AIIB set to support Indian sovereign wealth fund

AIIB’s investment in NIIF is part of a larger package of loans for infrastructure projects in India totaling $1.5 billion, the bank’s president, Jin Liqun, said following a meeting with Indian Prime Minister Narendra Modi. The loans will be provided this year and are earmarked for investments in specific energy, roads, and urban development projects, while the NIIF commitment is intended to give the government more flexibility in how it uses the funds.

NIIF launched in 2015 with a view to raising about INR400 billion ($6.2 billion) for a mother fund and several subsidiary vehicles. It is intended to catalyze economic activity in greenfield and brownfield projects, including previously initiated but stalled operations.

Vehicles include the NIIF Master Fund - backed by the Abu Dhabi Investment Authority along with the Indian government - which invests in mature businesses with long-term track records. The Master Fund recently partnered with Dubai-based port operator DP World to establish a platform to invest up to $3 billion in transport and logistics.

NIIF also operates a fund-of-funds program, which will work with Indian fund managers across a range of product and market targeting strategies.

The government is pushing a broad platform of improvements to the country’s infrastructure, with renewable energy a prime focus. However, financing these projects has been difficult because India’s domestic banks are still saddled with crippling amounts of non-performing loans that restrict their lending ability.

Regulators have implemented measures to give lenders greater power to resolve bad loans, but these will need time to fully take effect. In the meantime, the government has sought to mobilize foreign capital to support its infrastructure plans through initiatives such as NIIF. Finance Minister Arun Jaitley said last year that investments of up to $646 billion might be required over the next five years to meet development goals.

India is the second-largest shareholder in AIIB with an 8.4% stake, behind China with 29.8%. As of December 2017, the bank had approved investments of $4.2 billion in 24 projects in its member countries. Five of these projects, totaling $1.1 billion, are in India.

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• Topics
• South Asia
• Fundraising
• Infrastructure
• India
• LPs