New Delhi | Mumbai: The Abu Dhabi Investment Authority (ADIA) will invest $1billion in the National Investment and Infrastructure Fund (NIIF), marking the start of India’s ambitious attempt to raise equity funds for the infrastructure sector.
The agreement has been signed between NIIF Master Fund and a wholly owned subsidiary of Abu Dhabi Investment Authority (ADIA), one of the largest sovereign wealth funds in the world, NIIF said in a statement.
ADIA will become the first institutional investor in NIIF’s Master Fund and a shareholder in National Investment and Infrastructure Ltd, the NIIF’s investment management company.
Six domestic institutional investors — HDFC Standard Life Insurance, HDFC Asset Management, Housing Development Finance Corp, ICICI Bank, Kotak Mahindra Old Mutual Life Insurance and Axis Bank — will also be joining the NIIF Master Fund along with ADIA, apart from the government.
“This is a significant milestone in operationalisation of NIIF,” said Subhash Chandra Garg, economic affairs secretary.
“This agreement paves the way for creating significant economic impact through investment in commercially viable infrastructure development projects,” he said. The government has kept its stake in NIIF at 49%, giving it private sector character and operational flexibility and making it more attractive to sovereign wealth funds besides multilateral and bilateral investors.
It’s structured as an alternative investment fund (AIF) under Securities and Exchange Board of India regulations and will provide equity support to infrastructure projects. It will initially target a corpus of Rs 40,000 crore.
“We are proud to have ADIA as our founding partner and grateful for its support and contributions to date, and we now look forward to announcing further agreements with other investors,” NIIF CEO Sujoy Bose said. Khadem Al Rumaithi, executive director of real estate and infrastructure at ADIA, said the fund is set to play an important role in facilitating the flow of foreign capital into India’s infrastructure sector.
ADIA is among the most active foreign investors in India and has deployed its funds across asset classes in India including equities, fixed income, real estate and private equity. It is a large limited partner of several India and Asia-focused PE funds. It has backed two of the largest renewable energy companies in the country, investing $350 million in ReNew Power and Greenko.
ADIA’S INDIA PLAY
At a diplomatic level, Abu Dhabi has become a strategic partner to Prime Minister Narendra Modi’s efforts to woo foreign investments.
ADIA is expected to be one of the most aggressive bidders for 50 highway auctions under the new toll-operate-transfer (TOT) system, the first set of which has already been launched.
“We have built strong relationships with key partners in the NIIF over the past year and are looking forward to this now evolving as we jointly seek to deliver investment opportunities across a range of sub-sectors,” Al Rumaithi said.
“In parallel, ADIA will also continue to consider and pursue investments into Indian infrastructure opportunities that fall outside the scope of the NIIF, including taking minority stakes in high-quality Indian companies alongside aligned and reputable partners.” Cash-strapped Indian companies like GMR Airports or PE-backed platforms like Cube Highways have engaged with ADIA on flagship projects.
“The investment is likely to act as a catalyst for other investors as this is probably the single largest such investment by ADIA in India,” said Ananda Bhoumik, MD, India Ratings. “It reinforces the belief that the long-term infrastructure investment story in India is intact.”
The government has already promised budgetary support of Rs 20,000 crore to the fund while long-term international investors, such as a sovereign wealth funds, insurance and pension funds, and endowments will bring in the rest.
Finance minister Arun Jaitley had announced the NIIF in his second budget, proposing it as a fund that will leverage its initial equity to raise more money to provide equity support to infrastructure projects.