Fund houses have filed offer documents with SEBI for launching infrastructure debt funds, but experts feel their success will depend on liquidity.
Fund houses like Axis, L&T, IDFC and IDBI have filed offer documents with SEBI to get approval for launching their Infrastructure Debt Funds (IDFs). Only IDFC has received SEBI approval so far.
Now, SBI MF is also working on this product. Some AMCs are still evaluating the pros and cons.
Dhirendra Kumar, CEO, Value Research feels that institutional investors may not compromise on liquidity. “For listing on exchanges you need a large market for liquidity. When Morgan Stanley had 10 lakh investors it was trading at 30% discount on the exchange. Listing is done just to be compliant with regulations. It is more like a private placement. AMCs have great relationships with corporates but they (corporates) are unlikely to compromise on liquidity if they are stuck for five years in an IDF. Investing in a liquid fund is different and investing in an infrastructure debt fund is a completely different ball game.”
The funds may not be suitable for retail investors as the minimum investment amount is set at Rs 1 crore. All the schemes would normally come with tenure of five to fifteen years which will be decided by the AMC at the time of the launch.
“The scheme will be listed on the exchange like a close-ended debt scheme. We don’t envisage this to be a retail product. This product is meant for local and global institutional investors. We will use the brand and distribution bandwidth of Schroders Plc to market this scheme internationally,” says Rajiv Anand, CEO, Axis AMC.
These schemes will invest a minimum of 90% in securitised debt instruments of infrastructure companies, Infrastructure capital companies, infrastructure projects, special purpose vehicles (SPVs), bank loans in respect of completed and revenue generating projects of infrastructure companies and the balance 10% in debt-oriented securities.
These schemes will not carry any exit loads and will be listed on the stock exchanges so that investors can directly redeem from the exchange. They will disclose the indicative portfolio of these schemes on a monthly and half-yearly basis.
Most of these schemes will be benchmarked against the CRISIL Composite Bond Fund Index as there is no index in India which tracks the infrastructure sector. Strategic investors will have to make a minimum contribution of Rs 25 crore. The schemes will come with growth and dividend options and both will have a common portfolio. There is no restriction on IFAs to sell these products, though these funds could be only suited for IFAs catering to HNIs.
The
AMC has to mobilise a minimum of Rs 50 crore during the NFO. The scheme,
similar to an equity fund, will charge a maximum of 2.25% for the first Rs 100
crore, 2% on the next Rs 200 crore and so on.
