The institutional framework established in Tamil Nadu will pave the way for the State to be among the early recipients of large-scale private equity in infrastructure sector, according to Krishnamurthy Vijayan, CEO of Tamil Nadu Infrastructure Fund Management Corporation.
TNIFMC, a fourth generation financial institution which will structure and launch Alternative Investment Funds, has received SEBI registration for the first fund targeting about ₹12,000 crore, including State government contribution. By March 2017, it hopes to raise the first tranche of about ₹3,000 crore. Tamil Nadu’s contribution will be about 2.5 per cent to the fund.
The State government has constituted a statutory Tamil Nadu Infrastructure Development Board led by the Chief Minister and ensured transparency with well-established rules. The TNIFMC addresses the specific lacunae in infrastructure funding as banks are constrained in lending for long-term infrastructure projects, national infrastructure finance institutions have varied priorities and there is huge competition between States.
State-specific, government-backed financial institutions give huge comfort to private investors in infrastructure, he said addressing participants at the CII infrastructure summit, Summinfra 2016.
S Krishnan, Principal Secretary, Department of Planning Development and Special Initiatives, Tamil Nadu, cautioned large infrastructure companies from over extending beyond capacities in bidding for projects. Aggressive bidding leads to inability to complete projects. Even in the case of three large contractors “who walked away from the Chennai Metro Rail project”, the issue was that they over reached and due diligence was not done.
Financial institutions too need to take adequate care, he felt.
This is the reason Tamil Nadu’s procurement rules provide for rejection of unrealistic, low bids, he said.