Information and Broadcasting Minister Prakash Javdekar on Wednesday said NIIF would take all necessary steps to use the equity investment funds expeditiously.
The NIIF Strategic Opportunities Fund (NIIF SOF) has set up a debt platform comprising an NBFC Infra Debt Fund
(IDF) and an NBFC Infra Finance Company. NIIF, through the NIIF SOF, owns a majority position in both companies and has already invested Rs 1,899 crore across the platform.
The SOF fund, through which the NIIF investment had been made, would continue to support the two companies apart from investing in other suitable investment opportunities, Javdekar said.
Finance Limited (AIFL), one of the companies of NIIF, will predominantly focus on under-construction greenfield assets, besides brownfield assets with less than a year of operations. The debt financing platform will have its own in-house appraisal system, which will enable faster deployment of funds.
Finance Limited (NIIF-IFL), the other company of NIIF, will operate as a take-out vehicle for mature operating assets. It will help infrastructure investors replace high-cost bank finance with cheaper IDF finance post-commissioning.
Over the next five years of the national infrastructure pipeline, the debt financing platform can potentially support the construction of infrastructure projects worth Rs 1 trillion. This will act as a catalyst in attracting more investments into the infrastructure sector.
In India, infrastructure projects are executed through special purpose vehicles. Typically, the SPVs, on a standalone basis, would find it challenging to get investment-grade rating, even after the completion of construction. It is also expected that the debt platform will raise debt from the bond market and serve as a trusted intermediary.
AIFL is rated AA by Care Ratings and NIF-IFL is rated AAA by Care Ratings and ICRA. Bond investors seek lower margins than banks, but prefer to invest in debt of AAA-/AA-rated entities to meet their own risk management guidelines. Long-term bond investors, including pension and insurance funds, typically invest in bonds rated AAA.