Australian infrastructure major Macquarie made a splash in the Indian infrastructure space in 2018 when it became the highest bidder, by a mile, for the National Highways Authority of India's (NHAI) first ToT (Toll, Operate, Transfer) road bundle with a Rs 9,681-crore bid.
However, since then, Macquarie's pace of investments in Indian infra has lagged peers, such as Brookfield and KKR, which have invested several billions. In an interaction with Moneycontrol, Abhishek Poddar, India Country Head at Macquarie Group, dispelled any notion that the company has changed its outlook on India.
He shed light on the firm’s strategy and long-term commitment to India's infrastructure sector. Poddar also discussed Macquarie’s focus on energy transition, renewable energy, digital infrastructure, and the fast-evolving electric vehicle (EV) ecosystem, and highlighted how Macquarie is investing in India through multiple pools of capital, inlcuding its balance sheet.
Edited excerpts:
Q. It appears that Macquarie has been relatively inactive in the Indian infrastructure sector over the past few years, with the firm seemingly focusing more on exits than on new investments. Has there been a strategic shift in Macquarie’s approach to India?
Poddar: There has been no change in our India outlook. India’s infrastructure sector is ripe with potential, driven by its vibrant economy and surge in demand for essential infrastructure to support digital and renewable energy growth, as well as favourable demographics and growing investor appetite.
Holding a long-term and positive outlook on India, we are committed and excited about the opportunities covering the energy transition, infrastructure and digital space. At Macquarie Group, we’ve spent over 25 years in building our operations in India since opening our first office in 1999, and have been investing in local infrastructure since 2008. Our current activities in India, including through our portfolio companies, include renewable energy development, and investment in traditional and digital infrastructure.
Over the last 18 months, Macquarie Asset Management has concluded a buy-out transaction of Aurang Tollway Ltd and launched an EV platform named Vertelo. Similarly, Macquarie Capital acquired a majority stake in a digital infrastructure company CloudExtel, and provided growth capital to ChargeZone, which is a fast-growing electric charge infrastructure company in India.
Q. Are you looking to bring in more pools of capital to India, beyond just the Asian infrastructure funds from which you have been investing so far?
Poddar: Macquarie is investing in India through several pools of capital. Our Asia-Pacific infrastructure flagship fund series invests in core and core-plus opportunities in India.
Additionally, our Green Investments business is exploring renewable energy opportunities as well as opportunities to back emerging transition technologies like EVs, battery storage, green hydrogen, renewable gas, etc. India is also a growth market for many of our regional and global operating platforms like Blueleaf Energy (a renewable and storage assets platform in Asia- Pacific) and Corio Energy (a global offshore wind developer).
We are also deploying Macquarie’s own balance sheet capital for growth infrastructure and energy transition opportunities in India through Macquarie Capital. In addition, we have 15 commercial aircraft with a combined value of over $800 million on lease from Macquarie AirFinance to Air India and Indigo.
Q. You have set up an EV leasing business in India recently. In the past, we have seen Macquarie invest in hard infrastructure assets, such as roads and renewables. Is Macquarie's strategy shifting more towards asset-light models? Or will roads and renewables continue to be the main areas of capital deployment for the firm?
Poddar: Macquarie remains one of the world’s largest infrastructure managers, and we continue to invest in assets like roads, renewables and digital infrastructure. However, we have identified that, in India, although the transformation of the smaller vehicle market continues at a good pace, bus and commercial fleet and fleet owners need a great range of financing options and support on leasing and financing, charging infrastructure and energy solutions, fleet management services, and end of vehicle life management.
We launched Vertelo to fill this gap. The company plans to accelerate the transition to EV fleets and build a robust EV ecosystem by offering bespoke solutions in these segments.
Also Read: Macquarie introduces $1.5-billion India EV financing platform Vertelo
The new platform has received anchor investment from the Green Climate Fund, the world's biggest climate-focused fund. Vertelo plans to mobilise $1.5 billion in the Indian e-mobility ecosystem over 10 years with the aim to achieve a potential lifetime reduction of ~9.5 MtCO2e (Metric tons of carbon dioxide equivalent) of greenhouse gas emissions.
Q. Energy transition is a big opportunity, globally. What are the spaces in India that are attractive from an energy transition perspective?
Poddar: At Macquarie, we are committed to playing a leading role in the global transition to net zero emissions by 2050, by creating practical climate solutions and supporting our clients and portfolio companies on their decarbonisation journeys.
India is already one of the emerging nations that has most decisively embraced the opportunity brought by the unprecedented decline in clean energy costs over the last decade to chart a more sustainable economic trajectory.
India's energy transition journey is creating a landscape rich with opportunities across renewable energy generation (utility scale and C&I), energy storage, EVs, green hydrogen, and energy efficiency. These areas not only offer attractive investment prospects but also align with global sustainability goals, making India a key player in the energy transition narrative.
India’s stated goal is to pursue net zero emissions by 2070. With an ongoing need for expanded physical infrastructure, there is powerful scalable opportunity ahead for institutional investors with an eye for discipline, patience and intrinsic value.
Q. With high interest rates in the US and other developed markets, a lot of yield-seeking investors had slowed down investments in India due to better risk-reward ratio for developed markets. With the US Fed beginning to cut interest rates, do you see those investors returning to India?
Poddar: India's robust economic growth trajectory makes it an attractive destination for investors. The country's GDP growth, driven by strong domestic consumption, infrastructure development, and government reforms can potentially offer compelling opportunities for yield investors looking for growth as well as returns.
Against a backdrop of rising interest rates and inflation, infrastructure investments have shown superior performance, compared to other types of assets. They've demonstrated their strength during economic downturns by offering better risk-adjusted returns, protection against inflation, and the advantage of diversifying an investment portfolio.
Given this strong performance potential, we anticipate that many institutional investors will keep increasing their investments in India, specifically in infrastructure. Hence, it’s essential to have strategies in place for hedging against interest rate changes to navigate the current market successfully.
Q. Given that Macquarie has been investing in India for a long time, what are some of the key learnings that you have picked up across your multiple funds?
Poddar: From our experience, we know that while opportunities are abundant, India can still be extremely complicated for the uninitiated, which is where investing in the right local partnerships, teams and knowledge becomes critical.
This is why we come to the market with both local experts and years of experience operating in the infrastructure and energy transition segments. Our experience in India has reinforced the importance of a collaborative approach, working closely with government bodies and local communities, which, in turn, has a positive impact on the communities in which we work.
Another challenge is that you can very easily lose sight and follow growth that’s not commercially viable. You have to have expertise, resilience, patience – and the ability to ride through the volatility. We've been clear on where we want to participate and how – and where we won’t go.
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