In a bid to give fillip to infrastructure project financing, India Infrastructure Finance Company Ltd (IIFCL) is planning a radical overhaul of its takeout finance scheme so that it becomes attractive for banks.
The Government-owned special purpose vehicle is seeking to do away with the takeout financing fee it charges banks. It plans to take over projects immediately after their commercial operation date and pass on interest rate concessions to project developers.
Under takeout financing, a lender financing infrastructure projects enters into an arrangement with IIFCL for transferring to the latter the outstanding in respect of such financing in its books on a predetermined basis.
Takeout financing addresses sectoral/group exposure issues and asset-liability mismatch concerns of lenders, who are providing debt financing to infrastructure projects.
As per the changes envisaged in the takeout financing scheme, lender(s) making use of takeout finance from IIFCL will not have to pay the takeout fee of 0.3 per cent per annum (of the takeout amount) to IIFCL, according to Mr S. K. Goel, Chairman and Managing Director, IIFCL.
IIFCL will take over projects immediately after their scheduled commercial operation date (COD). Currently, the scheduled date of occurrence of takeout is one year after the scheduled COD of the project.
The rate of interest for the loan taken-out by IIFCL on the schedule date of occurrence of takeout could be subject to a reduction of 75-200 basis points based on the revised risk profile of the project, Mr Goel said.
So far, IIFCL has inked takeout financing agreements aggregating about Rs 3,100 crore with a host of banks, including Union Bank of India (Rs 1,020 crore), Central Bank of India (Rs 1,000 crore); Punjab National Bank (Rs 180 crore), and Punjab National Bank (Rs 600 crore).
Infra, equity funds
IIFCL, which is planning to convert itself into a non-banking finance company, will float a Rs 5,000-crore debt infrastructure fund once the Reserve Bank of India issues guidelines in this regard.
“We will invest Rs 500 crore in the debt fund and seek subscriptions from domestic as well as multilateral lending institutions.
“The proceeds of the fund will be utilised to finance the debt component of infrastructure projects,” said Mr Goel.
Also, in the works is a Rs 3,000-crore equity infrastructure fund. The proceeds of this fund will be utilised to pick up stakes in infrastructure projects.
Bond issue
IIFCL is planning to mop up Rs 10,000 crore through a tax-free bond issue for institutional investors and Rs 1,000 crore through a tax-savings bond issue for retail investors in the current financial year.
The financial institution plans to grow its direct lending portfolio to Rs 25,000 crore by March-end 2012, against Rs 19,000 crore as on March-end 2011.