The move comes in the backdrop of the poor response from private companies and banks in financing projects, especially those in sectors like highways and urban transport and infrastructure.
"The objective is to identify infrastructure opportunities from the perspective of a PE firm and then set out to attract investments from them," an official explained. While the finance ministry and the Planning Commission have already begun working on a preliminary set of guidelines for private equity investors, it is also planning to appoint a consultant to finalise the norms.
The fresh guidelines for PE investors, which will be unveiled later this year, will cover all major infrastructure sectors, including electricity, telecommunications, roads and bridges, railways , ports, airports, irrigation, water supply and gas distribution. This would be the first such effort by the government to come out with comprehensive guidelines to attract PE firms.
Source: Economic Times PE-friendly norms soon for investment in core sector
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By ugesh sarkar, Section News
Posted on Fri Feb 05, 2010 at 11:01:04 PM EST
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On the other hand, after the financial crisis of 2008, PE funds are once again showing interest in the sector. According to a Grant Thornton study, the largest number of investments by PE firms was made in sectors such as real estate, infrastructure and power in 2009. This was despite a 68% fall in PE investments.
Deepak Parekh committee on infrastructure financing, in its report had also suggested greater role for PE investors in infrastructure. It had recommended that PE funds registered with the Securities and Exchange Board of India should be allowed to directly bid for infrastructure projects.
However, analysts are unsure about the effectiveness of a new policy. "I don't know if the norms will have any impact as a lot of times PE funds decide to stay away from the sector because of issues of valuation and the long gestation period of such projects," said Amrit Pandurangi, executive director, PricewaterhouseCoopers.
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