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NIIF to buy IDFC's infra fund biz in maiden control deal
Photo Credit: Mukul Mudgal/VCCircle

India’s National Investment and Infrastructure Fund (NIIF) has agreed to acquire a majority stake in non-bank lender IDFC Ltd's infrastructure fund business in its first control transaction.

The acquisition of the stake in IDFC Infrastructure Finance Ltd (IDFC-IFL), a non-banking company which manages a debt fund, will enable NIIF to provide private debt funding to infrastructure projects, according to a press statement on Wednesday.

“This investment demonstrates the ability of NIIF to make commercially attractive counter-cyclical investments, since it comes at a time when the non-banking finance sector is facing some temporary headwinds," said Sujoy Bose, managing director and CEO at NIIF.

IDFC-IFL lends to operating infrastructure projects. The company has a loan book of more than Rs 4,500 crore and no material repayment obligations for the next two years. IDFC-IFL was 81.48% owned by IDFC Financial Holding Company Ltd as on March 2016. Mortgage lender HDFC Ltd held an 11.11% stake in the company while SBI Life Insurance Company owned 7.41%.

This acquisition is the first investment from NIIF’s Strategic Fund and the first control transaction for NIIF. The deal is subject to approval from the Reserve Bank of India and customary closing conditions. The financial details of the deal were not disclosed. 

The Indian government has established three funds under NIIF. The Strategic Fund will acquire equity or equity-linked projects and focus on greenfield and brownfield projects in core infrastructure sectors, the government said in August. 

In addition, NIIF invests out of the Master Fund and Fund of Funds–I. NIIF has about $3.5 billion of total committed capital across the three funds.

In September, NIIF announced the second close of its Master Fund after it received Rs 2,700 crore ($400 million) in anchor commitment from Singapore state investment firm Temasek. This took the fund’s corpus to Rs 14,000 crore. 

Other investors in the Master Fund include Abu Dhabi Investment Authority (ADIA), HDFC Group, ICICI Bank, Kotak Mahindra Life Insurance and Axis Bank

A key investment from the Master Fund was the setting up of a $3 billion platform to invest in ports, terminals, transportation and logistics businesses in India.  

NIIF’s Fund of Funds–I has invested in HDFC's affordable housing fund and Everstone Capital’s energy fund. Earlier this year, Everstone set up a joint venture with British solar company Lightsource BP, where NIIF came in as an investor.

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