The NIIF will also try to rope in equity investors – domestic and global pension, insurance and sovereign wealth funds – in the debt platform, which could further its leveraging ability.
To catalyse debt funding of infrastructure projects, the Cabinet on Wednesday approved a proposal to infuse Rs 6,000 crore in the debt platform of the National Investment and Infrastructure Fund (NIIF) over two years. The capital infusion is expected to enable the two NIIF-sponsored incorporated entities to raise Rs 1 lakh crore in debt over five years. The NIIF will also try to rope in equity investors – domestic and global pension, insurance and sovereign wealth funds – in the debt platform, which could further its leveraging ability.
Of course, given the fiscal constraints, only Rs 2,000 crore of the proposed capital will be infused in the two entities – AIFL and NIIF-IFL – in the current fiscal; the balance amount will be provided in FY22. The proposal was part of the Atma Nirbhar Bharat 3.0 package announced on November 12.
“NIIF Infrastructure Debt Financing (IDF) platform… will act as a catalyst in attracting more investments into the infrastructure sector as envisaged in National Infrastructure Pipeline (NIP),” the government said. Under the NIP, investments to the tune of Rs 111 lakh crore is envisaged in various infrastructure sub-sectors over the next 5 years. This would require at least Rs 60-70 lakh crore in debt financing.
Operationalisation of the debt platform will help relieve exposure of banks to infrastructure projects and free up space for new green-field projects. “Strengthening the IDF/take-out financing space in the infrastructure sector will support enhance liquidity of infrastructure assets and lower the risks,” the government said.
The strategy is that AIFL will predominantly focus on under construction /greenfield / brownfield assets with less than one year of operations. The IDF platform will have its own in-house appraisal system, which will enable faster deployment of funds. NIIF IFL, on the other hand, will operate as a take-out vehicle for mature operating assets. It will help infrastructure investors in replacing high cost bank finance with cheaper IDF finance post-commissioning.
The NIIF Strategic Opportunities Fund (NIIF SOF) has set up a Debt Platform comprising an NBFC Infra Debt Fund and an NBFC Infra Finance Company. NIIF through its NIIF SOF owns a majority position in both the companies and has already invested about `1,899 crore across the platform. The Strategic Opportunities Fund (SOF fund) through which the NIIF investment has been made will continue to support the two companies apart from investing in other suitable investment opportunities.