NIIF Infrastructure Debt Financing Platform

Context: The Union Cabinet has given its approval to the proposal for equity infusion by Government of Rs 6000 crores in NIIF Debt Platform sponsored by National Investment and Infrastructure Fund (NIIF).

Analysis

  • This was one of the twelve key measures made by Union Minister for Finance & Corporate Affairs, as part of Government of India’s stimulus to the economy, under Aatma Nirbhar Bharat 3.0 on 12th November, 2020.
  • In India, infrastructure projects are executed through Special Purpose Vehicles (SPVs). 
  • Typically, the SPVs on a standalone basis would find it challenging to get investment grade rating, even after the completion of construction.
  • Long term bond investors including Pension and Insurance Funds seek lowers margins than banks, but prefer to invest in debt of AAA / AA rated entities, to meet their own risk management guidelines.
  • The NIIF Strategic Opportunities Fund has set up a Debt Platform comprising an NBFC Infra Debt Fund and an NBFC Infra Finance Company.
  • It is expected that well-capitalized, well-funded and well-governed NIIF debt Platform can play a major role in infrastructure financing and development of Bond Market in India by acting as a AAA/AA-rated intermediary between the bond markets and infrastructure projects and companies.
  • The Debt platform will raise debt from the Bond market and serve as a trusted intermediary.

Background

  • As per the National Infrastructure Platform (NIP), investment in infrastructure sector is targeted at Rs.111 lakh crore over the next 5 years across various sub-sectors, creating substantial need for debt financing.
  • This would require at least Rs 60 to 70 lakh crores in debt financing.
  • This current environment requires well-capitalized specialized infrastructure focused financial institutions, such as the ones being developed by National Investment and Infrastructure Fund (NIIF), which can focus on lending across the project life cycle with a strong capital base and expertise driven approach.
  • NIIF Infrastructure Debt Financing Platform is expected to contribute nearly Rs 1 lakh crores in debt to the infrastructure sector over the next 5 years. 
  • This will act as a catalyst in attracting more investments into the infrastructure sector as envisaged in National Infrastructure Pipeline.

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