Can NIIF provide the much-needed financial firepower to roads sector?

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The National Investment and Infrastructure Fund (NIIF), envisaged to plug the gaps in the infrastructure sector with long-term capital, has snapped up tollways from the debt-laden Essel Group.

The deal marks NIIF's foray into the roads and highway sector and the road projects will be managed by Athaang Infrastructure, NIIF’s road platform.

NIIF last year tied up with global transport infrastructure operator ROADIS to invest up to $2 billion in road projects.

Anchored by the Union government, NIIF manages over $4.3 billion of equity capital commitment across its three funds – Master Fund, Fund of Funds and Strategic Opportunities Fund.

The Canada Pension Plan Investment Board, Asian Development Bank and Abu Dhabi Investment Authority are some of its investors, along with domestic private banks such as ICICI Bank, HDFC Bank and Axis Bank.

NIIF has a crucial role to play in providing a fillip to the roadways sector, which has struggled to get the required support from public sector banks in recent times.

So, with COVID-19 dampening sentiments, can NIIF prop up the sector?

Suman Chowdhury, Chief Analytical Officer, Acuite Ratings and Research, feels NIIF can play the role of a catalyst in resuscitating the sector.

"There is a huge infrastructure funding requirement. It has to come from international fund houses and not just public sector banks or government-owned entities. NIIF can play a big role in this space as it can channel those funds into the roads sector, where there is a large opportunity. There are a lot of assets which would be attractive propositions for the fund houses and NIIF should play a major role," he told Moneycontrol.

Chowdhury added that the IL&FS episode has been a big setback for the infrastructure sector and NIIF has not been able to hit the ground running.

"Its ramp-up has not been very impressive, maybe because the last few years have been very difficult for the Indian infrastructure sector. Infrastructure creation plays a very important part in the revival of the economy and NIIF has to meet the expectations of the stakeholders," he said.

As the government looks to stay on course in its target of spending big on infrastructure projects, attracting foreign investment remains key to achieving the stated targets as the economy looks to recover from the coronavirus setback.