National Investment and Infrastructure Fund (NIIF)

The National Investment and Infrastructure Fund (NIIF) was proposed in Union Budget 2015. In the last week of December, the government has set up this Rs. 40000 crore fund to provide long term capital for infrastructure projects.

Objective

The objective of NIIF is to maximise economic impact through infrastructure development in viable projects both greenfield and brownfield, including stalled projects, mainly in the core infra sector.

Structure

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. Total corpus of the fund is Rs. 40000 Crore.  The government will invest Rs.20,000 crores into it from budget while the remaining Rs. 20,000 crores are expected to come from private investors. Government stake has been fixed at 49%. This stake structure (49% government, 51% private) will help NIIF to be seen with characters of both sovereign fund as well as private sector.

NIIF is a fund of funds. This implies that there would be multiple alternative investment funds underneath the main fund. Examples of such funds include stressed-assets fund, renewable energy fund, brownfield projects fund etc.

Governance

NIIF has been set up as a Trust registered under the Indian Trust Act. The activities of NIIF will be overseen by a Governing Council, which is to be headed by Finance Minister and which has been formed to oversee the activities of NIIF. Further, there are five members of this council as follows:

• Secretary, Department of Economic Affairs
• Secretary, Financial Services
• Ms Arundhati Bhattacharya (Current Chairman of SBI)
• Hemendra Kothari (Investment Banker)
• V. Mohandas Pai (former Infosys Director)

The mandate of the Council is approval of guidelines for investment of Trust property/Corpus of NIIF and parameters for appointment and performance of investment managers/ advisors.

Further, India Infrastructure Finance Company Limited (IIFCL) has been appointed as the investment advisor to NIIF for a six-month period, while IDBI Capital Market Services has been selected as advisor to NIIF Trustee for a period of one year.

Functions of NIIF

NIIF will raise funds from investors and markets and would invest the same in companies, institutions and infrastructure projects. It will also provide advisory services.

Source of Funds

The sources of funds for NIIF are as follows:

• Government budgetary funds to each AIF set up under NIIF. These funds will be provided every year as required.
• Private investors. The fund will solicit equity participation from strategic anchor partners. It is also expected to attract overseas investors, PSUs, domestic pension, provident funds and NSSF (National small savings fund) also.

The international pension funds and sovereign wealth funds from Singapore, Russia and the UAE have showed interest to invest under the fund. On February 2, 2016, NIIF and Russia’s RUSNANO OJSC have signed an MoU to set up the Russia-India High Technology Private Equity Fund for joint implementation of investments into projects in India.