India’s SWF gets ready to launch non-bank lender

Economy


Mumbai: Sensing a huge market opportunity to provide liquidity support to cash-starved Indian infrastructure companies, the National Investment and Infrastructure Fund (NIIF), the country’s sovereign wealth fund, is all set to launch a nonbank lender of its own.

Aseem Infrastructure Finance Limited (AIFL), the new NBFCIFC (Infrastructure Finance Company), is expected to get RBI approval before March this year. AIFL would target the broader segment of infrastructurelending market and leverage NIIF’s reach in the space to build a specialist credit platform knowledge capital, said people in the know.

The fund will have $400-500 million of seed capital and plans to achieve a loan book of $3 billion in the next couple of years. NIIF has begun discussions with global institutions, pension funds and domestic insurance firms to secure sponsors for the NBFC.

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NIIF already counts CPPIB, Abu Dhabi Investment Authority, AustralianSuper, Ontario Teachers’ Pension Plan, Temasek, Axis Bank, HDFC Group, ICICI Bank and Kotak Mahindra Life Insurance as investors in the NIIF Master Fund, along with the government of India.

Virender Pankaj, former chief executive (wholesale business), L&T Finance Holdings, will head the new NBFC.He has joined as a consultant, Strategic Fund – IFC, NIIF.

Presence in Infra Lending Space

Pankaj had managed the wholesale business for L&T Financial Services with an asset book of $6 billion in areas of infrastructure finance, structured corporate finance and debt capital market.

An NIIF spokesperson declined to comment.

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“The Indian public sector banks and the lending firms — which have been the primary source of debt — keep reducing their exposure to the infrastructure space due to various challenges including legacy non-performing assets (NPA). This presents an opportunity for a well-capitalised, specialised infrastructure-focused financial institution to grow significantly over time,” said one of the persons cited above.

The government has set a target to spend up to Rs 102 lakh crore by 2024/25 in infrastructure projects across the country.

Credit growth to companies has slowed sharply this year as troubled non-bank lenders cut back on lending and big banks shied away from funding infrastructure projects. The government is considering various plans to step up lending to consumption sector. ET reported on January 20 that a ‘TARP’-like programme could be on the anvil. The Troubled Asset Relief Programme (TARP) was instrumental in pulling the United States out of the global financial crisis in 2008/09. It involved a special fund that would buy out stressed assets, thereby allowing banks freedom to lend again.

But the NIIF lending arm would operate in infrastructure and provide money to projects. The NIIF’s Strategic Opportunities Fund (SOF) already has a presence in infrastructure debt space through its buyout of IDFC Infrastructure Finance Limited (IFL), a non-banking finance company registered with the RBI as an Infrastructure Debt Fund (IDF). IDF’s focus is on refinancing operating infrastructure projects with stable cash flows and raise matching long-term liabilities.

At present, NIIF IFL has a book size of Rs 6,000 crore. NIIF acquired IDFC Infrastructure Finance (IDFC-IFL) in 2018.

“India provides a significant return compared with international markets. Especially in infrastructure lending space, India offers 8-10.5% return for global investors,” one of the sources said.

In April last year, NIIF had tied up with ROADIS, a wholly-owned subsidiary of PSP Investments, to launch a platform that will invest in road projects in India. The platform will invest up to $2 billion of equity to target Toll Operate Transfer (TOT) models and acquisitions of existing road concessions.

NIIF is also set for its debut deal in India’s road sector. The SWF will buy two road assets of debtridden Essel Group for an enterprise value of Rs 2,000 crore. The two assets are Essel Devanahalli Tollway Private Limited near Bengaluru airport, and Essel Dichpally Tollway, a state highway in Telangana.



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