India Infrastructure Finance Company Ltd (IIFCL) is open to the idea of investing in subordinated debt of non-PPP projects as part of its efforts to support infrastructure project developers.
“If the Government permits, we are ready to do subordinate debt for non-PPP projects also,” S.K. Goel, Chairman and Managing Director of IIFCL, told Business Line here.
The issue of parking funds in subordinated debt of non-public-private partnerships (PPP) projects to support developers’ fund requirements came in for discussion at a recent meeting of the High Level Committee on Financing Infrastructure, headed by HDFC Chairman Deepak Parekh.
IIFCL already has a scheme for subordinate debt, which is confined to PPP projects only.
A subordinated debt is one that ranks after other debts, should a company fall into liquidation. Simply put, it has less priority than that of any senior debt claim on the same asset. As a subordinated debt is repayable after other debts are paid, these are more risky for the lender.
“Right now, we can do (park funds in subordinated debt) for PPP projects. But the PPP projects don’t need subordinate debt. It is not picking up much even though we can give 10 per cent of project cost. There is not much demand from PPP projects, but there is lot of demand from non-PPP ones,” Goel said.
Any project that is not through the bidding route is becoming non-PPP. Goel admitted that comparatively, the risk went up slightly if funds were to get parked in subordinated debt of non-PPP projects.
The demand for equity support is mainly coming from power and seaports (non-PPP projects).
“Our support through subordinated debt can help developers take up bigger projects and ensure that they are not deprived because of lack of funds,” Goel said.
On the proposed infrastructure debt fund (IDF), Goel said IIFCL was awaiting final approval of the capital market regulator. IIFCL is looking to launch an IDF through the mutual fund route.