The infrastructure finance arm of engineering giant Larsen & Toubro resumed the fund-raising exercise after the general election and aims to finish by next year. The money is expected to be raised from domestic and foreign institutional investors. A senior executive at a global secondaries fund, a direct investor in such PE funds, confirmed that it was one of those approached.

"Some of the global pension funds, sovereign wealth funds and family offices have (also) been approached for the fund raising," the executive said. There is renewed interest in infrastructure with the Narendra Modi government keen to ensure that projects stuck for years get going again so that the country can take advantage of an economic turnaround that's looking increasingly likely, given the economic and industrial data.

Delays in execution, mostly due to lack of government approval, and high-debt levels have plagued infrastructure companies over the past few years. Investor confidence has been dented, leading to a slump in capital expenditure. This meant that the L&T Infra PE fund had met with muted investor demand when it was launched last year.

"The change in government has helped revive the mood. However, only when positive policy measures are undertaken will investors come back to India," said a limited partner (LP) who was approached by L&T Infra. "The fund size could come down due to the lack of investor appetite for infra at this point of time." Limited partners contribute money to PE funds.

An L&T Infra Finance spokesperson said by email: "We had a first closing of approximately Rs 500 crore from domestic investors. We are assessing the interest of international investors given the change in their outlook towards India and will begin the formal process after completing the first-level assessment." India holds opportunity for PE funds in the sector, according to Global consulting firm Deloitte.

"Private equity represents a modest share of the $1-trillion to be spent on infrastructure in 2012-17, about half of which would come from private sector funds, compared with a target of one-third in the previous five years," it had said in a report.

Betting on a massive need for electricity, roads, ports, irrigation, water supply and sanitation projects, other PE companies such as IDFC Alternatives, ICICI Venture and IL&FS have either recently raised funds or are in the process of doing so. But investors won't be jumping back in with their eyes closed. "The investor is selective with capital this time around.

We will not see the kind of euphoria we saw in the previous cycle," said a managing director at an infrastructure-focused PE fund. The subdued sentiment is also because existing infrastructure-focused funds have failed to deliver. "The returns are nowhere in sight and the report card for most funds is in the red," the fund manager said. "Unless we get a strong push from the government, the infra story will not play out."