In what could give a leg-up to the country’s efforts to find the elusive equity capital for its mammoth plans for infrastructure creation, at least four global sovereign wealth funds including the Abu Dhabi Investment Authority (ADIA), Singapore’s Temasek and Russian Direct Investment Fund have evinced interest in its National Infrastructure and Investment Fund.
The NIIF, to be set up with an initial corpus of Rs 40,000 crore, including half that from the government which will remain a minority partner, is expected to catalyse financing of infrastructure projects, by leveraging the same multiple times.
“Discussions are currently on with ADIA on what should be the structure of its participation, direct equity in NIIF or its sub funds,” an official privy to the matter told FE. The $773-billion ADIA, owned by the emirate of Abu Dhabi, is the second largest sovereign wealth fund globally after that of Norway. ADIA’s managing director Sheikh Hamed bin Zayed Al Nahyan is currently in India to participate in a two-day investor summit organised by the finance ministry.
The official cited above declined to reveal the exact quantum of ADIA investment in NIIF, saying it is a sensitive matter on which talks haven’t concluded. He also confirmed the likely participation of Temasek and the Russian sovereign wealth fund in India’s new flagship infrastructure investment vehicle. NIIF is being set up with a view reducing the potential financial burden on the exchequer for building infrastructure.
Temasek, which has assets under management of $270 billion, is already present in India with investments in sectors like banking. Russia’s Rusnano may also participate in the NIIF. Russian Direct Investment Fund is a $10-billion fund, which seeks to invest in infrastructure projects such as aerospace, alternative energy and nuclear power. Rusnano is a private equity and venture capital arm of Russia specialising direct and fund of funds investments.
Besides, wealth funds and other global long-term funds, and several central public sector enterprises including the State Bank of India will likely participate in the infrastructure fund.“We may think about investing in some of these funds,” SBI chief Arundhati Bhattacharya said.
The paucity of equity capital is felt strongly in many key infrastructure sectors like roads, ports and railways where the government is actively promoting the public private partnership model with apparently attractive concession provisions. At the other end of the scale, banks have developed cold feet on investing in long-term infrastructure projects given an asset-liability mismatch and past failures of some promoters in sectors like roads and power to service the debt. Even the special agencies created by the government like India Infrastructure Finance Company and the new models of debt-financing like take-out financing or the several other policy steps to attract investors haven’t yielded the desired results, prompting it to try the NIIF.
In the NIIF, the Centre will invest Rs 20,000 crore and hold up to 49% equity while the remaining stake would be offered to foreign and domestic strategic anchor partners. As a fund of funds, it would help make the required finances available to commercially viable projects, including stalled ones. By leveraging this, the NIIF could raise debt up to 10 times, or Rs 4 lakh crore, over a period of time to ensure long-term fund flows to the infrastructure sector at reasonable cost. Besides some policy issues, lack of funds is one of the major reasons why India is likely to miss by 30% an ambitious target of channelising Rs 55.7 lakh crore in five years through March 31, 2017.
The NIIF is being set up in a tax-efficient manner as a category II Alternate Investment Fund, which will be eligible for a pass-through status under the Income Tax Act, to attract investors. It will be operationalised in the next fiscal year after the upcoming Budget allocates Centre’s portion of about Rs 20,000 crore.
Abu Dhabi’s ADIA, Singapore’s Temasek, Russia’s RDIF and Rusnano likely to invest in NIIF
The $773-billion ADIA is world’s second largest wealth fund, while Temasek manages $270 billion
SBI willing to invest in some of the sub funds of NIIF, says chairman Arundhati Bhattacharya
With 49% stake, Centre piloting NIIF to address equity crunch that hampers infrastructure financing