Infrastructure sector is very important for the economy, but it has been facing an investment crunch due to long gestational period characteristic of the sector, coupled with the rising NPAs of commercial banks. Moreover, cost overruns due to administrative delays make investment in infrastructure sector unattractive.
National Investment and Infrastructure Fund (NIIF)
NIIF is an investor owned fund manager, created to provide equity support to infrastructure finance companies, by mobilising capital from both domestic and international sources. It currently manages three funds, each with its distinctive investment strategy and mandate: Fund of Funds, Master Fund, and Strategic Fund. These funds are registered with SEBI as alternative investment fund (AIF).
NIIF was first set up in 2015. The Government of India has 49% stake in NIIF, thus it is considered as India’s quasi-sovereign wealth fund, or the first sovereign wealth fund of India.
- 2017: Abu Dhabi Investment Authority (UAE) announced to invest $1 billion in NIIF, becoming the first institutional investor and shareholder in NIIF.
- 2018: NIIF acquired debt-ridden IDFC Infrastructure Finance (IDFC-IFL). This acquisition is the first investment from NIIF’s strategic fund.
India Infrastructure Finance Company Limited (IIFCL)
- IIFCL is a wholly-owned Government of India company, set up in 2006, to provide long term financial assistance (debt) to viable infrastructure projects. The total lending by IIFCL to any project is limited to 20% of the total project cost.
- IIFCL raises funds from domestic and international sources on the strength of government guarantees. Which implies that IIFCL’s ability to gather financing depends on India’s sovereign credit ratings.
Logistics sector (industrial parks, cold chains, and warehousing facilities) and affordable housing have been granted infrastructure status by the government. This status enables these sectors to have easier access to financing from banks and specialised lenders like IDFC, IIFCL at more friendly terms.
The Santiago Principles refer to transparency and good governance principles for Sovereign Wealth Funds, created out of concern of investors regarding transparency, independence and governance of the state-owned wealth funds. These principles are endorsed by the International Forum of Sovereign Wealth Funds (IFSWF), that is a group of sovereign wealth fund managers, established in 2009, and based in London, England.