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MFs with 5-yr record can float infra debt funds

Mumbai | Updated on July 29, 2011 Published on July 28, 2011

Credit risks associated with underlying securities have to be borne by investors



With regard to the infrastructure debt funds (IDFs), the SEBI board has approved the framework for setting up of the IDF by any existing mutual fund house that has been in the infrastructure financing business for at least five years. These IDF schemes would invest 90 per cent of its assets in the debt securities of infrastructure companies or Special Purpose Vehicles across all infrastructure sectors, said a release from SEBI.

Investor strength

The minimum investment into an IDF scheme would be Rs 1 crore with Rs 10 lakh as minimum size of the unit. However, it was made clear that the credit risks associated with underlying securities of the schemes would have to be borne by the investors and not by the IDF.

Also, the IDF is to have a minimum of five investors with no investor owning more than 50 per cent of net assets of the scheme. The regulation mandates that a commitment of up to Rs 25 crore from strategic investors is required.

However, the mutual fund houses launching the schemes are allowed to disclose the indicative portfolio of infrastructure debt scheme to the potential investors and are also allowed to the type of assets the fund will be investing. Partly paid units can also be issued to the investors by the fund house launching the IDF.

The IDF to be launched would either be close-ended schemes with a maturity of more than five years or as interval schemes with a lock-in of five years. The fully paid units of the scheme will have to be listed on the stock exchanges.

Published on July 28, 2011
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