In a major boost to the National Investment and Infrastructure Fund (NIIF), the government has secured an investment commitment of up to $1 billion from Abu Dhabi Investment Authority (ADIA), which will become the first institutional investor in the NIIF Master Fund and a shareholder in the Fund’s investment management company — the National Investment and Infrastructure Limited.
The initial size of the Fund, set up two years ago, is being expected to close at $2.1 billion, with the government keeping a green shoe option to raise it up to $2.8 billion depending upon the response from the investors, a senior finance ministry official said.
“We are expecting the initial close within a month’s time. The ADIA is expected to hold around 10-11 per cent stake in the NIIF Master Fund,” the official said.
ADIA is expected to bring in $200-250 million in the first fund and will invest the remaining portion in investment vehicles created by the NIIF. “Right now, ADIA has signed on an investment commitment of up to $1 billion. There will be a number of funds and investment avenues wherein ADIA can invest. They will pick up around 10-11 per cent stake in the fund (entailing an initial investment of around $200-250 million),” the official said.
The government is not providing any guarantee on returns and the “investments will be done purely on commercial basis,” the official said. Apart from ADIA, six domestic institutional investors will also join the NIIF Master Fund: HDFC Standard Life Insurance Company Ltd, HDFC Asset Management Company Ltd, Housing Development Finance Corporation Ltd, ICICI Bank Ltd, Kotak Mahindra Old Mutual Life Insurance Ltd and Axis Bank Ltd.
“The domestic investors have made their investment commitments. They will bring in their contribution in due course,” the official said, without elaborating. The Fund will invest across infrastructure projects in the economy including in power, green energy and road sectors.
NIIF was set up in December 2015 to catalyse funding into the country’s core sector. It has a targeted corpus of Rs 40,000 crore to be raised over the years — 49 per cent of which will be funded by the government at any given point of time. The remaining 51 per cent of the corpus is to be raised from domestic and global investors, including international pension funds, sovereign wealth funds, multilateral/bilateral investors.
Commenting on the first investment agreement signed between NIIF Master Fund and a wholly owned subsidiary of the ADIA on Monday, Department of Economic Affairs Secretary Subhash Chandra Garg said: “This is a significant milestone in operationalisation of NIIF. This Agreement paves the way for creating significant economic impact through investment in commercially viable infrastructure development projects.”
“This agreement marks the culmination of an extensive process of collaboration with ADIA to develop an investment structure that is attractive to international investors while remaining closely aligned with the NIIF’s objectives,” said NIIF CEO Sujoy Bose. The Fund is planning to announce further agreements with other investors, Bose said.
On April 5, 2017, India and the UK announced the launch of a Green Growth Equity Fund to leverage private sector investment from London to invest in green infrastructure projects in India. The two countries had, in principle, agreed to anchor investments up to £120 million each (total £ 240 million) in the joint fund, which will be established under the NIIF framework.
The NIIF has also signed memoranda of understanding with the government of UAE, Russia’s RUSNANO and RDIF; the Qatar Investment Authority and the Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development to explore investments in the Fund.
A Governing Council chaired by Finance Minister Arun Jaitley has already been set up to act as an advisory council to the NIIF.
In the last financial year, the NIIF received a total of Rs 15 crore from budgetary resources for meeting administrative expenses. For the current financial year, the government has allocated Rs 1,000 crore as per Budget Estimates to NIIF. The government expects NIIF to raise Rs 8,000 crore from various sources to fund projects worth Rs 16,000 crore in the current financial year, according to the Output Outcome Framework for Schemes 2017-18.
NIIF was registered with the Securities and Exchange Board of India as a Category II Alternate Investment Fund on December 28, 2015. The fund has been set up as a fund of funds structure with an aim to generate risk-adjusted returns for its investors alongside promoting infrastructure development.
“The NIIF is set to play an important role in facilitating the flow of foreign capital into India’s infrastructure sector. As a long-standing investor in India and in infrastructure globally, ADIA welcomes the opportunity to be the first to partner with NIIF in a platform that is sure to be of interest to other long-term institutional investors,” said Khadem AlRemeithi, Executive Director of the Real Estate & Infrastructure Department at ADIA, according to a statement.