With an uptick in demand for project finance from late last year, bankers believe need for long-term funds should rise by anywhere between 12-15% this year.
Bank credit deployed in the infrastructure segment rose 10.2% year-on-year in April 2022, with roads, telecommunications and power leading the pack. The outstanding credit to this space, towards the end of March was Rs 12 trillion, according to Reserve Bank of India (RBI).
Consequently, banks are now gearing up to meet demand for infrastructure projects in FY23, which they expect will be an even better year for the segment. Much of the demand in the infra segment is coming from large conglomerates in segments like roads, ports, airports, renewable energy, data centres and gas pipelines.
Projects where finance is being tied up are Mumbai International Airport, Noida Jewar International Airport, Ganga Expressway, hybrid annuity model (HAM) projects where the National Highways Authority of India (NHAI) has sought bids in the last four months, some solar projects and small port projects in Telangana, Odisha and Maharashtra.
Rajneesh Karnatak, executive director, Union Bank of India, said the government’s capex push and its intention to achieve 60% of the capex target by September 2022, suggests strong credit off take in FY23.The government has budgeted Rs 7.5 trillion as capital expenditure forFY23.
“We are looking at all sectors and projects and we are taking a share wherever the project is viable and the promoter is strong. There are also some refinance transactions happening in some thermal, renewable and road projects where there is demand for refinance after cash flows have commenced,” Karnatak said.
The spurt in demand has encouraged even large private banks to take a share of the pie. HDFC Bank, known for avoiding riskier bets, is participating in project finance transactions. For now, at least, the lender is sticking to the classic private-bank script of financing projects where cash flows have already started coming in rather than in ones where the commercial operation date (COD) is a few years away. Bankers say that the magnitude of demand is sizeable enough to accommodate all interested players.