India Infr. Fund

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26237
Company name	India Infrastructure Fund
Country	India
Sector	Collective Investment Vehicles
Environmental category	FI
Department	Infrastructure
Status	Active

Date SPI disclosed	August 24, 2007
Projected board date	September 27, 2007
Previous Events	Invested: March 18, 2008 Signed: March 11, 2008 Approved: September 27, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The India Infrastructure Fund (IIF or the Fund) is being created as a closed-end fund that will invest in a diversified portfolio of project equity investments in the Indian infrastructure sector.

IIF will invest in projects in one or more of the following sectors in India:

- Energy and Utilities: electricity generation, electricity transmission and distribution networks, oil and gas pipelines, oil and gas import terminals, storage and processing facilities;
- Transport Infrastructure: roads, railways, ports, airports and logistics centers;
- Telecommunications Infrastructure: broadcast and mobile towers, terrestrial networks, satellite systems and submarine cables;
- Other Infrastructure: water supply and treatment, waste collection and treatment, healthcare facilities, schools and correctional facilities.

Anticipated development impact of the project

The project will address a key constraint for developers of private or public-private partnership infrastructure projects in India – the availability of equity capital. Given the large funding requirements and the long gestation periods of infrastructure projects, long term equity remains scarce for such projects.

Infrastructure is central to economic growth, improved living standards, and broader development. Through its investments, the Fund will help reduce bottlenecks in the power, water, airport, road, port, and rail sectors in India. This is expected to have an impact on numerous stakeholder groups. The project will free public sector capital for investments in other priority sectors, thereby helping the central and local governments. Residents will benefit from improved and more competitive services in all of these sectors. Services such as water, sanitation, and electricity improve health and social welfare, and they are essential for modern industry and commerce. Companies cannot compete when they are burdened with high-cost, unreliable, or low-quality infrastructure. The project will therefore benefit local companies, customers and suppliers, as well as help exporters with better access to foreign markets and importers with more efficient delivery of production import through improved transport infrastructure.

The Fund is also expected to impose market discipline on investee projects, leading to better alignment with demand for infrastructure services, more efficient management, and lower operating and maintenance costs.

If the Fund is listed, it would be the first listing of a dedicated infrastructure fund in India. This would provide additional capital market resources to a much needed sector.

IFC's expected development contribution

IFC’s proposed participation in the Fund reflects its continued support to a long standing IFC client as it creates a new asset class in India’s capital markets. With its knowledge of both the infrastructure sector and the country, IFC’s participation would provide additional comfort to potential investors in this new fund sector, as well as to potential retail and institutional investors during listing.

IFC will work with IIF to develop its Social & Environmental Management System, through which the Fund will oversee the social and environmental risks of all Fund investments, thus ensuring improved performance of all projects in which the Fund invests.

IFC will add value with its knowledge of fund structuring to comply with new regulations in India. IFC will also actively participate on the Advisory Board to ensure good governance.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the activities proposed to be supported with IFC financing for types of transactions and infrastructure sectors, and determine the applicable requirements, that are expected to be:

- The IFC FI Exclusion List,
- The applicable Indian Social and Environmental Laws and regulations, and
- The IFC Performance Standards (PS).

IFC will also review the capacity of IIF to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, IIF will be required to:

- Develop or upgrade, if necessary, the SEMS, prior to commitment to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that investments supported by IFC financing are in compliance with the applicable requirements;
- Commit to take action to remedy gaps, if any, in SEMS implementation on an ongoing basis; and
- Submit a periodic report to IFC describing the environmental and social performance of IIF’s investments.

Additionally, given the potential E&S issues associated with the sectors of IIF investment, IFC will also review the implementation and performance of IIF’s SEMS for the first few projects, prior to IIF investment, to ensure that the IIF SEMS is robust. For all category A subprojects, IIF will need to provide IFC, prior to investing, information relating to IIF’s assessment and management of social and environmental risks.

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