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IFC fund to invest in India's auto ancillary sector

International Finance Corporation will invest in India's rapidly growing and evolving auto ancillary sector that supplies the automotive industry, through a private equity fund, the India Auto Ancillary Fund.

IFC signed the first closing of the fund, which has a targeted capital of $ 30 million this week in Bombay.

The auto ancillary sector has grown rapidly since the Indian automotive industry was liberalised in 1991. It is now undergoing major structural change as international companies compete on the Indian market and new technologies are brought on stream.

There is a process of consolidation underway among some 500 automotive ancillary firms and another 3,000 businesses in the informal sector supplying the auto industry.

This new business environment in India provides excellent investment opportunities for the fund, according to Rashad Kaldany, IFC's director for south and southeast Asia. He said that the fund would bring technological and engineering development, especially for smaller companies involved in auto ancillary production. The fund is likely to invest in about ten to 12 companies, he said.

IAAF is a closed-end-eight-year private equity fund. IFC will invest upto 15 per cent of the total value of the fund, which is being promoted by Infrastructure Leasing and Financial Services, a leading Indian financial institution that conceives, develops and finances infrastructure services.

Other investors included DEG-Deutsche Investions and Entwick Lungs Gesellschaft (the German development agency), Nissho Iwai, the Tamil Nadu Industrial Development Corporation, Bank of India, Mahindra & Mahindra and IL&FS. The fund will be managed by IL&FS Venture Corporation Limited, an affiliate of IL&FS, which manages venture capital and private equity funds. IVC has other funds under its management - the South Asia Regional Apex Fund and two information technology funds.

IFC, part of the World Bank group, encourages economic growth in the developing world by financing private sector investments, mobilising capital in the international financial markets, and providing technical assistance and advice to governments and businesses.

UNI