The National Investment and Infrastructure Fund (NIIF) has begun talks with two sovereign wealth funds to become the first investors to come on board, following the signing last fortnight of a government commitment to infuse ₹20,000 crore into the fund, CEO Sujoy Bose said on Monday.
The NIIF plans to leverage the Centre’s financing – equivalent to $3 billion – to invest a far higher amount in infrastructure firms and projects, in partnership with global, long-term investors eyeing infrastructure assets, and fund managers that could create dedicated infra sector funds.
“We have been having discussions with developers and financiers to see where the NIIF can add value and we will end up with a large pool of capital that will allow us to operate at a scale not common in India today, with sticky capital,” Mr. Bose said.
A big milestone was cleared two weeks ago when the Centre signed off on its initial commitment of ₹20,000 crore to the NIIF, he added.
“We are now in conversation with a couple of sovereign funds to become the first investors and we will expand that conversation with large global pension funds and insurance companies as well,” Mr. Bose said, stressing that this would be sticky, long-term capital unlike volatile global portfolio flows. The anchor investment by the government in NIIF will be split into two buckets – a billion dollars will be earmarked for a ‘NIIF Direct’ fund that could directly invest in existing or new infrastructure firms or projects.
Sovereign funds, pension and insurance companies would bring in a similar amount, while the government’s stake would be kept at 49% of this fund, he said.
“With the rest of the $2 billion equivalent, we will look to work with fund managers to see if we can create funds that can become partners with us in investing,” he said, speaking at an Indian Private Equity and Venture Capital Association conclave in the capital.
India is more attractive to foreign investors interested in infrastructure investments in emerging markets as it now has several privately executed projects that are operational or are close to completion, Mr. Bose said.
“Some investors prefer post-construction assets, some like to take a risk on construction but require a higher return. There are estimates that about $600 billion equivalent of operating or mostly constructed assets are available,” he said.
The NIIF will also back ‘platform companies’ that can scale up and deliver bigger projects as the sector has seen fragmented players, the fund’s chief executive said.
“There have not been many large firms coming up. Now we see firms like IDFC alternatives starting the concept of platform companies that can be scalable and become strong counter-parties to government in PPP structures,” said Mr. Bose.