IIFCs British arm to give more forex loans to Indian private cos

Written by feBureau | New Delhi | Updated: Apr 9 2013, 06:27am hrs
The finance ministry has tweaked the rules to allow India Infrastructure Finance Companys (IIFC) UK arm to lend half its funds sourced from the countrys foreign exchange reserves to Indian private firms. The move is likely to help project developers in power, oil, gas pipeline, fertiliser and Metro railways import capital equipment at a cheaper cost and ramp up capacity.

The government is also considering allowing IIFC (UK) to extend take-out financing to help companies retire costly external commercial borrowings (ECBs), said IIFC chairman SK Goel.

Apart from clearing stalled projects, the government has been trying to ease rules to help Indian companies get access to cheaper funds and aid quicker recovery of the economy that is estimated to have grown 5% in 2012-13, the slowest pace in a decade.

Following the rule change by the finance ministry, IIFC (UK) is now targeting to treble loan disbursement to $1 billion in 2013-14 to infrastructure developers and manufacturing firms compared with $300 million last year and a total $975 million in the last four years. IIFC (UK), which was set up to channelise a part of Indias foreign exchange reserves for infrastructure development, was funding public-private partnership (PPP) projects and other private projects in the ratio of 80:20. The finance ministry had recently approved raising the limit to 50% for foreign currency loans to private companies.

This would enable a larger number of infrastructure projects to avail foreign currency financing from IIFC (UK) for import of capital goods, Goel said, adding many of the companies involved in power, oil, gas pipeline, fertiliser and Metro rail projects are eager to get cheaper funds for their ongoing projects.

Apart from utilising the forex reserves through its UK arm, IIFC plans to raise R10,000-12,000 crore in 2013-14 R6,000 crore through tax-free bonds, $1 billion from Asian Development Bank and the rest through ECBs.

IIFC targets loan disbursement of R12,500 crore in 2013-14, a 62% rise from last years level of R7,857 crore. The company posted a 277% growth in take-out financing at R2,126 crore in 2012-13.

Higher loan disbursement and reining in cost of borrowing has helped IIFC grow net profit by 30% to R1,000 crore and targets a 40% rise in 2013-14.

The company will formally launch infrastructure debt funds (IDF) through the mutual fund route. IIFC is trying to rope in a clutch of domestic and foreign lenders like ADB, International Finance Corporation, Canara Bank, Corporation Bank, Oriental Bank of Commerce, Hudco and Srei Infrastructure for the IDF.

Since its inception in 2006, the company has sanctioned loans worth R90,000 crore and has been a major source of innovative financing, including take-out financing and credit enhancement.

Forex funds

* IIFC (UK) targets to treble loan disbursement to $1 billion in 2013-14 to infrastructure developers and manufacturing firms

* The finance ministry approved raising the limit to 50% for foreign currency loans to private companies

* Apart from utilising the forex reserves through its UK arm, IIFC plans to raise R10,000-12,000 crore in the current financial year