NIIF: The Sleeping Giant?

Prithu Sharma 08th Apr 2016

The National Investment and Infrastructure Fund (NIIF), seems to have finally come out of its Odin nap (not sleep) with its first investment. NIIF has been structured as a fund of funds and set up as Category II Alternate Investment Fund (AIF) under the Securities and Exchange Board of India (SEBI) Regulations. Its proposed corpus of funds is INR 40,000 crore and the government will be investing INR 20,000 crores into it from budget since the government's stake has been fixed at 49 per cent. The remaining INR 20,000 crores is expected to come from private investors.

The recent investment by NIIF, in partnership with DP World, will create a platform for utilising opportunities in sea-ports, river ports, freight corridors, port-led special economic zones, inland container terminals, and logistics infrastructure including cold storage. According to DP World's press release, regarding the same, the platform seeks to "invest up to USD 3 billion of equity to acquire assets and develop projects in the sector."

However, the gung-ho about the investment is misplaced. A single investment, more than two years after getting registered is no big feat, nor is it sufficient. Envisaged as a means to bridge the infrastructure funding gap in view of the twin balance sheet problem plaguing the banking sector(the primary infrastructure fund provider in the country); NIIF, as of now, has fallen way short of its mark.

Registered in December 2015,NIIF was unable to garner any funding commitments from foreign sovereign wealth funds or investors till Q1 FY 18. And even though it has gathered some steam in the past few months by securing investments from local and international partners, its pace of operations, is still very much lacking. Recent estimates by the government itself had placed the infrastructure investment-funding gap for 2017-22 at USD 646 billion (INR 41 trillion). In view of such a massive shortfall for infrastructure funds, NIIF's underperformance becomes even more of an issue.<...

Note: Views expressed in this blog are those of the author.