The fund, which intends to raise capital from both offshore and domestic sources, will invest in revenue earning and commercially viable projects in the state, its executive director and Kerala finance secretary Sanjeev Kaushik told ET.
The fund would tap pension funds and sovereign wealth funds starting from North America to Europe, Middle East and South East Asia, besides high-networth family offices and university endowments.
“We have received Sebi approval to set up alternate investment fund. We are raising an AIF category II fund and will invest in projects and companies that are commercially viable,” Kaushik said.
Kerala Infrastructure Investment Board (KIIFB), the investment arm of the state, will have a 26% stake in the proposed fund, while financial institutions from the state would hold the rest.
Geojit Financial Services, South Indian Bank, Dhanalaxmi Bank and Cochin International Airport Ltd (CIAL) are the other shareholders of the proposed fund.
“We are also talking to State Bank of India (SBI) and Life Insurance Corp (LIC) to become equity partners in the project. This will be the first such investment vehicle with government backing and will invest in private projects,” Kaushik said.
“Given the limitations on state fiscal and budget constraints, states will need to explore newer and diverse sources of funding infrastructure. The private equity route is one such area…” Kaushik said.
“The challenge is to find commercially viable infrastructure projects that are able to meet the high return expectations of investors.”
Banker-turned bureaucrat Kaushik was the former managing director of India Infrastructure Finance Co and he headed capital markets in the ministry of finance from 2011-2015. He started his career at the M&A unit of ING. He later joined Bank of America and became a MD at Lehman Brothers and HSBC before joining the government.
The fund’s principle sponsor KIIFB has recently raised Rs 2,150 crore through a masala bond, the first of such successful issues in recent times, which saw participation from pension funds and sovereign funds and long-only institutional investors from North America, Europe, Middle East and south east Asia.
India received a record $35.8 billion in private equity and venture capital investments in 2018, 37% higher than the previous high of 2017, according to data compiled by EY. Fund raising by PE/VCs increased nearly 40% to $8.1 billion in 2018. Exits in 2018 almost doubled in value to $26 billion.