ICICI Bank-backed infrastructure debt fund (IDF) India Infradebt plans to raise Rs 3,000 crore via bonds in FY18 in anticipation of growth picking up in the infrastructure space, MD & CEO Suvek Nambiar told FE. In FY17, it had raised Rs 2,500 crore. The funds, Nambiar said, would be raised from the domestic market which is more cost competitive compared with foreign borrowings. “There is a dearth of AAA-rated infrastructure paper in the market. For the funds we have raised so far — about Rs 4,000 crore — there are about 200 institutional investors who have invested in our bonds. The market is quite comfortable,” he said. The company’s balance sheet stood at Rs 4,500 crore as of March 31, 2017. It plans to grow this to Rs 7,500 crore by the end of the current financial year, and to Rs 11,000 crore by FY19.
The company currently has exposure to 40 projects, of which a third are in the renewable energy sector. The rest of the projects are in the roads sector with most being build, operate, transfer (BOT) projects. Infradebt made a profit of Rs 48 crore in FY17, up from Rs 29 crore a year ago. “As IDFs have lower overheads, we can raise money at fine rates (of around 8%) and an NBFC IDF also does not have to pay income tax,” Nambiar said. “Hence, we are able to pass the benefits back to the projects and are more competitive than banks in the refinancing business.”
Infrastructure debt funds were envisaged as an alternative to bank loans for long-term projects and had a combined asset base of approximately Rs 6,000 crore at the end of FY16. As per the regulations of the Reserve Bank of India, NBFC IDFs can only invest in assets that have been operational for at least a year.
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Manish Agarwal, leader of the infrastructure advisory practice at PwC India, told FE that the volume of operational assets has increased. At the end of FY17, the three IDFs — Infradebt, L&T-owned L&T IDF, and IDFC IDF — had a combined balance sheet size of Rs 11,000 crore. While L&T IDF and Infradebt completed three full years of operations in FY17, IDFC IDF has been around for two years. However, refinance opportunity for NBFC IDFs is estimated at about Rs 1 lakh crore. “As the sector’s debt restructuring and problems of non-performing assets (NPAs) get resolved, the market for IDFs to refinance banks would become even more ripe. IDFs should be aggressively looking to get into such assets as the debt problems get solved,” Agarwal said.
In comparison to IDFs, banks have exposure of more than Rs 9 lakh crore to the infrastructure sector as of March 31, 2017, according to data from the RBI. ICICI Bank is the largest shareholder in Infradebt with 31% stake, followed by Bank of Baroda with 30%. Citicorp Finance holds 29% and Life Insurance Corporation of India holds the remaining 10%.