Maritime Development Fund may set sail with foreign kitty, PSU push

Centre looking for equity commitments to the Rs 30,000 crore maiden fund

India’s maiden Rs 30,000 crore Maritime Development Fund (MDF) is garnering interest from the domestic and overseas financing majors, amid the initial discussions on its framework kicked off by the Ministry of Ports, Shipping, and Waterways.

The Centre is looking for equity commitments, and has received interest from several institutions, multiple officials told Business Standard.
 

“We are looking at raising equity from long-term investors and have had several rounds of discussions with banks, non-banking financial companies (NBFCs), and institutional investors, who have shown keen interest in being a part of the fund,” an official said.
 

Wave of investment
 

Multiple banking sources confirmed that they were willing to lend to specific maritime projects but stakeholders await the creation of the dedicated fund.
 

 The fund will promote domestic shipbuilding of all types and sizes to reduce India’s dependence on foreign ships. India holds less than 1 per cent of the global shipbuilding market, which is dominated by China, South Korea, and Japan.
 

In June, the shipping ministry conducted a meeting with potential investors to gauge initial interest in the fund.
 

“The meeting had witnessed participation from a diverse range of domestic and international investors and lenders, including prominent institutions such as NIIF, IFSC, SBI, Standard Chartered, Deutsche Bank, and HDFC,” an official said.
 

“Participation was also witnessed from institutions based out of IFSC-GIFT. The ministry presented the structure for the proposed MDF and framework for the functioning of the proposed Ship Owning and Leasing Entity (SOLE),” the official said.

The government is expected to have to shell out about Rs 15,000 crore (49 per cent) from its coffers, while the rest (51 per cent) will come from quasi-government entities, private equity investors, and public sector undertakings (PSUs). The official added that all 12 major ports will also be active equity partners in the fund.
 

Another  official said the funding structure and exact stakeholding patterns for equity investors would be clear only after the response from all institutional investors. He added that several patient capital funds such as Canadian Pension Funds and the National Investment and Infrastructure Fund (NIIF) had shown interest in the fund.
 

Canadian Institutional investors have been active investors in Indian infra, with major investments in highways through infrastructure investment trusts and other instruments. The expectations for the internal rate of return for patient capital investors are around 11-13 per cent, the official said.
 

Some will wait at the shores
 

However, some investors want more clarity on terms and definitions while others await large institutions to show the way. V K Dewangan, chairman and managing director, REC Ltd told Business Standard they were interested in the upcoming sector as part of REC’s expansion plans but will remain cautious.
 

“We are ready to do debt financing but the project needs to be viable with revenue and cash flow ensured. We would evaluate projects in the sector only if it is commerci-ally viable,” Dewangan said.
 

“We follow the ‘Harmonised list of infra projects’ notified by the department of economic affairs which enlists ports and shipyards but not shipbuilding,” he added.
 

Banks were also approached in June for their interest in the project-specific lending once the fund was set up. Barring port development projects by major infrastructure players, many projects in the maritime space, especially shipbuilding, have struggled to access credit in the past – the precedent necessitating the need for the fund.
 

“We do not have an issue with providing money for the maritime fund. However, we need to assess the project's viability. Since things are in the initial stage, we need to wait for some time,” said a senior bank executive from a large public sector bank.
 

Another executive, who was invited by the shipping ministry for project lending, later said that they will wait for the large banks such as State Bank of India, HDFC Bank, and others to make a move before they make a commitment. “However, since the blue economy is emerging, we would not hesitate to provide the credit. For now, we are in a wait-and-see mode,” he said.

FINANCING NEEDS

Govt may shell out Rs 15,000 cr (49%) from its own coffers

Rest to come from quasi-government entities, private equity investors, and PSUs

All 12 major ports to be active equity partners
 

Prominent institutions such as NIIF, IFSC, SBI, Standard Chartered, Deutsche Bank, and HDFC showing interest 

(With inputs from Shreya Jai)