The government has picked SBI Ventures Ltd (formerly SBICAP Ventures Ltd) as the fund manager for the Rs 20,000 crores Maritime Investment Fund tasked with fundraising, structuring, managing and overseeing the investment portfolio aimed at catalysing capital into the sector, multiple sources said.

A formal mandate to manage the fund will be given to SBI Ventures soon, a government source said, adding that the development is expected to transform the funding requirements for the sector.

SBI Ventures was selected through a bidding process in which a consortium of Indian Infrastructure Finance Company Ltd and Climate Fund Managers was the only other contender in the fray.

SBI Ventures is an alternative asset management company with assets under management of around Rs 30,000 crores ($3.5 billion). It is a wholly owned subsidiary of State Bank of India, India's largest lender and is the investment manager for Neev Funds, SWAMIH Investment Fund and various Fund of Funds.

The Ministry of Ports, Shipping and Waterways did not respond to a mail seeking comment.

The Rs 20,000 crore Maritime Investment Fund is a key component of the Rs 25,000 crore Maritime Development Fund approved by the Union Cabinet last year.

The Union government will contribute 49 per cent equity or Rs 9,800 crore to the corpus of the Maritime Investment Fund through budgetary support.

The remaining 51 per cent of the corpus will be raised from private and commercial investors, sovereign wealth funds, institutional investors, fund of funds, Central Public Sector Enterprises (CPSEs), Public Sector Undertakings (PSUs), Major Ports Authorities, and other eligible contributors.

Through equity participation, the MIF aims to catalyse investment by adopting a blended finance model to enhance the availability of long-term, affordable, and accessible capital for the maritime sector, government sources said.

The government will channelise its committed capital to MIF through the Sagarmala Finance Corporation Ltd, a Non-Banking Financial Company (NBFC) dedicated to the maritime sector. Investments made by the government's contribution will be held by SMFCL in a fiduciary capacity while accounting for applicable legal and tax considerations in-line with applicable public finance norms.

The balance released commitment net of investments will be grouped under 'Other Liabilities' in the books of SMFCL with all gains/losses, income and expenses forming part of the fund.

The returns and capital redistribution from MIF will be retained at the SMFCL entity level with the flexibility to seed future fund creation, enabling a sustainable and long-term capital recycling mechanism till such time as may be decided by the government.

The MIF will be set-up as a trust under the Indian Trusts Act, 1882 and registered as a closed-end Category I/ Category II Alternative Investment Fund (AIF) with SEBI (Securities and Exchange Board of India).

The Fund could be structured as a single AIF or multiple AIFs, each with a focus on specific maritime sub-sectors.

The fund manager may also setup one or more feeder funds/fund of funds/co-investment vehicles in the International Financial Services Centres Authority (IFSCA) GIFT City to pool investments by global investors in the downstream MIF structures in India.

The fund will likely be structured to have multiple closes. At each close, it will be ensured that the Union government's commitment does not exceed 49 per cent of the corpus raised during that close.

The first close will be achieved within 12 months from the date of SEBI registration, with an initial corpus of at least Rs 5,000 crore.

The final close should be completed within 36 months from the first close. The investment period for the fund will be 5-8 years from first closing.

The overall corpus of the fund may be enhanced beyond the initial target of ?20,000 crore through additional contributions from investors other than the Union government, potentially reaching up to Rs 30,000 crore.

In a scenario where the Union government's stake within the total corpus falls below 49 per cent, the fund manager must ensure that investor commitments, hurdle rates and governance standards are preserved while leveraging greenshoe provision to attract private capital.

A hurdle rate is the minimum rate of return a company or investor requires to approve a project or investment, acting as a benchmark for financial viability.

The fund manager will invest primarily in projects of national and strategic importance, including shipbuilding, shipbuilding clusters, ship repairs, ship ownership, port expansion, IWT, coastal shipping as well as international shipping.

A minimum of 50 per cent of the investable corpus will be allocated to projects in priority sectors, which could be increased up to 70 per cent based on sectoral opportunities and fund objectives.

Central public sector undertakings (CPSUs) transporting EXIM/coastal cargo would maintain an "appropriate equity stake of MIF" in all vessel-owning special purpose vehicles (SPVs) set up by them, according to government sources.

The balance Rs 5,000 crore of the Maritime Development Fund will be pooled as an Interest Incentivization Fund (IIF) set up through budgetary support from the Union government. It will operate in the nature of financial assistance/grants, aimed at reducing the effective cost of debt and improving the overall bankability of maritime projects.

An Interest Incentivisation Fund or an Interest Subvention Scheme is a government-backed programme that provides a subsidy to financial institutions to reduce the interest rate for borrowers, such as industries, encouraging them to take loans for productive activities. The aim is to make credit more affordable, with the government covering a portion of the interest that would otherwise be paid by the borrower.

India needs $18 billion to become a global player in shipbuilding, ship repair and ancillary industries, according to a government document. While another $388 billion is required to expand India's shipping tonnage and $260 billion for enhancing green tonnage.

Source: ET Infra. Com 

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