The global slump in oil prices amid the coronavirus outbreak will push Indian state-owned firms to sell some assets, according to Macquarie Infrastructure and Real Assets (MIRA), and the world’s biggest infrastructure investor is already eyeing those assets.
MIRA has raised about $61 billion in capital globally last year — the highest in the world based on data from Infrastructure Investor –and has poured $2.5 billion into India over the past decade. Attracting foreign investment is crucial to meet Prime Minister Narendra Modi’s goal of spending $1.5 trillion on new roads, rail links and other infrastructure over the next five years as public finances deteriorate.
Canada’s Brookfield Asset Management last year acquired Reliance Industries Ltd.’s East West Pipeline via an infrastructure investment trust for 130 billion rupees ($1.7 billion).
The government plans to split GAIL India’s transmission business into a separate entity that it could sell to strategic investors. GAIL owns more than 70% of the country’s 16,800 kms pipeline network.
MIRA which came to India in 2009, has so far more than half its investment in the road sector. It is now looking to exit several investments.
However, much depends on how quickly the economy recovers from the coronavirus-led disruption. Another is banks’ increasing unwillingness to lend to the infrastructure sector. Indian lenders are battling the world’s worst stressed-loan ratio, with much of the soured debt in the infrastructure space. Banks’ lending to the sector, which includes power, roads, telecom, contracted by 1.8% in the first 10 months of the fiscal year ending March 31 compared with 10.8% growth a year earlier.
Hopefully, with RBI’s latest action on easing of Working Capital loans, another liquidity injection action will spur big players into the Infra sector.