment?
Globally, infrastructure funds are generally geared towards deploying capital in operating assets which provide yield or further growth.
Recently, in India there has been a growth of infrastructure investment trusts (InvITs) and real estate investment trusts in the country. These are suitable vehicles for infrastructure-like yield-generating assets with long concession periods. InvIT might present a good opportunity, depending on the quality of the assets and the value being created. In general, InvIT structures are present across the world and the product is capable of attracting long-term capital into a country.
What is the outlook of infrastructure financing in India? What are your targets for the ongoing fiscal year?
The Indian government has built many assets over the years. For a very long time, assets were created by public sector undertakings or directly by the government. Many of these are good quality assets that are attractive to foreign investors. MIRA supported the first road privatisationprogramme by participating in the first TOT bundle.
Investors are looking forward to the government’s flagship National Infrastructure Pipeline (NIP). Many large foreign investors have a presence in India, pointing towards the overall confidence in the country’s growth prospects. They are looking at bringing in more capital to the country. Through the NIP, the government aims to create capital for itself (by privatising certain assets or through public-private partnerships) for building new assets. A lot depends on the execution of projects under the NIP.
MIRA is one of the largest infrastructure managers in the world. We are pleased to be able to continue to bring capital and experience to invest into India and to look at India positively.