While India’s billionaire business moguls have attracted billions in capital, India’s National Investment and Infrastructure Fund (NIIF) has proceeded at a slower pace of investment – but the situation looks set to change as the fund develops new partnerships and strategies.

This week, the NIIF launched a US$600 million India-Japan Fund (IJF) in collaboration with the Japan Bank for International Co-operation (JBIC), an investment arm of the Japanese government. The IJF is being billed as a major leap forward in the partnership between the two countries. In a statement, the Ministry of Finance said the NIIF would provide 49% of the target investment with JBIC contributing the remaining 51%. The IJF will be managed by NIIF Ltd. The bilateral fund’s goal will be to channel investment into environmental sustainability and low-carbon emission strategies and become the preferred partner for facilitating Japanese investment in India.

The Indian government has 49% stake in NIIF with the rest held by marquee foreign and domestic investors and multilaterals, including ADIA, Temasek, OTPP, AustralianSuper and AIIB. NIIF is structured in three different funds: Master Fund (the largest infrastructure fund in India), Fund of Funds, and Strategic Fund.

NIIF has been on a mission to attract co-investment with institutional investors and is reportedly engaged in talks for a INR20 billion (US$244 million) infrastructure investment trust that would include some assets from Athaang Infrastructure, which operates toll roads. The investment would be a private placement and media reports suggested fund raising would take place by September, although there is no further news on when the target will be reached.

In May, local media reported it was planning to launch its second fund-of-funds (FoF) to raise US$1 billion to invest in the funds of local asset managers, possibly launched by the end of the year. NIIF’s first FoF received commitments of US$600 million, aiming to invest in up to 10 Indian private equity funds – at present, the fund’s website lists seven funds with a total allocation of US$463 million, the biggest of which are the Green Growth Equity Fund (US$130 million) and the Multiples Private Equity Fund III (US$106 million). Although the NIIF has stated its AUM is US$4.2 billion, recent transactions suggest that it has grown to more than US$5 billion.

Compared to the big ticket deals secured by the Ambani and Adani business empires, NIIF has operated under the radar with many foreign sovereign wealth funds and public pension funds preferring to originate their own deals, particularly in renewables. This looks like it is about to change.

India’s quasi-SWF is ramping up its mission to deliver infrastructural improvements with affiliate Ayana Renewable Power (owned by NIIF, British International Investment (BII) and the Green Growth Equity Fund), announcing that it had signed a Power Purchase Agreement with Aditya Birla Group’s Hindalco Industries for the supply of 100 MW of renewable energy to its smelter plants in Odisha. Electricity will be supplied from solar and wind sources, in partnership with Greenko, which is backed by ADIA and GIC. The deal will will take Ayana’s cumulative capacity close to 5GW, putting it halfway to its goal of 10GW by 2025.

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 the summer 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. NIIFIFL 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.

The fund is also looking to support the South Asian nation’s digital infrastructure to support the rapidly growing e-commerce and fintech sectors. Strategic concerns prompted NIIF to announce earlier this year a partnership - Digital Edge DC - with Singapore’s Digital Edge and AGP DC InvestCo to develop a pan-India portfolio of hyperscale data centers.  It is 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.

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