Over the past 20-30 years, the US, China and Australia as well as countries in Europe have benefited from the emergence of large-scale asset managers who have played an important role in pooling domestic and international institutional capital to invest in risk assets in infrastructure and other key sectors. This has, in turn, spurred investment, productivity and growth. As India moves towards its goal of becoming a $10 trillion economy by 2030, it will be important for the country to have a vibrant and growing asset management industry. The industry should be mature enough to be trusted by intermediaries for both domestic and international capital to be invested in various sectors of the country. An important area of asset management is “alternative assets”, which focuses on private investments in companies and projects prior to their public listing.
While the local alternative investment fund (AIF) industry in India is growing, it has not achieved the required scale. In order to support the investment needs of the country, the industry will need to comprise fund managers with demonstrated ability to manage large pools of capital. Today, there are only a handful of managers with assets under management of over $1 billion of capital. In this context, the emergence of the National Infrastructure and Investment Fund (NIIF) as a large-scale asset management and investment platform, with the sponsorship and support of the central government in collaboration with reputed domestic and international institutional investors, is almost a first-of-its kind development economy-wise. Many other countries are attempting to create such public-private investment platforms to mobilise capital for their development needs.
Investment strategy
The NIIF has adopted a segmented approach for investments and fund-raise, targeting different pools of capital for different strategies and sequencing the execution of those strategies. This approach also aligns with preference of large investors to separate their capital pools for different asset classes. Typically, these institutional investors separate their investment exposures and teams between listed and private investments, equity and fixed income investments, and even within private investments, between infrastructure, real estate and private equity. This not only ensures transparency and asset management but also helps build expertise.
NIIF’s overall investment strategy has been designed to create an impact in the country, keeping in mind the preference of investors. Its three funds follow different strategies: the Master Fund focusses on core infrastructure – mostly transportation, energy and digital infrastructure, Fund of Funds focuses on investing in AIFs managed by home-grown managers, and the Strategic Opportunities Fund focuses on growth sectors such as financial services, social infrastructure, manufacturing and other sectors of national importance.
Scaling up
Instead of only backing established companies, the NIIF has invested in building teams at the platform level to develop them into long-term vehicles – with the expectation that these entities would be able to attract larger amounts of private and international investment over time. It has set up Athaang Infrastructure, a wholly owned roads platform that has now acquired four strategically located highway assets.
Alongside the acquisition of the Infrastructure Debt Fund (IDF) (now NIIF-IFL), the NIIF also incubated Aseem Infrastructure Finance Limited (AIFL) to create an infrastructure debt business. The AIFL has a combined loan book of approximately Rs 260 billion with nil non-performing assets (NPAs) and has grown into an important infrastructure financier to Indian corporates.
In the infrastructure segment, the NIIF’s approach has been balanced. The Master Fund invests in operating, brownfield and greenfield assets through platforms that are wholly or partially controlled by the NIIF. Till date, it has created five platforms, focused on ports and logistics, renewable energy, roads, smart meters and digital infrastructure.
The Strategic Opportunities Fund invests in nationally important sectors. An example is its presence in the infrastructure debt financing sector through two majority-owned infrastructure non-banking financial companies (NBFCs). Apart from this, it has invested in a national hospital chain and an electric two-wheeler manufacturer. International investors have followed the NIIF’s lead in investing directly in one of the NBFCs and in the EV company – a good ratification of their trust in the NIIF’s investment expertise. Meanwhile, the Fund of Funds invests in Indian AIFs, which, in turn, provide equity capital to businesses.
To date, the NIIF has invested in six funds, which, in turn, invested in areas such as climate, affordable housing, affordable healthcare, and venture capital (VC)/technologies.
Strategic engagements
NIIF has incubated pan-Indian integrated logistics companies, Hindustan Infralog Private Limited (HIPL), in partnership with DP World, a Dubai-based multinational logistics player. In less than three years, HIPL has become the second largest player in container logistics with a 10 per cent market share in Inland Exim/domestic containers. NIIF has also recently expanded its partnership with DP World and signed an agreement to acquire a stake in Hindustan Ports Private Limited (HPPL) which has a 27 per cent market share in the ports sector.
In the renewable energy space, the NIIF has built a renewable energy platform, Ayana Renewable Power, alongside the British International Investment and Green Growth Equity Fund (GGEF), which now has approximately 4 GW operating and under-development capacity across solar, wind and hybrid. Additionally, the NIIF has anchored a smart meter infrastructure platform, IntelliSmart, in a joint venture with Energy Efficiency Services Limited (EESL), a Government of India undertaking.
Through the Fund of Funds, the NIIF has backed industries that are aligned with India’s growth priorities. The NIIF partnered with the UK Foreign, Commonwealth and Development Office to conceptualise and anchor the GGEF, which is one of the largest single-country-focused climate funds ($740 million) in emerging markets with underlying investments in water, waste management, electric mobility, renewables and green finance. Similarly, the NIIF has committed capital to an affordable housing fund, an affordable healthcare fund, couple of private equity growth funds and a deep tech VC fund.
Infusing equity
Other than control investments, the NIIF has made minority but significant investments in credible Indian companies operating in rapidly growing sectors of the economy. Its investment in Manipal Hospitals – a pan-Indian hospital and healthcare chain – is aimed at supporting the growth of high-quality healthcare services in various parts of the country. The NIIF forayed into the e-mobility segment with its recent investment in Ather Energy. Through this investment, NIIF is supporting Ather in its expansion in the two-wheeler segment, grow its in-house research and development (R&D) as well as patent development. Since the NIIF’s investment, Ather has increased its manufacturing capacity from 110,000 scooters per annum to 400,000 scooters.
SIPA group
Given NIIF’s overall positioning, the Strategic Initiatives & Policy Advisory (SIPA) team sits at the intersection of government, institutional investors and private operators. It provides strategic advisory by working closely with the Department of Economic Affairs/other government departments/state governments on new projects, investments, and policy ideas. Some of the areas where it has played an important role are – monetisation of AAI airports, policy amendment enabling EPFO/insurance funds to invest in AIFs/InvITs, healthcare PPPs, ideation for the National Infrastructure Pipeline, among others.
In sum
Over the past few years, the NIIF has built a pan-Indian presence 
by creating/investing in 15 distinct companies and fund vehicles across its three funds, which cater to different sectors of the economy such as ports and logistics, renewables, roads and digital infrastructure. With strong support from the central government, the NIIF has now developed into an internationally credible investment platform, backed by several highly respected global and domestic investors across India, the UAE, Singapore, Canada, Australia, the US, the UK and Japan. It is well poised to play a leading role for combining public and private capital to address the equity capital needs of the country.