IL&FS backed infra debt fund targets $1bn corpus

Cuts size from $2bn to tap Australian Pension funds

The infrastructure Debt Fund, backed by IL&FS and Life Insurance Corporation of India (LIC), is initially planning to raise upto $1 billion from overseas and domestic investors.

The fund will use trust structure (mutual fund route) for this venture since it provides flexibility to invest in green-field projects also. Besides, power, ports and road projects, IDF may look at healthcare and education projects as well.

Ramesh Bawa, managing director and chief executive of IL&FS Financial Services said after getting final approval from Securities and Exchange Board of India (Sebi), the fund will start to raise money (upto $1 billion) in next few months.

In May last year, the company had said that they would set up an infrastructure debt fund with a targeted corpus of $2 billion.

Asked about reasons to cut corpus size from $2 billion, Bawa said this is not an investor issue. The board (directors) has advised to initially to raise $1 billion and then scale up size (even beyond $2 billion) based on requirements and performance.  

Bawa claimed given the IL&FS standing, there is adequate interest and it does not face challenge in raising money, especially from global investors.

An independent insurance company official said there is no decision to reduce size. It is flexible arrangement, allowing to expand corpus at later date.

Bawa said it will approach Japanese and Australian investors including pension funds. The share of overseas money in fund is expected to be 50-60%. The balance will come from domestic investors.

As for LIC, initially it was to take 10% stake in proposed IDF. But, now with a change in regulatory norms for investment it may take higher stake, he added. LIC has now been permitted to hold upto 30% stake in a company.

LIC makes long-term investments into equity and debt instruments. It LIC has invested in various infrastructure companies for facilitating long term growth in the sector.

As part of this activity, LIC has invested in the equity share capital of IL&FS, parent of IFIN. It is the largest equity shareholder in IL&FS with a stake of 25.9%.