India’s new infra fund to lure cautious investors with 18% returns

India has become the latest emerging market to use its sovereign wealth fund to move into the infrastructure arena. Managing director Sujoy Bose tells GlobalMarkets that investors could make a return as high as 18% but investors still fret over bureaucracy

  • By Rashmi Kumar
  • 20 Oct 2019
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A combination of juicy returns and a maturing regulatory framework makes it the “perfect time” for investors to pump money into India’s nascent infrastructure financing market, the chief executive officer of the country’s sovereign wealth fund told GlobalMarkets.

In an exclusive interview, Sujoy Bose, the managing director of India’s National Investment & Infrastructure Fund (Niif), said that recent developments around infrastructure in the world’s most populous democracy had made investing in the sector a very attractive proposition.

“Indian infrastructure is at a point where the regulatory system has actually matured,” he said. “The World Bank would say it has one of the more mature regulatory frameworks for infrastructure in emerging markets.

“There are a lot of assets that can actually be acquired so it’s no longer only a development game as you can buy operating assets. The returns of those operating assets are quite attractive relative to the risks that they pose. It’s a market that is not only sizable, but also has breadth and depth.”

Depending on the kind of project and the type of deal, investors can make as much as 13%-18% in rupee returns, Bose said — an incredibly attractive number in a world of negative interest rates.

Niif, which is 49% owned by the Indian government with the rest held by a combination of Indian and international investors including Singapore’s Temasek Holdings and the Abu Dhabi Investment Authority, is working hard to make investors understand the potential of the country’s infrastructure market. The government chipped in $3bn to the fund manager, with Niif also separately raising money from other investors.


Risks and rewards

Investors will want to know the country can shed its reputation for overregulation. “The regulatory environment in India is challenging,” the CEO of an India bank said. “The [central bank] has made efforts to simplify rules around tax and investment caps many times, but there are cases where they announce something and then do a U-turn on the rule, making it difficult to keep up with the new regulation.”

An ECM banker in India said there had only been a handful of IPOs from infrastructure trusts this year. “There is interest, but it’s going to take investors time to get their heads around this new asset class before they can become comfortable investing in this sector. There are risks and there are rewards, but in some cases, the risks outweigh the rewards.”

The fund is looking at infrastructure development and financing through a sustainability lens, given the rising importance for regulators, sovereigns, funds, investors and developers, of the need for sustainable infrastructure. Niif has adopted the environmental, social and governance (ESG) standards of the multilateral development bank, the Asian Infrastructure Investment Bank.

Vishakha Mulye, executive director at ICICI Bank, said that India was increasingly paying more attention to sustainable financing, including in the infrastructure sector. “Until now, this portfolio was not profitable,” she said. “But given the wealth that is getting created, many of these segments are now getting quite profitable.”

  • By Rashmi Kumar
  • 20 Oct 2019

All International Bonds

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3 Bank of America Merrill Lynch 272.19 1172 6.51%
4 Barclays 248.32 1038 5.94%
5 HSBC 206.35 1143 4.93%

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3 JPMorgan 30.68 81 5.46%
4 Bank of America Merrill Lynch 26.25 77 4.67%
5 Deutsche Bank 25.94 95 4.61%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $b No of issues Share %
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2 Morgan Stanley 10.59 51 9.12%
3 Goldman Sachs 9.63 50 8.29%
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5 Bank of America Merrill Lynch 5.50 29 4.73%