India’s National Investment and Infrastructure Fund (NIIF) recently confirmed that it had acquired IDFC Infrastructure Finance Limited (IDFC-IFL). IDFC-IFL is a non-banking finance company (NBFC), registered as an infrastructure debt fund with the Reserve Bank of India.
For the record, IDFC-IFL loans funds to operating infrastructure projects, enabling the original project financiers to recycle their capital after the operations have commenced. Having a loan book of over Rs4,500 crore and a strong asset quality, the company does not have any material repayment obligations for coming two years.
This acquisition marks the very first investment from the NIIF’s Strategic Fund and also NIIF’s first control transaction, sources mentioned. The deal is subject to customary closing conditions and RBI’s approval.
NIIF chief executive and managing director, Sujoy Bose stated that NIIF would be able to play an important role in the private debt space in India infrastructure by building on this acquisition. The fund sees a growing need for capital with India’s expanding infrastructure ambition, potential for substantial returns and an emerging gap as traditional lenders are consolidating, Bose added.
According to Bose, NIIF’s Strategic Fund has a long-term nature, with strong underwriting and governance standards. Combining these features with NIIF’s ability to attract capital would allow it to build on the strong platform that IDFC has created and continue to grow the business.
At a time when the NBFC segment was facing headwinds, this investment has established the ability of the NIIF to make counter-cyclical investments that are commercially viable, Bose claimed. For the uninitiated, NIIF was set up by the government in 2015 as an investment fund resource for commercially attractive greenfield, brownfield as well as stalled infrastructure projects.
The government is investing 49% in the fund, with the rest of the share being raised from third-party investors, like sovereign wealth funds, endowments, insurance and pension funds. The NIIF’s mandate consists of investing in sectors such as housing, transportation, energy, waste management, water and other areas associated with infrastructure in India.