Sebi may give more room to IDF-MFs to boost market

Written by Sunny Verma | Arun S | New Delhi | Updated: Oct 25 2012, 06:43am hrs
With less than a fourth of the 40-plus asset management firms showing interest in the Infrastructure Debt Fund (IDF) market, Sebi is expected to give further leeway to IDFs floated through the mutual fund (MF) route in marketing their offers to potential investors.

The market regulator is considering to increase the new fund offer (NFO) period for IDF-MFs from the current limit of 15 days for the mutual funds industry, official sources said.

The sources added that since IDFs will be marketed to foreign investors as well as high net worth individuals, industry players have sought extra period of up to three months in closing a fund offer floated by an IDF. Sebi may double NFO subscription period for IDFs to 30 days, an official said.

Extending the NFO subscription period from the present 15 days would definitely help in selling units by the IDFs. The government should also permit insurance firms and pension funds to invest in IDFs, said an industry executive in the process of setting up an IDF.

IDBI MF and ICICI have already announced plans for IDFs. IIFCL, L&T MF, Axis MF, Reliance MF, SBI MF and Srei Infrastructure Finance have also sought SEBI's permission to launch an IDF. The regulator has granted its nod for IDFC.

IIFCL CMD SK Goel said the SEBI draft norms on IDFs are supportive enough but any fresh relaxation would definitely benefit the industry. IIFCL is planning to set up a $1-billion IDF through the mutual fund route.

SEBI has already given in-principle approval to our proposal to launch an IDF. We are now waiting for a final approval and hope to launch it by next month, Goel told FE.

IDFs will help in bridging the financing gap in the infrastructure sector, wherein an estimated $1-trillion investment is proposed in the 12th Plan Period (2012-17). The government is banking on the private sector to finance at least half of this projected investment.

With most commercial banks already breaching their lending exposure limits to the infrastructure sectors, IDFs are a critical component for providing long-term financing.

The companies looking at setting up an IDF can either structure it as a trust regulated by Sebi and then enter as a mutual fund, or set it up as a non-banking finance company regulated by the Reserve Bank of India. On its part, Sebi is not keen to make any major relaxation of norms.

It has already put its foot down on the demand of the asset management companies for easing the lock-in period beyond the present five years as the funds are meant for infrastructure projects with long gestation period. Besides, the regulator is keen that only those AMCs with experience in infra sector apply for IDF-MFs.