Taking a cue from government’s interest in raising funds for
infrastructure financing, the Securities and Exchange Board of India (Sebi) has
allowed both existing mutual funds and non-banking finance companies (NBFCs) to
launch infrastructure debt funds (IDFs).
Schemes would invest 90 per cent of its assets in debt
securities of infrastructure companies or special purpose vehicles (SPVs)
across all infrastructure sectors. Funds could launch close-end schemes that
have a maturity of more than five years or it could also introduce interval
schemes with a lock-in period of five years. Even companies that have been in
the infrastructure financing sector in the last five years can set up a fund.
Under the guidelines, these companies can have a minimum of
five investors where no single investor shall hold more than 50 per cent of
assets. Strategic investors could invest up to to Rs 25 crore in the fund.
The minimum investment into the fund would be Rs 1 crore
with the minimum lot size being Rs 10 lakh for the unit. “Given that, the
quantum of funds that can be invested is high, it will attract institutional
buyers and high networth individuals (HNIs),” says Amar Ranu, senior manager,
third-party products research, Motilal Oswal Wealth Management.
However, one can expect some liquidity since the fully paid
units of the funds shall be listed on stock exchanges. Mutual funds launching
these funds may issue partly paid units to its investors.
According to the government’s 12th Five Year Plan, it has
planned $1-trillion investments in infrastructure projects. It was $500 billion
during the 11th Plan (2007-12) and the government has been keen to raise funds
through debt instruments like bonds and other routes such as units in the
capital markets.Finance Minister Pranab Mukherjee had announced tax breaks for
IDFs in his budget speech for this fiscal (2011-12), to attract foreign
investments in the various infrastructure projects.
In the earlier guidelines for released by Reserve Bank of
India in June 2011, NBFCs who set up these IDFs have been permitted to sell
bonds to refinance public private projects, once the construction is complete.
This would also help PPPs to attract long term funds at lower costs because of
lower risk. However, in terms of attracting investments, IDFs would have to
compete with the existing triple AAA rated papers which provide a liquid
market.
source: Business Standard