State-owned India Infrastructure Finance Company Ltd (IIFCL) today said it has got Sebi nod for floating USD 1 billion (about Rs 5,000 crore) infrastructure debt fund (IDF), which will be operational in a month.
"Yesterday, we got the approval of Sebi (Securities and Exchange Board of India) that we have been registered as an IDF... Within a month's time we should be able to operationalise this IDF," IIFCL Chairman and Managing Director S K Goel said.
"IDF initial corpus we have kept in mind is USD 1 billion of which 50 per cent will be contributed by Indian investors and 50 per cent by foreign investors," he said at the launch of first credit enhanced infrastructure bonds.
IDF will be floated via mutual fund route which is more flexible, Goel said.
"Among the Indian investors we have already discussed the things with LIC, IDBI Bank and on the capital front the State Bank of India is with us," he said.
"About foreign partners, we have already sent our request to ADB, which is processing about USD 200 million request, but only after final sanction we will be able to say who are the final partners into this," Goel added.
The fund generated by the IDF would be utilised for funding infrastructure projects in the country.
India's poor infrastructure, seen as a major block for economic growth, requires a whopping USD 1 trillion in the 12th Plan period (2012-17). Of this, it about 50 per cent is expected to come from the private sector.
Meanwhile, the infrastructure financing company launched its credit enhancement initiative with the support of Asian Development Bank by signing of IIFCL Guarantee with GMR Jadcherla Expressways Ltd.
Financial Services Secretary D K Mittal said the initiative will help develop a bond market for infrastructure sector, which is predominantly dependent on banks for funding.
It will also help banks in managing challenges like asset liability mismatch and exposure constraints which they face in long term infrastructure lending, Mittal said.
Explaining the scheme, Goel said infrastructure developers can raise the bond in the market and IIFCL is giving a partial guarantee to enhance the rating to AA so that provident fund and the insurance sector long term investors can invest into this.
"Today Rs 309 crore bond issue has been approved and it (GMR Jadcherla Expressways Ltd) is going to the market and we are giving about 24 per cent partial guarantee to this bond issue to raise the rating to AA," he added.
Meanwhile, Goel said: "LIC is a very keen partner on investing in these bonds because they were feeling very handicapped, because of the rating particularly."
Insurance and pension firms, as per the investment norms, are not allowed to invest below 'AA' rated bonds.
Goel further said that IIFCL is actively considering more transactions under its Credit Enhancement Scheme.
On the tax free bonds, Goel said, "Our issue has been good. We will be coming up with a second tranche, our aim is to collect at least Rs 5,000 crore in this tax free bonds."
So far, the company has collected about Rs 3,700 crore from the sale of tax free bonds.
"So, if we come out with one more tranche we are sure that we will exceed our target of Rs 5000 crore," Goel added.