Foreign investors eye co-investment deals in India’s infrastructure sector: NIIF CEO

Foreign institutional investors — including sovereign wealth funds, global pension funds, and private equity firms — are increasingly exploring co-investment...

What Happened

Foreign institutional investors — including sovereign wealth funds, global pension funds, and private equity firms — are increasingly exploring co-investment structures to participate in India's infrastructure financing, moving beyond simple equity stakes to more structured arrangements.
The preferred vehicles are Infrastructure Investment Trusts (InvITs) and Alternative Investment Funds (AIFs), which provide regulated, transparent frameworks with defined income distribution obligations.
SEBI, in its March 2026 board meeting, approved a package of regulatory relaxations for InvITs: allowing continued holding of Special Purpose Vehicles (SPVs) beyond concession expiry under defined conditions, expanding temporary surplus investment options into lower-risk liquid mutual funds, permitting privately placed InvITs to invest up to 10% in under-construction infrastructure assets, and introducing additional borrowing flexibility.
Crisil Ratings estimates InvITs now manage INR 6.3 trillion (approximately USD 72 billion) in assets, expected to grow 25% to INR 8 trillion by FY 2027, with the roads sector contributing the largest increment.
Co-investment structures typically involve a domestic AIF (as master fund) paired with an overseas feeder vehicle in a jurisdiction like GIFT City (Gujarat International Finance Tec-City), allowing global investors to participate through a familiar regulatory framework while remaining compliant with SEBI's AIF Regulations.
The National Monetisation Pipeline (NMP) — the central government's programme to lease brownfield public infrastructure assets to private operators — is a primary source of deal flow for InvITs and co-investment structures, covering roads, railways, gas pipelines, power transmission lines, and telecom towers.

Static Topic Bridges

Infrastructure Investment Trusts (InvITs)

An InvIT is a trust registered with SEBI under the SEBI (Infrastructure Investment Trusts) Regulations, 2014. It raises funds by issuing units to investors and uses those funds to acquire revenue-generating infrastructure assets — roads, power transmission lines, gas pipelines, renewable energy projects. InvITs provide retail and institutional investors access to infrastructure returns (typically stable, yield-like) without requiring direct project ownership. They are structured around four entities: the Trustee (registered with SEBI), the Sponsor (the infrastructure owner/developer), the Investment Manager (manages assets on behalf of unit holders), and the Project Manager (executes on-ground operations).

InvITs must invest at least 80% in completed, revenue-generating infrastructure assets; up to 20% in under-construction or other permissible assets.
SEBI mandates distribution of at least 90% of net distributable cash flows to unit holders, making InvITs yield instruments for investors.
Public InvITs are listed on stock exchanges (NSE/BSE) and open to all investors; Privately Placed InvITs have higher minimum investment thresholds and are typically for institutional and sophisticated investors.
Notable InvITs in India include IRB InvIT (roads), India Grid Trust (power transmission), PowerGrid InvIT, and Bharat Highway InvIT.
As of 2026, InvITs manage INR 6.3 trillion in assets — up from a nascent market in 2017 when the first InvIT listed.

Connection to this news: Foreign investors are drawn to InvITs because they offer regulated access to India's infrastructure with transparent governance, mandatory distributions, and SEBI oversight — reducing the governance and liquidity risks that typically deter foreign capital from direct infrastructure investment.

Alternative Investment Funds (AIFs)

Alternative Investment Funds (AIFs) are privately pooled investment vehicles regulated by SEBI under the SEBI (Alternative Investment Funds) Regulations, 2012. They are categorised into three classes: Category I (infrastructure funds, venture capital, social impact — typically attracting regulatory concessions), Category II (private equity, debt funds, fund of funds — neither Cat I concessions nor leverage beyond permitted limits), and Category III (hedge funds using complex trading strategies). Foreign investors co-investing with domestic AIFs use the AIF structure as it complies with FEMA (Foreign Exchange Management Act) regulations while providing flexibility in deal structuring.

Minimum investment in an AIF is Rs 1 crore for accredited investors (Category I and II) or Rs 5 crore for others.
Infrastructure-focused Category I AIFs can access SIDBI (Small Industries Development Bank of India) and NaBFID (National Bank for Financing Infrastructure and Development) refinancing windows.
GIFT City (IFSC) allows offshore AIF structures with Rupee-denominated units, enabling foreign investors to access Indian assets through a familiar jurisdiction with tax treaty benefits.
AIFs must be registered with SEBI and file periodic disclosures on investment activities, portfolio, and investor composition.

Connection to this news: The parallel AIF + InvIT co-investment structure described in the article is a response to the regulatory complexity of direct foreign infrastructure investment in India. Using a domestic AIF as the master fund and an IFSC-based feeder, foreign investors can participate efficiently while staying within FEMA and SEBI compliance frameworks.

National Monetisation Pipeline (NMP)

The National Monetisation Pipeline (NMP), announced in August 2021, is the Government of India's framework to unlock value from brownfield public infrastructure assets by leasing them to private operators (while the government retains ownership) over a defined concession period. The underlying principle is that private operators — including InvITs — can improve asset utilisation and generate stable cash flows, while the government receives upfront lease proceeds it can redeploy into new capital expenditure.

NMP targets monetisation of INR 6 lakh crore worth of assets over FY22–25, spanning roads (NHAI), railways (Indian Railways), gas pipelines (GAIL), power transmission (Power Grid), telecom towers (BSNL), and airports (AAI).
NITI Aayog developed the NMP framework; individual sector ministries are responsible for execution.
InvITs are the most commonly used vehicle for NMP asset monetisation — e.g., PowerGrid InvIT holds power transmission lines leased from Power Grid Corporation.
A key risk in NMP monetisation is "concession expiry" — when the lease period ends, the asset reverts to the government; SEBI's March 2026 relaxation allowing SPV holding beyond concession expiry addresses a major concern foreign investors had about exit and continuity.

Connection to this news: The NMP is the pipeline of deals that foreign co-investors are targeting. The regulatory improvements — especially the SPV holding relaxation — directly address the risk that foreign capital was hesitant about, making NMP monetisation transactions more investor-friendly.

Key Facts & Data

InvIT regulatory framework: SEBI (Infrastructure Investment Trusts) Regulations, 2014
AIF regulatory framework: SEBI (Alternative Investment Funds) Regulations, 2012
Total assets under InvITs (2026): INR 6.3 trillion (~USD 72 billion)
Projected InvIT AUM by FY27: INR 8 trillion (+25%)
Largest InvIT growth sector: Roads
Mandatory income distribution: At least 90% of net distributable cash flows
Minimum asset requirement in completed assets: 80% of InvIT portfolio
NMP target value: INR 6 lakh crore (FY22–FY25)
NMP sectors: Roads (NHAI), railways, gas pipelines, power transmission, telecom towers, airports
SEBI March 2026 relaxations: SPV holding post-concession, liquid MF investments for surplus, 10% under-construction limit for private InvITs
GIFT City IFSC: Enables offshore feeder structures with tax treaty and FEMA compliance benefits
NaBFID: National Bank for Financing Infrastructure and Development — provides long-term debt for infra projects
Category I AIF: Infrastructure, venture capital, social impact funds — eligible for concessional treatment