Infrastructure Debt Funds (IDFs), the investment vehicles for facilitating long-term debt for the infrastructure sector, will need additional borrowings of around ₹4,500–6,000 crore in the second half of current financial year to grow at 40-50 per cent and refinance the maturing debt, ICRA said in a report.
According to ICRA, the capitalisation profiles of four operating IDF-NBFCs are adequate given that they are promoted by strong institutions. However, given the tightening of systemic interest rates, the incremental cost of funds has gone up for these entities as well, the agency noted.
The agency has estimated the total exposure of NBFC-IDFs to infrastructure sector at around ₹21,400 crore as on September 30, 2018, registering a year-on-year growth of 41 per cent. At this book size, NBFC-IDFs accounted for 2.1 per cent of the total bank credit to the infrastructure sector.
The growth of trust-based IDFs (IDF – MF) continues to be muted, according to the report, with the average assets under management of these entities during July 2018 and September 2018 being only around ₹2,200 crore.
Growth sectors
Post the May 2015 regulatory change, which widened the business scope for NBFC-IDFs to include investments in PPP projects without a project authority (like NHAI) and non-PPP projects, the portfolio mix of IDF-NBFCs has gradually changed and now includes power and telecom.
While assets under management of IDF-NBFCs have picked up pace over the last three years with a CAGR of over 60 per cent, their overall presence in the infrastructure financing space remained modest, the report said.
However, with an estimated debt of ₹1,87,900 crore becoming eligible for refinance in the road and renewable power sector in last five years, and NBFC-IDF exposure only being at 9 per cent of this, the growth potential is huge.
As per ICRA’s estimates, from FY12 to FY18, road projects of over ₹60,000 crore became operational and post one year of satisfactory track record of operations they could have been eligible for refinance by IDFs, in addition to all the projects that became operational prior to this period.
“The penetration of IDFs in this segment is limited, and there is significant potential to grow”, ICRA noted.
In the renewable space which has seen addition of over 19 GW of solar capacity and 15 GW of wind capacity during FY14-FY18, the NBFC-IDFs’ exposure was only 7 per cent of the total debt, which indicated an even higher growth potential, ICRA said.