Local press reported yesterday that V.Venkata Ramana, Director of India Infrastructure Finance Company Limited (IIFCL), emphasised at an event the need to come out with longer tenure debt options for infrastructure projects ensuring financial viability while also strengthening the bond market in India.
He said that IIFCL can lend for longer tenures, longer than commercial banks and remain as sole lender in case of public private partnership projects under direct lending.
He also said IIFCL in association with the Asian Development Bank is working on credit enhancement scheme on pilot basis for enabling infrastructure projects to tap capital markets.
IIFCL is presently undertaking pilot transactions under its Credit Enhancement initiative. Under this scheme IIFCL provides partial credit guarantee to enhance the ratings of the project bond issue thereby enabling channelization of long term funds from fairly untapped sources such as insurance companies and pension funds etc towards infrastructure sector.
Asian Development Bank (ADB) is participating in this endeavor by committing to support IIFCL by providing backstop guarantee facility up to 50% of IIFCL's underlying risk. Credit enhancement scheme will help the project developers to raise funds at a reasonable rate from the bond market and consequently help in development of corporate bond market in India.
Under this initiative, IIFCL said it has helped financing four projects. The guarantee agreement for those projects has been signed in the first private transaction for bond issue by NHAI. The road projects are promoted by the GMR Group.
V.Venkata Ramana said that they were already associated with some of the metro projects in the country and expects to close some more deals extending finance.