L&T Infrastructure Finance (LTIF), the wholly owned subsidiary of L&T Finance Holdings, has received the first tranche of $50 million ECB loan from Asian Infrastructure Investment Bank (AIIB) to finance sustainable infrastructure.
Beijing-headquartered AIIB, a multilateral development bank, has outlined a total $100 million in ECB loans to LTIF and this development marks AIIB’s first loan to a non-banking financial company (NBFC) in India.
Renewable energy push
The loan proceeds will be used to on-lend to large and mid-scale wind as well as solar power infrastructure projects in India. L&T Infrastructure Finance is a financier of renewable energy in India and with the closure of this financing deal, LTIF has further diversified its long-term funding sources.
LTIF’s collaboration with AIIB will also help the company bolster its environmental and social capabilities, which will enable it to tap the international market for green finance, in the future.
Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings, said, “Investments from an organisation like AIIB, that follows a stringent due diligence process of the company’s capacity, viability, past performance and regulatory compliances, before any investments, reiterates our commitment to green project financing. Our lending to clean energy goes beyond the actual book and we have today built an ecosystem for all stakeholders to be a part of the green energy initiative.”
Further, the partnership with AIIB will also aid L&T Finance to tap into the international market of green finance.
LTIF will also set up an Environment & Social Monitoring System that will screen, categorise, appraise, contract and monitor sub-projects supported by AIIB in accordance with the AIIB Environmental and Social Standards (ESS).
Headwinds seen
This development comes as a small boost at a time when the government’s plan of a massive increase in investment with the target of ₹111-lakh crore under the National Infrastructure Pipeline (NIP) between FY2020 and FY25 is likely to see severe near-term headwinds, due to the Covid-19 pandemic. While even prior to the Covid-19 pandemic, the NIP was already quite ambitious and challenging, but it seemed achievable with a significant push towards infrastructure.
Despite the Covid-19 headwinds, renewable energy — which accounts for a 12 per cent share in total energy generation — witnessed output increase by 5.2 per cent to 23.5 billion units during April and May, when compared on a yearly basis, according to Care Ratings.