Pvt investments in infrastructure likely to surpass public sector funding by 2017

Along with other financial institutions, Indian Infrastructure Finance Company lTD (IIFCL) is emerging as one of the crucial players in funding core sector projects in the country. SK Goel, who recently took over as the chairman and managing director of IIFCL in an interview with FE?s Sitanshu Swain & Kumud Das discusses about strategies to change the domestic infrastructure financing scenario.

What is your agenda after taking over as chairman of IIFCL?

IIFCL is providing long term financial assistance to various infrastructure projects in the sectors like roads, power, airport, port, urban infrastructure etc. The company will continue to accelerate lending to eligible infrastructure projects, with overriding priority to PPP projects. A five-year roadmap is being evolved which will include business strategy including business expansion, launching of innovative products, organisational design etc. Based on the roadmap, the company would chart its growth path.

The government wants huge infrastructure spending during the next few years. What kind of contributions IIFCL will have for this?

It is projected that during the 12th Plan period (2012-2017), investments required in infrastructure could be $1 trillion (Rs 41,00,000 crore at 2006-07 prices) and private sector investments are expected to surpass public sector investments during the Plan period. IIFCL is fully prepared to support the expectations of the stakeholders and participate in financing of infrastructure projects, particularly by way of support to small and medium infrastructure projects. The overriding priority of the company would be financing PPP projects in various sectors.

What is the status of takeout financing which was to be launched by the company?

The ?Takeout Finance Scheme? of IIFCL has already been implemented. The scheme has been circulated amongst banks and the company has received enquires from different banks. Preliminary due diligence has been completed in the proposals posed by banks for takeout finance. After final evaluation of the potential proposals, the takeout transactions would be executed.

What kind of interest rate will be charged by the company for infrastructure lending?

The company participates along with other banks/institutions as part of the consortium to finance infrastructure projects. IIFCL charges rate of interest as decided by the consortium members, while factoring the cost of funds and other operational costs.

Which are the sectors the company is seeking exposure immediately?

IIFCL?s cumulative gross sanctions at the end of July 2010 amounted to Rs 26,740 crore. Major portion of sanctions are in road sector and power sector as maximum number of proposals for loan are also from these sectors. Other sectors which have been financed by IIFCL relate to airport, port and urban infrastructure. Depending upon the opportunities available in the sectors mandated for financing, the company will try to achieve a balanced growth of its portfolio.

How has been IIFCL?s business in the first quarter of the current year?

During the first quarter of the current year, gross sanctions by the company amounted to Rs 974 crore in 6 projects.

Which are the sectors that have been lent by IIFCL and how much amount has been lent to those sectors?

The company?s cumulative disbursement at the end of July 2010 was Rs 10,818 crore. Of this, Rs 3,767 crore have been provided to 63 road projects, Rs 4,508 crore to 22 power projects. The remaining amount has been lent to airport, port and urban infrastructure projects. This also includes Rs 1,500 crore provided by IIFCL to Power Finance Corporation and Rural Electrification Corporation as refinance.

What are the other synergies that you would like to see from Indian banks? What kind of resources you are planning to raise in the current fiscal? How much of it will be in forex?

The company has signed MoU with 29 banks/institutions for deal flows and for related business. All the loans provided by IIFCL are as part of consortium of banks/institutions. As per the mandate, the company can take exposure only up to 20% of the total project cost in any project. Accordingly, IIFCL has been closely working with Indian banks in supplementing the resources available for infrastructure financing.

At the present juncture, the company has adequate resources and would raise resources from the domestic market depending upon its requirements. It has set up a Medium Term Note (MTN) programme for raising external commercial borrowings and on the basis of market conditions and its own resources requirements, it will be accessing the international markets for funds.

Are you seeking any capital from the government?

The company is a wholly owned by the government and has been in operation for the past four years only. Currently, the paid-up capital of the company is Rs1,800 crore. As the business expands, the company would require additional capital to meet the capital adequacy and exposure norms. As such, government support by way of capital infusion would be required.