3i ramps up team to support growth in Asia

By Tony Munroe and Alison Tudor

HONG KONG (Reuters) - British private equity firm 3i Group Plc (III.L: Quote, Profile, Research, Stock Buzz) has recently added six new partners in Asia, including a senior buyout specialist transferred from its London office, as the region accounts for a growing share of its business.

Chris Rowlands, 3i's managing partner for Asia, said the credit crunch has done nothing to crimp the mid-market focused firm's growth plans in Asia, although financing terms are tighter.

A year ago, Rowlands predicted that Asia would be home to one-fifth of the firm's assets under management within two to three years, compared with 5 percent in November 2006, and he said on Monday that the firm is on schedule to meet that target.

"It is our number one priority to grow our business in Asia," Rowlands told the Reuters Hedge Funds and Private Equity Summit in Hong Kong on Monday.

He also said the group's new $1 billion Indian infrastructure fund, which is about to close, should generate returns of 18-20 percent a year -- superior to the 10-12 percent returns anticipated by the group's London-listed 3i Infrastructure Ltd (3IN.L: Quote, Profile, Research, Stock Buzz), whose portfolio is mostly in Europe.

Of its new partners in Asia, three are in India, one of whom heads the Indian infrastructure business, and one each based in Hong Kong and Shanghai.

3i also recently moved David Osborne to Singapore from London to head a buyout team that numbers three people now and will eventually grow to six, Rowlands said.

In Asia, 3i invests in growth capital, infrastructure and buyouts, making it less exposed to the credit crunch than rivals with more exposure to core-play buyouts.

"Debt is still is available here, both on a local and a regional basis," Rowlands said, pointing to a buyout that 3i expects to announce in the healthcare sector in Singapore shortly.

"It's done and signed and raised debt, and on terms which reflect the repricing of debt, and the availability of debt in Asia now," he said.

"The multiples available, the amounts available are tighter," he said, noting that the Singapore deal is leveraged at about 3.5 times EBITDA (earnings before interest, tax, depreciation and amortization), compared with the 4.5 to 5 times it might have managed a year ago.

"These deals are being equitized more heavily," Rowlands said, meaning buyers need to pay with more equity and less debt.

He said the equity to debt ratios on buyouts in Asia had risen to about 40 percent equity/60 percent from 25/75 previously.

The group's new India infrastructure fund, which has attracted more than its targeted $1 billion, is investing in the power and transportation sectors, both of which have lagged far behind the country's economic development.

The fund has announced two deals already, a $101 million investment in engineering and construction firm Soma Enterprise Ltd and $227 million in power plant developer Adani Power Pvt Ltd. It is focused on power, including thermal and hydroelectric power, as well as roads, ports and airports, Rowlands said.  Continued...