India Infra Debt gets first IDF-NBFC licence

Will raise debt capital for investment in infrastructure projects under PPP model

The country’s first Infrastructure Debt Fund (IDF) under the NBFC (non banking finance company) structure was formally launched here on Tuesday with Finance Minister P. Chidambaram handing over the first IDF-NBFC licence to India Infra Debt Limited (Infradebt) in the presence of its four promoters — ICICI Bank, Bank of Baroda, Citibank and Life Insurance of Corporation of India (LIC).

Infradebt, according to a Finance Ministry statement here, would seek to raise debt capital from domestic and foreign sources for investment in infrastructure projects under the public-private partnership (PPP) model that have completed one year of operation.

“Infradebt will expand and diversify the domestic and international sources of debt funding to meet the large financing needs of the infrastructure sector, thereby giving an impetus to the creation of the infrastructure necessary to drive India’s growth,” it said.

While ICICI Bank (together with a wholly-owned subsidiary) is the largest shareholder in Infradebt with a 31 per cent holding, Bank of Baroda follows next with a stake of 30 per cent. The shareholding of Citibank and LIC stand pegged at 29 per cent and 10 per cent, respectively.

Speaking at the formal launch, the Finance Minister underscored the need to meet the financing requirements of the country's deficit in infrastructure. Spending on infrastructure development during the XII Plan (2012-17) is projected at a high $1 trillion as compared to about $500 billion during the XI Plan. Over the years, the share of private investment in total investment in infrastructure has increased significantly from 22 per cent in the X Plan to 38 per cent in the XI Plan and is projected at 47 per cent during the XII Plan.

To mobilise resources of this magnitude, Mr. Chidambaram said that many more institutions were required to share the fund-raising responsibility and asked the promoters of the Infradebt to provide sound management to make these projects successful. “Financing investments of this order with significant participation from the private sector will require innovative ways of financing,” he said. The government expects the cost and tariff of infrastructure services to go down as a result of low-cost long-term debt provided by IDFs. Further, buy-out guarantee from the project authority will also enable IDF-NBFC to maintain zero NPAs (non-performing assets). The taking over of existing bank debts by IDFs will release an equivalent volume for fresh lending by banks to infrastructure projects.