First major deal for National Investment and Infrastructure Fund inked; Abu Dhabi Authority to pump in $1 bn

Financial Express
October 17, 2017, New Delhi

The National Investment and Infrastructure Fund (NIIF) on Monday signed an agreement with a wholly-owned subsidiary of Abu Dhabi Investment Authority (ADIA) for an investment of $1 billion, sealing the first major deal since it was set up close to two years ago. As part of the pact, ADIA will become the first institutional investor in NIIF’s Master Fund and a shareholder in the NIIF’s investment management company. 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. The deal 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. 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. Economic affairs secretary Subhash Chandra Garg said, “This agreement paves the way for creating significant economic impact through investment in commercially viable infrastructure development projects”.

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% is to be raised from sovereign wealth funds, other global long-term investors and public-sector units. In April, India and the UK announced the launch of a Green Growth Equity Fund and agreed to anchor investments up to £120 million each in the joint fund, which will be set up under the NIIF framework. Although no investment has flowed in yet following this agreement, official sources said work is on.

The Indian government has already approved its contribution of Rs 20,000 crore towards the NIIF. Of this, however, only Rs 1,000 crore has been budgeted for 2017-18, down from the BE of Rs 4,000 crore for the last fiscal. The reduction in budgetary allocation for 2017-18 was mainly in light of the trend last fiscal. Since the NIIF couldn’t attract any foreign or domestic fund or company last fiscal, the government wasn’t required to contribute anything either. So it disbursed only Rs 15 crore to the NIIF last fiscal to just take care of its administrative expenses. However, since more sovereign wealth funds are now likely to follow the ADIA way, the government, too, has to raise its budgetary support for the NIIF for the current fiscal from its committed corpus. The NIIF was set up as a trust and registered with Securities and Exchange Board of India as a category-II alternate investment fund in December 2015. It was set up as a fund of funds, with an aim to generate risk-adjusted returns for its investors alongside promoting infrastructure development and technology in the country. Two companies — NIIFTL, the trustee of the fund, and NIIFL, the investment management company, were incorporated in 2015. A governing body has been set up under the chairmanship of the finance minister Arun Jaitley to act as an advisory council to NIIF.

Location: New Delhi, Delhi, India

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