APG is to provide mezzanine financing for Indian infrastructure development, the latest step in an ongoing push into real assets in the country by the Dutch pensions giant.
Indian conglomerate Piramal Enterprises and APG are entering into a joint venture to invest $1bn (€747m) over the next three years.
Both parties have made initial commitments of $375m.
A statement claimed that it was “one of the largest private sector commitments to the infrastructure sector in India” and “one of the single largest commitments to date by a foreign investor to the infrastructure sector in India”.
The commitment from APG is its largest to Indian infrastructure so far and comes after the country voted in a new government seeking to promote greater foreign investment.
Hans-Martin Aerts, head of infrastructure for Asia at APG, said: “The infrastructure sector in India is at an inflection point.
“Given the strong push of the new government on sector revival through conducive policy measures, the funding from this strategic alliance will help infrastructure companies to recycle capital and contribute significantly to the further development of India’s infrastructure sector.”
The platform will invest in rupee-denominated mezzanine instruments issued by infrastructure companies.
The strategy will be to focus on infrastructure projects either operational or near completion in a bid to limit execution risk and to generate cash flows.
Piramal has experience in providing mezzanine debt to companies, including infrastructure firms.
Jayesh Desai, co-head of structured investment group at Piramal, said: “Indian infrastructure players have moved up in maturity scale as the portfolio of operational projects has increased and, hence, is lending high visibility to future cash flows.
“Over $150bn of equity and mezzanine funding is required to meet government target investment of $1trn until 2017, and this is the gap our strategic alliance seeks to bridge.”
Desai attributed the funding gap to constraints on commercial banks in India to “provide only senior-secured lending at asset level where there is limited headroom, especially in cases where there has been delay in project execution.”
The partnership also follows a number of real estate joint ventures by APG in India.
APG is already investing in hotels with Lemon Tree, housing with Godrej Group and, most recently, offices with Xander Group.
Spokesman Harmen Geers said: “We will continue exploring new investment opportunities, predominantly joint ventures and co-investments alongside strong, like-minded partners.
“If suitable opportunities continue to present themselves, we may look to expand such partnerships.”