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IIFCL gets nod to float infra debt fund

The finance ministry has allowed state-owned India Infrastructure Finance Company to float an infrastructure debt fund by the mutual fund route.

The finance ministry has allowed state-owned India Infrastructure Finance Company (IIFCL) to float an infrastructure debt fund (IDF) by the mutual fund route. The idea is to facilitate new funding sources for the infrastructure sector, which requires $1 trillion over the next five years.

?IIFCL got the approval on December 3 after its board cleared it. The company is aiming to launch the debt fund by January end,? a government official told FE.

The government entity engaged in facilitating funds to infrastructure projects, is in talks with IDBI Bank to be one of the sponsors for the fund. The official quoted above said that a formal nod from the Securities and Exchange Board of India to float the fund is awaited.

IIFCL is the second infrastructure company to get approval for launching IDF after Srei Infrastructure Finance, which will be launching its fund with LIC as the key sponsor.

The IDF was proposed by finance minister Pranab Mukherjee in the union budget for this fiscal, aimed at accelerating flow of long-term debt for infrastructure development. As per norms, an IDF may be set up either as a trust or as a company. While the trust-based IDF (mutual fund) would be regulated by Sebi, an IDF set up as a company (NBFC) would be regulated by RBI.

The framework for the debt fund has been notified by both the regulators and it is up to the companies to choose a suitable model.

Under the mutual fund route, IDF would invest 90% of its assets in debt securities of the sector companies.

An infrastructure debt fund scheme will be launched as a close-ended scheme maturing after more than five years or as an interval scheme with a lock-in of five years. The minimum investment into IDF would be R1 crore and the minimum size of the unit would be Rlakh.

The strategic investor would have to make a firm commitment of R25 crore. The units of fund schemes shall be listed on the stock exchange.

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First published on: 09-12-2011 at 02:41 IST
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