After IDBI Mutual Fund and IDFC Mutual Fund filed offer documents with SEBI to launch their IDFs, six more fund houses have joined the race to launch IDFs. In the last four months, Birla Sun Life, ICICI Prudential, Reliance, SBI, L&T and Axis have submitted their offer documents to SEBI to launch IDFs. So far, only IDFC Mutual Fund has received SEBI nod to set up its IDF.
RBI has allowed banks, NBFCs and AMCs to launch infrastructure debt funds. In March, LIC, Bank of Baroda, Citicorp Finance and ICICI Group signed a memorandum of understanding (MOU) to set up India’s first infrastructure debt fund through the NBFC route.
Only those AMCs whose sponsors or parent company have a minimum of five years’ experience in infrastructure financing are allowed to launch IDFs.
IDFs floated by AMCs will come with a lock-in period of 5 to 15 years. As these are close ended, investors can only redeem their units through stock exchanges. The minimum application amount is Rs 1 crore and the fund will have to rope in strategic investors (Infrastructure Finance Company registered with RBI as NBFC, scheduled commercial bank and International Multilateral Financial Institution) who would bring Rs 25 crore before the fund is marketed to other investors. The NAVs of these schemes will be published on a quarterly basis. These IDFs will be benchmarked against CRISIL Composite Bond Fund Index and CNX Infra Index.
According to SEBI, an IDF will have to invest a minimum of 90% of the schemes corpus in the debt securities or securitized debt instruments of infrastructure companies or projects or special purpose vehicles created for the purpose of promoting investment in infrastructure or bank loans in respect of completed and revenue generating projects of infrastructure companies or special purpose vehicle. The balance can be invested in stocks of infrastructure related companies or market instruments and bank deposits.
Offer documents filed by fund houses show that they can charge an up to 2.45 % as investment advisory fee. On the first Rs 100 crore, mutual funds can charge 2.25%, 2% for the next Rs 300 crore and 1% if the corpus exceeds Rs 700 crore.
The creation of IDFs was announced in Union Budget 2011-12 to facilitate long term financing for the infrastructure sector. IDFs can be created in two ways - as a trust by AMCs and as a company by NBFCs. The RBI will regulate IDFs launched through NBFCs while SEBI will oversee IDFs of AMCs.
Media reports suggest that the department of financial services is planning to channelize pension and provident funds in IDFs.
