IIFCL to float $1 b debt fund by February

S.K. Goel, IIFCL Chairman and Managing Director. Photo: Kamal Narang  

India Infrastructure Finance Company Ltd. (IIFCL), seeking to turn a new chapter in the funding of the clogged and inadequate infrastructure sector, will float a $1-billion (Rs.5,000 crore) infrastructure debt fund with the participation of private players.

With a targeted $1 trilion needed by India to overhaul its infrastructure sector in the next five years, IIFCL has been given the go ahead by the Finance Ministry to facilitate new funding sources.

“IIFCL got the approval on December 3 after its board cleared it. The company is aiming to launch the debt fund by February,'' IIFCL Chairman and Managing Director S. K. Goel told a press conference here.

The Infrastructure Debt Fund was proposed by Finance Minister Pranab Mukherjee in the budget this year. The fund is aimed at removing bottlenecks in infrastructure growth, which are having an adverse impact on the economic progression of the country.

HSBC, Asian Development Bank, Life Insurance Corporation of India and IDBI Bank will be the co-sponsors of the fund. Under the mutual fund route, IDF would invest 90 per cent of its assets in debt securities of the sector companies.

“We have decided to go for the mutual fund route which is more flexible. We are planning to launch it by the end of February,'' he added.

IIFCL, being the lead player, will have 26 per cent stake. IDBI Bank and the Life Insurance Corporation will have 14 per cent and 10 per cent stake, respectively. Foreign partners — Asian Development Bank and HSBC — are expected to have 25 per cent each.

Referring to the recent changes allowed by the government on ‘takeout financing', Mr. Goel said the modifications had been carried out to make the scheme more attractive to infrastructure project developers and banks.

Transparent and a competitive pricing for the takeout finance scheme had been put in place. The pricing of takeout shall range from 0.25 per cent to 1.5 per cent over the benchmark rate of lending of IIFCL, which is now 9.65 per cent, depending on the post-commercial operation date (CoD) credit rating of the project, he said.

Takeout financing is a procedure under which loans made by banks to infrastructure firms are sold to other institutions so that banks recover their much-needed funds ahead of the payment schedule under the loan agreement.

“This is done to address the asset-liability mismatch. Major concession in pricing has been announced for PPP projects and the current rate of takeout would range from 9.90 per cent to 10.85 per cent depending on the ratings of the project,'' he said.

The government has also allowed that proposals for takeout can now be received from borrowers also. The existing lenders would be incentivised by way of passing on the takeout fee to the extent of 0.3 per cent of the takeout loan.

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Printable version | Nov 30, 2020 9:08:55 PM |

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