Infrastructure Finance Update, April 2023

Infrastructure Finance Update for the month of April 2023 covers majorly the developments from the national financial institutions for infrastructure building like the National Infrastructure Investment Fund (NIIF), National Bank for Financing Infrastructure Development (NaBFID), National Asset Reconstruction Company Limited (NARCL), India Infrastructure Finance Corporation Limited (IIFCL) and Indian Renewable Energy Development Agency (IREDA). ICRA has said that the improved economic outlook for the infrastructure financing NBFCs due to the increased focus on infrastructure development by the government. The World Bank has been roped by the Finance Ministry to suggest innovative financing mechanisms to bring private investments in infrastructure projects and adding to that the focus on creating new financing mechanisms for urban infrastructure projects continues. For details please continue reading –

India’s NIIF Infrastructure Finance plans to raise Rs 5 billion ($61.2 million) through bonds with a maturity of 10 years. The bonds are rated AAA by ICRA. It has invited bids from bankers and investors, the report said.

National Asset Reconstruction Co Ltd (NARCL) aims to acquire ₹30,000 crore of Srei Equipment Finance and Srei Infrastructure Finance loans this fiscal year. In FY24, the bad bank will also acquire ₹600 crore offered to Rolta India’s secured lenders for their admitted claims of ₹7,086 crore. NARCL is a government-promoted company that acquires distressed assets and is sponsored by state-owned banks. Its acquisitions were delayed due to a lack of clarity on the dual structure relationship between NARCL and India Debt Resolution Co Ltd.

National Bank for Financing Infrastructure and Development (NaBFID), India’s newly created infrastructure-financing institution, is planning a maiden bond issue of Rs 50 billion in the next quarter. The institution aims to test the market in terms of pricing with the small issuance. The infrastructure-focused lender plans to leverage the government’s equity capital to the extent of three or four trillion rupees through the issuance of Tier-1 and Tier-2 bonds, among others. It will tap pension funds and insurance companies to raise funds and aims to finance the capital needs of various sectors including energy and transmission, airports, ports, and urban infrastructure. It plans to disburse between Rs 100 billion to 150 billion of loans from a pipeline of Rs 500 billion worth of projects in the next quarter.

The Reserve Bank of India (RBI) granted an Infrastructure Finance Company status to Indian Renewable Energy Development Agency (IREDA), earlier classified as Investment and Credit Company (ICC). With the IFC status, IREDA will be able to take higher exposure in RE financing. The IFC status will also help the company to access a wider investor base for fund mobilisation, resulting in competitive rates for fundraising. It finances all RE technologies and value chains such as solar, wind, hydro, bio-energy, waste to energy, energy efficiency, e-mobility, battery storage, biofuel and new and emerging technologies.

During the 5th meeting of the Governing Council the Finance Minister asked to look out for investible greenfield and brownfield investment projects under under PM Gati Shakti, National Infrastructure Pipeline, and to try and crowd in commercial capital into those opportunities. The Council also guided NIIF to undertake advisory activities to support central and state governments to create a pipeline of investible PPP projects.

It was also informed that the first bilateral fund for NIIF called ‘India Japan Fund’ with central government’s contribution has been proposed between National Investment and Infrastructure Fund Limited (NIIFL) and Japan Bank for International Development (JBIC). It was apprised of the current status of the 3 funds – the Master Fund, the Fund of Funds (FoF), and the Strategic Opportunities Fund (SoF) – managed by NIIF. It was informed about the investments and performance of NIIF operating companies in sectors such as ports and logistics, renewable energy, and digital infrastructure besides its foray into sectors such as waste management, water treatment, healthcare, EV manufacturing.

Urban Infrastructure financing continues to be a focus sector for growth as discussed during the G20’s infrastructure working group meeting in Visakhapatnam. The avenues for financing urban infrastructure are said to be – Public private partnerships, issuance of municipal bonds and green bonds by urban local bodies (ULBs), land value capture in terms of additional floor space index etc., could be the alternative financing sources. Also, local bodies could look at recovering user charges for sanitation, water etc. If successful, this would help improve their creditworthiness.

According to the Committee on Public Undertakings (COPU) report submitted recently in the Parliament said initiative taken by the state-owned entity IIFCL will keep bad loans under check and also help it in discharging its role as a pioneer lender in financing infrastructure projects. It said that the measures taken will go a long way in improving and strengthening the functioning of IIFCL. The proactive actions are towards close monitoring, constant follow-up and evolving suitable modes for early resolution/ recovery of dues in line with the prescribed norm/guidelines of RBI and other applicable statutory/ regulatory authorities or directions from the central government. IIFCL has set up a specialised recovery and NPA management department. The capacities were further strengthened with external experts including an independent High Level Advisory Committee.

The World Bank has been asked by the Finance Ministry to examine financing in infrastructure sectors like railways, roadways, urban infrastructure, and power that primarily depend on public investment. The Bank will submit detailed reports to attract private investment into these sectors. It will do a deep dive into these sectors, and engage with the line ministries. The reports are expected to be submitted this month and will suggest innovative financing structures to attract more private investment.

ICRA has said that NBFC-IFCs (Infrastructure Finance Companies) are expected to grow 10-12 per cent in FY24 supported by continued government thrust on the infrastructure sector. ICRA has revised the industry outlook for NBFC-IFCs from ‘stable’ to ‘positive’, reflecting its expectation that the enhanced performance witnessed in FY23 will continue in FY24. Overall infrastructure credit, including banks and NBFCs, saw annualised growth of 8 per cent in the first nine months of the financial year ending March 2023. It added that the increased demand has corresponded with the period in which NBFC-IFCs observed receding asset quality pressure, stressed asset resolutions/ recoveries, sizeable write-offs, etc.

Sterlite Power has received funds worth ₹305 crore from Aseem Infrastructure Finance to set up the Kishtwar Transmission Limited (KTL) project located in Jammu & Kashmir. The transmission system will aid evacuation of 1000MW of power from Pakaldul Hydro Electric Project to the Kishtwar substation.

IRB InvIT Fund has received loan facility from Aseem Infrastructure Finance Limited (AIFL) and Aditya Birla Finance Limited (ABFL) for refinancing/financing the debt of its present and future project SPVs. AIFL has extended a loan facility aggregating to ₹138 crores and ABFL has extended loan facility aggregating to ₹50 crores.