THE Asian Development Bank (ADB) and the National Investment and Infrastructure Fund (NIIF) of India on March 30 announced the signing of an agreement under which ADB will invest up to US$100 million equivalent in Indian rupees into the NIIF Fund of Funds. ADB’s investment will support the growth of India’s private sector by helping the country’s maturing private equity industry to efficiently raise capital from international and domestic institutions.
ADB joins the Government of India and Asian Infrastructure Investment Bank (AIIB) as investors in NIIF Fund of Funds, which has now secured US$700 million in commitments. ADB’s investment is expected to help attract new investors to NIIF Fund of Funds and enable it to reach its target size of US$1 billion.
ADB vice-president for private sector and public-private partnerships Diwakar Gupta says: “ADB’s investment in NIIF Fund of Funds will help catalyze institutional capital into domestic private equity funds in India, thereby contributing to greater availability of long-term growth financing for private sector companies and leading to the creation of quality jobs, social infrastructure development and economic growth.”
NIIF managing director and CEO Sujoy Bose says ADB’s commitment reflects the bank’s confidence in the continued growth and potential of the Indian economy, its skilled private equity fund managers and the large pool of determined entrepreneurs who seek capital to grow and strengthen their companies. “With this capital infusion, NIIF Fund of Funds will be able to increase its support to India-focused private equity fund managers at a time when global fund-raising prospects may be challenging in the short term.”
NIIF Fund of Funds was established in 2018 and invests in private equity funds managed by India-focused fund managers, with a focus on smaller and medium-sized enterprises that require growth equity to further scale up their businesses. So far, it has made commitments to three private equity funds aggregating more than US$350 million in equivalent rupees, which invest across several segments, including green infrastructure, middle-income and affordable housing, and entrepreneur-driven middle market growth companies operating across diversified sectors.
The managers of the three funds have been able to raise an additional US$1.1 billion alongside NIIF’s investments, demonstrating NIIF’s ability to crowd-in capital alongside its own investments.
ADB’s investment contributes to the fund of funds component of the strategic NIIF initiative by the Government of India. NIIF currently manages over US$4 billion of capital commitments across three funds, each with its distinct investment strategy. NIIF’s direct funds are focused on large investments in infrastructure and associated sectors.
The board of AIIB approved an equity investment of US$100 million in NIIF Fund of Funds in June 2018 as part of the initial closing for Phase 1. At that point in time, the bank says it was considering a further investment of another US$100 million as part of Phase II for the final closing, which will bring its total commitment to US$200 million.