NIIF, DP World set up $3-billion platform

By: | Published: January 23, 2018 7:05 AM

The National Investment and Infrastructure Fund (NIIF) on Monday announced its tie-up with Dubai-based ports operator DP World to create a fund to invest up to $3 billion of equity in India’s transport and logistics sectors.

National Investment and Infrastructure Fund, DP World, Dubai, World Bank Logistics Performance Index ,ADIA, HDFC Group, ICICI Bank, Kotak Mahindra LifeThe move comes at a time when the government has granted infrastructure status to the logistics sector, enabling it to raise cheaper finances. (Reuters)

The National Investment and Infrastructure Fund (NIIF) on Monday announced its tie-up with Dubai-based ports operator DP World to create a fund to invest up to $3 billion of equity in India’s transport and logistics sectors. This is NIIF’s first investment, following the first close of the NIIF Master Fund in October 2017 with contributions from a subsidiary of the Abu Dhabi Investment Authority (ADIA) and four domestic institutional investors. The fund will aim at acquiring assets and developing projects in sea and river ports, freight corridors, special economic zones, inland container terminals, and logistics infrastructure such as cold storage, NIIF and DP World said in a joint statement. Economic affairs secretary Subhash Chandra Garg said NIIF has made “good progress”. NIIF chief executive Sujoy Bose said the fund will aim to reduce the cost of moving cargo between port and origin/destination. “This is NIIF’s first investment and is a good example of how NIIF can work with international capital and expertise to invest at scale to build critical infrastructure in India,” he said.

The move comes at a time when the government has granted infrastructure status to the logistics sector, enabling it to raise cheaper finances. The commerce ministry has even set up a separate logistics division, reflecting the government’s growing seriousness about the sector. The country’s performance improved to 35 from 54 in the World Bank Logistics Performance Index last year. The government expects the logistics sector to grow to $360 billion by 2032 from the current $115 billion. In October last year, NIIF had signed an agreement with a subsidiary of ADIA for an investment of $1 billion, sealing the first major deal since it was set up around two years ago. As part of the pact, ADIA became the first institutional investor in NIIF’s Master Fund and a shareholder in the NIIF’s investment management company. HDFC Group, ICICI Bank, Kotak Mahindra Life and Axis Bank also joined the NIIF Master Fund along with ADIA and the government.

The NIIF and its sub-funds are supposed to invest in infrastructure projects – greenfield, brownfield and stalled. The proposed initial corpus of NIIF is Rs 40,000 crore, of which 49% will be contributed by the government. The remaining 51% are to be raised from sovereign wealth funds, other global long-term investors and public sector units. The Indian government has already approved its contribution of Rs 20,000 crore towards the NIIF. Last 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. Since most public sector banks are struggling to cope with toxic assets, their ability to fund large infrastructure projects is very limited. So, funds for infrastructure from other sources, including NIIF, assume importance. Last year, India and the UK had announced the launch of a Green Growth Equity Fund. Although no investment has flowed in yet following this agreement, official sources said the work is on.

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