Even as the India Infrastructure Finance Company Ltd (IIFCL) is set to approach the market next week to raise the first tranche of tax-free bonds under the Rs 10,000 crore window opened up by the stimulus package announced in December, the Centre on Friday allowed IIFCL to raise a further Rs 30,000 crore through such bonds over the next eighteen months after the Rs 10,000 crore window is exhausted.
While the Rs 10,000 crore facility is expected to help finance highway and port projects worth Rs 25,000 crore, the fresh window cleared on Friday will help fund projects worth Rs 75,000 crore. Cabinet Secretary K M Chandrasekhar told FE, ?While the first set of bonds is only for ports and road projects, the Rs 30,000 crore tax-free bonds can also be utilized to help finance projects in the power sector.? Explaining how developers will be funded, IIFCL CMD SS Kohli said, ?We will give them a reasonable spread. We are still waiting for the approval of the government. The initiative will help refinance of the new projects.?
IIFCL plans to raise funds for the first tranche of Rs 10,000 crore, announced in the stimulus package last month, by mid of this month. ?The bonds will generate investor interest as they are transferable from day one. Also, they will be listed in the wholesale debt market and there will be no lock in period,? Kohli said. Experts feel the modalities of the deployment of the funds as well as the interest rates are the major issues on which the government needs to come out clearly. Even as the experts welcome the move, they feel that the initiative needs to be an all encompassing one to bailout the infrastructure sector, along with clarity on cost of refinance as well as administrative efficiency.
?The initiative taken to empower IIFCL is a step taken in the right direction. However, it is believed that the measures will benefit new projects. There are a large number of projects that are on the implementation level. If they are not supported, it will not auger well for the future projects as the developers may not be encouraged to take them up,? said Vinayak Chatterjee, chairman, Feedback Ventures.
?Secondly, the manner in which the funds are deployed is also an important issue. Is it only a refinance for the commercial lenders or will it be used as equity as well as subordinated debt, are two very important factors,? he added.?Also, the larger issue is that refinance is not independent of interest rates. A scenario of refinance to commercial lenders without mention of interest rate will make it an arbitrary on the part of commercial lender on this front. Government needs to take a long-term view on the interest rates. We recommend an interest rate of interest rate of 12%. If you agree with the proposition of refinance at this particular rate for fresh as well as ongoing projects, the amount required to provide momentum to the infrastructure sector will be worth Rs 100,000 crore,? he added.
Emphasising on the need to have a administrative shake up he said, ?There are a lot many administrative issues that need to be tackled. We need a national agency to deal with infrastructure otherwise the fiscal initiatives will not be converted into action on ground with required speed,? Voicing a similar concern, a top official of a highway construction company said, ?There are no projects to fund. Bids are not coming and there is a question on the viability of the projects as the bids are being taken at the topmost grant. The basic need is that there should be availability of the projects to fund them.?
Talking about more flexibility that needs to be brought, Vishwas Udgirkar, partner (Infrastructure), Pricewaterhouse Coopers said, ?It is a good measure to increase the fund raising capacity of the IIFCL. However, a main concern for the road project is that IIFCL is allowed to invest in projects in which the average tenure of loan is 10.2 years.?