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Indian infrastructure companies are embarking on a fund-raising spree that will give investors access to what is expected to become one of the biggest sectors on the country's stock market over the next few years.
Indian infrastructure-related share issues, dominated by power companies, are expected to total $6bn-$7.5bn in the first half of this year, mostly in the form of initial public offerings, bankers say.
This will put India's stock market on track for a record capital-raising year in 2008. Last year, Indian companies across all sectors sold shares worth a total of $8.25bn, itself a record.
"India is hungry for infrastructure," said Atul Mehra, joint head of investment banking at Mumbai-based JM Financial, which is advising on some of the listings. "The big difference between India and China is that China has already spent a lot of money on infrastructure while India is just getting started."
If India is to sustain economic growth of 8 per cent per year, it will need to nearly double the capacity of its power industry from 135,000 megawatts today to 250,000MW by 2015, according to Tata Power, one of the country's biggest private power operators.
The country also faces chronic shortages of port and airport capacity, logistics parks, modern highways and urban infrastructure.
But until now, infrastructure has barely registered on India's capital markets, with the sector raising only $967m through IPOs last year, according to figures from Dealogic. The infrastructure fund-raising spree is being kicked off with the $3bn IPO of Reliance Power, controlled by businessman Anil Ambani, which is expected to start trading in February.
Companies queuing up behind Reliance include Jaiprakash Power Ventures, a New Delhi-based operator, which is looking to raise about $1bn; JSW Energy, controlled by steel magnate Sajjan Jindal, which wants to raise $1bn; and LNJ Bhilwara Group, with plans for $200m, bankers and company sources said.
Essar Power, a unit of the steel-to-telecoms conglomerate Essar, is seeking to raise $600m through a sale to a private equity firm, while Sterlite Power, controlled by UK-listed Vedanta Resources, is also studying a stake sale worth up to $2bn, bankers said.
JM Financial's Mr Mehra said he could not comment on specific transactions. But he said that while power would be the "centrepiece" of moves on infrastructure this year, he expected other sectors, including ports, construction companies and capital goods manufacturers, to also come to the market.