India’s sovereign fund, the National Investment and Infrastructure Fund (NIIF), is aiming at a heightened pace of investing in climate opportunities in the country through its India-Japan Fund (IJF).

Armed with $600 million in commitments, the IJF will likely deploy its remaining capital in the next 18-24 months, a senior fund executive said in an interview with Mint. The fund has backed Ather Energy, Eka Mobility and Mahindra Last Mile Mobility so far and is targeting sub-sectors such as mobility, energy efficiency, energy transition and waste recycling.

“We are looking to invest in opportunities that arise from the India-Japan corridor, where Japanese companies can bring their expertise or technical know-how to the Indian market. We are also evaluating opportunities to invest in India alongside Japanese companies. From an overall portfolio perspective, we expect climate-focused investments to account for around two-thirds, with the remaining one-third in the India-Japan corridor,” said Krishna Kumar, a partner at the IJF.

Kumar’s team is looking to invest $50-60 million in growth equity in companies that fall into these buckets.

The NIIF is a government-anchored infrastructure investment platform that manages about $5 billion in capital commitments across four funds, investing in infrastructure assets and related sectors.

While the government of India has committed $3 billion and serves as the anchor investor, the platform also counts institutional investors such as Abu Dhabi Investment Authority, Temasek, Ontario Teachers' Pension Plan, AustralianSuper and Asian Infrastructure Investment Bank among its backers.

NIIF invests through four strategies – Infrastructure, Private Markets, Climate (via IJF) and Growth Equity.

The IJF is a strategic partnership between the government of India and the Japan Bank for International Cooperation (JBIC), a Japanese public financial institution, both being anchor investors in the fund.

No VC risk

“Our fund (India-Japan Fund) is a private equity fund. We do not take venture capital risk. We do not take a business model risk. We want business models and unit economics to be proven… We don't mind being the first private equity growth capital investor, but we wouldn't want to be a late-stage VC investor,” Kumar added.

According to Kumar, about 40% of the $600 million in commitments have already been invested. In 2023, the IJF saw its final close with the government of India holding a 49% stake and JBIC with 51%.

“Climate is an emerging asset class. It's a new asset class. So, while we have evaluated more than 300 potential companies, many fall off in the initial filter because companies are growing, they are raising capital, and this asset class will evolve over the next five-10 years,” Kumar added.

According to Kumar, recycling, energy transition, industrialization and decarbonization are the segments throwing up opportunities.

“Our first 12-18 months went in developing the thesis and weeding out the kind of sub-segments we wanted to invest and those we wanted to avoid. Now with the playbook being set internally, you will see us deploying capital at a faster pace. From the pipeline that we have built, we are confident of investing the fund over the next 18-24 months,” Kumar said.

Second fund

Armed with the experience with the first fund, the firm is likely to target a larger second fund where it will look to expand its investor or limited partners (LP) base. However, Kumar declined to comment on the next fund timeline.

“Our focus for now is on deploying the fund and creating a robust portfolio which has the ability to generate attractive risk-adjusted returns. This is the sequence followed by our infrastructure and private market strategies before embarking on their successor funds,” said Kumar. “It’s still early for us to discuss a successor fund. When we launch our successor fund, we would expect it to follow the same architecture we have followed for other funds at NIIF, where existing investors form the anchor and we widen the LP base for incremental capital.”

NIIF has already returned almost $1.9 billion in capital across its funds. Most recently, TPG, a leading global alternative asset management firm, acquired 100 percent stake in Aseem Infrastructure Finance, alongside co-investor partners GIC and ICICI Bank, providing an exit to NIIF.

“We have crafted some good exits, whether it be exits from our infra fund, such Intellismart and Ayana Renewables, or from our growth equity strategy, where we've divested Manipal Hospitals and Ather Energy, among others. In less than 10 years since our inception, we've managed to return $1.9 billion of capital from completed and announced sale transactions," said Kumar.

India’s sovereign fund, the National Investment and Infrastructure Fund (NIIF), is aiming at a heightened pace of investing in climate opportunities in the country through its India-Japan Fund (IJF).

Armed with $600 million in commitments, the IJF will likely deploy its remaining capital in the next 18-24 months, a senior fund executive said in an interview with Mint. The fund has backed Ather Energy, Eka Mobility and Mahindra Last Mile Mobility so far and is targeting sub-sectors such as mobility, energy efficiency, energy transition and waste recycling.

“We are looking to invest in opportunities that arise from the India-Japan corridor, where Japanese companies can bring their expertise or technical know-how to the Indian market. We are also evaluating opportunities to invest in India alongside Japanese companies. From an overall portfolio perspective, we expect climate-focused investments to account for around two-thirds, with the remaining one-third in the India-Japan corridor,” said Krishna Kumar, a partner at the IJF.

Kumar’s team is looking to invest $50-60 million in growth equity in companies that fall into these buckets.

The NIIF is a government-anchored infrastructure investment platform that manages about $5 billion in capital commitments across four funds, investing in infrastructure assets and related sectors.

While the government of India has committed $3 billion and serves as the anchor investor, the platform also counts institutional investors such as Abu Dhabi Investment Authority, Temasek, Ontario Teachers' Pension Plan, AustralianSuper and Asian Infrastructure Investment Bank among its backers.

NIIF invests through four strategies – Infrastructure, Private Markets, Climate (via IJF) and Growth Equity.

The IJF is a strategic partnership between the government of India and the Japan Bank for International Cooperation (JBIC), a Japanese public financial institution, both being anchor investors in the fund.

No VC risk

“Our fund (India-Japan Fund) is a private equity fund. We do not take venture capital risk. We do not take a business model risk. We want business models and unit economics to be proven… We don't mind being the first private equity growth capital investor, but we wouldn't want to be a late-stage VC investor,” Kumar added.

According to Kumar, about 40% of the $600 million in commitments have already been invested. In 2023, the IJF saw its final close with the government of India holding a 49% stake and JBIC with 51%.

“Climate is an emerging asset class. It's a new asset class. So, while we have evaluated more than 300 potential companies, many fall off in the initial filter because companies are growing, they are raising capital, and this asset class will evolve over the next five-10 years,” Kumar added.

According to Kumar, recycling, energy transition, industrialization and decarbonization are the segments throwing up opportunities.

“Our first 12-18 months went in developing the thesis and weeding out the kind of sub-segments we wanted to invest and those we wanted to avoid. Now with the playbook being set internally, you will see us deploying capital at a faster pace. From the pipeline that we have built, we are confident of investing the fund over the next 18-24 months,” Kumar said.

Second fund

Armed with the experience with the first fund, the firm is likely to target a larger second fund where it will look to expand its investor or limited partners (LP) base. However, Kumar declined to comment on the next fund timeline.

“Our focus for now is on deploying the fund and creating a robust portfolio which has the ability to generate attractive risk-adjusted returns. This is the sequence followed by our infrastructure and private market strategies before embarking on their successor funds,” said Kumar. “It’s still early for us to discuss a successor fund. When we launch our successor fund, we would expect it to follow the same architecture we have followed for other funds at NIIF, where existing investors form the anchor and we widen the LP base for incremental capital.”

NIIF has already returned almost $1.9 billion in capital across its funds. Most recently, TPG, a leading global alternative asset management firm, acquired 100 percent stake in Aseem Infrastructure Finance, alongside co-investor partners GIC and ICICI Bank, providing an exit to NIIF.

“We have crafted some good exits, whether it be exits from our infra fund, such Intellismart and Ayana Renewables, or from our growth equity strategy, where we've divested Manipal Hospitals and Ather Energy, among others. In less than 10 years since our inception, we've managed to return $1.9 billion of capital from completed and announced sale transactions," said Kumar.