Narendra Modi’s ambitious National Investment and Infrastructure Fund has got a major boost with the Abu Dhabi Investment Authority committing to put in up to $1 billion (about Rs 6,500 crore) and becoming its first significant shareholder, after being largely dormant for nearly two years since it was launched. Abu Dhabi Investment Authority will become the first institutional investor in the NIIF Master Fund and a shareholder in NIIF’s investment management company — National Investment and Infrastructure Ltd.
Narendra Modi government’s ambitious infrastructure investment fund, set up in December 2015 to boost the funding into the country’s core sector, had not been able to fetch a single investment in any project till recently. NIIF, which has a mandate to fund commercially viable greenfield, brownfield and stalled project, is yet to start investing.
The corpus of NIIF is proposed to be Rs 40,000 crore (about $6 billion) wherein the government would invest 49 per cent (about Rs 20,000 crore). It will raise third-party capital for the remaining Rs 20,000 crore ($3 billion) from long-term international investors, such as a sovereign wealth funds, insurance and pension funds, endowments, other global long-term investors and public-sector units.
The Indian government has already approved its contribution of Rs 20,000 crore towards NIIF. But it has budgeted only Rs 1,000 crore for the current financial year 2017-18, since it was not required to contribute to it in the absence of other foreign or domestic investment into the fund. However, since more sovereign wealth funds are now likely to follow the ADIA way, the government, too, will most likely be required to raise its budgetary support for the NIIF.
ADIA is not alone. Six domestic institutional investors — HDFC Standard Life Insurance Company, HDFC Asset Management Company, Housing Development Finance Corporation, ICICI Bank, Kotak Mahindra Old Mutual Life Insurance and Axis Bank — will also join the NIIF Master Fund along with ADIA and the government, the finance ministry said in a statement yesterday.
The deal with ADIA follows an earlier memorandum of understanding (MoU) between the finance ministry and the UAE government to mobilise long-term investment into NIIF. India had also signed MoUs with Qatar Investment Authority and Russia’s Rusnano OJSC earlier and has been in talks with Singapore’s Temasek Holdings for investments under the NIIF framework
Earlier this year, finance minister Arun Jaitley had said the country required investments worth an estimated Rs 43 lakh crore (about $646 billion) in the infrastructure sector over the next five years. As much as 70% of this requirement will be in power, roads and urban infrastructure. Most public-sector banks are reeling under a very high level of NPAs and potential bad loans, their ability to fund large infrastructure projects is very limited. It’s why funds such as NIIF assume significance.