India’s state-owned strategic fund the National Investment and Infrastructure Fund (NIIF) is planning to launch a second fund of funds this year to inject US$1 billion in liquidity into funds operated by local asset managers, according to The Mint – the fund has made no official announcement.
The fund will follow the first FoF which received commitments of US$600 million to invest in 10 local private equity fund managers. It has so far committed around US$540 million to seven funds, most recently placing US$50 million in the Lighthouse India Fund IV AIF. The first FoF attracted a plethora of institutional investors, including state-owned funds such as AustralianSuper, Temasek, CPP Investments, Ontario Teachers’ Pension Plan (OTPP), and PSP Investments.
NIIF is also planning to launch its first infrastructure investment trust (InvIT), raising US$500 million in capital from foreign and domestic investors to expand its portfolio of US$2 billion of road assets.
Bond markets are being tapped for infrastructure financing, with NIIF Infrastructure Finance (which is 39.7% owned by NIIF via its strategic fund, 25.1% by the office of the President, 30.8% Aseem Infrastructure Finance and 4.4% by HDFC) announcing in recent days its plans to raise INR5 billion (US$61 million) through 10-year AAA-rated bonds maturing in 10 years. In April, the company raised INR4 billion via the reissue of 7.17% August 2031 bonds. NIIF IFL invests in infrastructure projects that have completed at least one year of commercial operations. By 2022, the loan book of NIIF IFL grew 67% to INR142 billion with expansion largely driven by the solar renewable segment over the past few years, while the share of the road segment has gradually declined.
Meanwhile, the Indian government is courting Abu Dhabi for investment in renewables and tech from its sovereign funds, including Mubadala and NIIF-backer ADIA. A senior Indian trade delegation is currently on a visit to the UAE, conducting top-level talks with the funds. The UAE is the seventh largest investor in India with an estimated investment of US$18 billion, much of it directed by the Abu Dhabi’s sovereign wealth funds. Bilateral trade received a 20% boost following the implementation of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which came into force last May.
NIIF is positioning itself as a conduit for investment. Its three sub-funds managed by NIIF Ltd are 49% owned by the Government of India, with the rest held by marquee foreign and domestic investors and multilaterals, including ADIA, Temasek, OTPP, AustralianSuper and AIIB.
The NIIF built a portfolio of more than US$4.3 billion under the leadership of Sujoy Bose, who is expected to be replaced by a new chief executive in coming months. According to Bloomberg, Padmanabh Sinha, CIO of NIIF’s growth equity program, and Manavendra Kumar Sinha, CIO for global infrastructure and natural resources investments at Abu Dhabi Investment Council, have been shortlisted to helm the company.
Bose announced his intention to resign in September following reports that high profile backers from Canada and the UAE expressed misgivings over NIIF’s performance and strategic direction. ADIA notably lodged its complaints that an NIIF-ADIA-PSP consortium lost in the competition to buy into Mumbai International Airport to the Adani group, which has close political ties to the government. Disagreements had also emerged between Indian government figures and NIIF leadership over asset allocation, with the government wanting the NIIF to break from buying commercial assets from other private equity firms to commit to ventures that drive capital into “underserved” sectors.
NIIF is already transitioning towards a new model of impact investment, notably with a partnership with Digital Edge and AGP signed in January to create an India portfolio of hyperscale data centers – starting with a US$2 billion investment in one of the country’s biggest facilities, a greenfield 300MW hyperscale facility in Navi Mumbai. The NIIF-backed platform is expected to provide a competitive advantage to India’s economy in the long run. Moving forward, Digital Edge DC will continue to capture the demand of the market via investing heavily in more data centers, as aligned with its strategy to further build its cloud standing.
