India’s youngest infrastructure financier looks beyond debt

Mint.A second fund, still on the drawing board, is a blended finance fund of similar size, Rai said in an interview at the Mumbai headquarters of Nabfid, which was founded in 2021. The company was initially set up as a development finance institution to support long-term projects.“We are (also)likely to launch an alternative investment fund, mainly for the equity side, in the next six months,” Rai said.Nabfid’s new subsidiary will be like a holding company, under which there will be multiple alternative investment funds (AIF).

The first of these is expected by September.The proposed category II alternative investment fund (AIF) will back infrastructure projects. “For all well-conceived projects, we are seeing a lot of bank sanctioning loans, but then equity is a problem,” Rai said, adding that while debt funding is readily available, equity remains scarce.“...foreign equity and all that is sought after.

Domestic equity is also a possibility. So, we want to enter that space to create alternative investment funds,” he said.AIFs are pooled investment vehicles that raise capital from investors to invest in assets such as infrastructure, private equity, or startups.The state-owned institution also plans to invest in underserved sectors such as urban infrastructure, waste management, and smaller healthcare projects, areas where capital is harder to access.Nabfid's blended finance vehicle is expected to focus particularly on urban infrastructure.

“Blended finance comes at a much cheaper rate. It is below the senior debt,” he said.The model involves combining low-cost international funds, such as green climate finance, with regular borrowing.“Suppose there is an infra project.