To import capital equipment, private infrastructure projects can now raise more via foreign currency loans from IIFCL’s London arm.
This has been made possible with the Government scrapping the 80:20 rule that capped the lendable resources of IIFCL’s London arm to private projects in India.
This rule had earlier required the London subsidiary to give 80 per cent of its lendable resources to public private partnerships (PPP) and the rest to private projects.
There is not enough demand from PPP projects, but a lot of private projects were queuing up for availing foreign currency loans, S. K. Goel, Chairman & Managing Director, India Infrastructure Finance Company Ltd (IIFCL) told
Power sector players are most likely to benefit from the latest Government move, he added.
“The Government’s approval to do away with the rule will help us ramp up disbursals to private projects. As much as $1.2 billion additional disbursal can now happen out of London due to this decision”, Goel said.
So far, IIFCL’s London arm had disbursed about $1 billion since its inception in 2008.
State-owned IIFCL had in 2008 set up a London subsidiary to provide foreign currency loans to Indian infrastructure project developers who could avail themselves of loans to import capital equipment.
In October this year, IIFCL’s London arm had slashed interest rates on long term foreign currency loans to Libor plus 200 basis points, against the earlier Libor plus 400-475 basis points.
BUDGET WISH LIST
In a related move, to increase the resource availability for infrastructure projects in India, IIFCL has sought Rs 500 crore capital support from the Central Government for 2013-14.
If approved, the additional capital infusion would enable IIFCL to lend an incremental amount of about Rs 4,100 crore to infrastructure projects.
Besides refinance, IIFCL is also into takeout finance and plans to soon launch an infrastructure debt fund. Last year, IIFCL had made a similar demand for Rs 500 crore and received Rs 400 crore.
“We have, as part of our budget wish list, asked for additional capital infusion of Rs 500 crore”, Goel said. As on date, IIFCL’s capital stood at Rs 2,900 crore, including the Rs 400 crore received last year.
Any capital infusion would help the infrastructure lender to make available more funds for power plants, roads, ports and airports.
On an aggregate basis, IIFCL had till end-September disbursed Rs 26,000 crore to infrastructure projects.