Equity infusion in NIIF to benefit projects that may not pass hurdle rate requirement of private entities

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Finance Minister Nirmala Sitharaman on November 12 announced equity infusion of Rs 6,000 crore into the National Investment and Infrastructure Fund (NIIF).

NIIF attracts sovereign funds for investment in infrastructure projects.

"This Rs 6,000 crore is a follow-through to the earlier budget announcement of seeding further capital to NIIF. By further leveraging this, NIIF could deploy in such infrastructure projects which may not necessarily pass the risk-adjusted hurdle rate requirement of other private players," Jagannarayan Padmanabhan, Director, Transport & Logistics, CRISIL Infrastructure Advisory, told Moneycontrol.

The government, as part of the 'Atmanirbhar Bharat 3.0' initiative to tackle the economic fallout of the coronavirus pandemic, said Rs 6,000 crore of equity investment will be made in the debt platform of NIIF.

"The government is infusing Rs 6,000 crore of equity to debt platform of NIIF where private equity participation will also come in. NIIF itself has invested Rs 2,000 crore. The platform has to provide infra project financing of around Rs 1.1o lakh crore by 2025," Sitharaman said.

Sitharaman said public expenditure for infrastructure is important at this stage. An additional amount of Rs 10,400 crore is being provided so that capital and industrial expenditure can be undertaken.

NIIF AIFL (AA Rating) and IFL (AA Rating) will raise Rs 95,000 crore debt from the market, including project bonds.

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NIIF has already invested nearly Rs 2,000 crore as equity in the platform. NIIF Strategic Opportunities Fund has a debt platform comprising NBFC Infra Debt Fund and NBFC Infra Finance Company.