Gaurav Dwivedi

Infrastructure Finance Update November 2023

The infrastructure continues to be the focus to push the economic growth rates in India. This month’s update provides the developments around the financial institutions such as India Infrastructure Finance Company Ltd (IIFCL), Rural Electrification Corporation (REC), Bank of India, and others that have been investing in the different infrastructure sectors and the projections about infrastructure sector by CRISIL. It also provides a quick snapshot of the major happenings in sectors like aviation, energy storage, roads, metros and others across the country.  

Financial Services Secretary speaking at an event organised by IIFCL in London, said national programs like the National Infrastructure Pipeline, Gati Shakti, Sagarmala, Bharatmala, UDAN and Maritime India Vision 2030, have created a lot of opportunities in the infrastructure sector. Adding that infrastructure sector in India is becoming a favoured destination for Foreign Direct Investment (FDI) as government has taken many supportive measures.

Also added that various innovative products of IIFCL such as credit enhancement, takeout finance, InvITs (Infrastructure Investment Trusts) and project bonds have proven to be a game changer for the sector.

Rural Electrification Corporation Limited (REC) signed an MoU with Bank of India (BoI) to explore funding power, infrastructure and logistics projects under the consortium arrangement. REC and BoI are partnering to co-finance loans costing Rs 30,000 crore for projects implementable over a 5 year period.

REC Limited, provides long-term loans and other financing for power-infrastructure sector including generation, transmission, distribution, renewable energy and new technologies like electric vehicles, battery storage, green hydrogen, etc. REC has diversified into infrastructure sector projects like roads, metro, airports, information technology, ports, etc. Ending first quarter of FY 2023-24, loan book of REC is at Rs 4.54 lakh crore.

India Infrastructure Finance Company Limited (IIFCL) has approved loans worth Rs 8,800 crore to push aviation sector and infrastructure in India.

IIFCL is a major financier of airports in India, it has supported airports with a total outlay of Rs 74,000 crore. IIFCL is working with the government under Public Private Partnership (PPP) and continues developing airport infrastructure and explore opportunities in financing greenfield airport projects in India, including maintenance, repairs and overhaul facilities.

National Infrastructure Pipeline (NIP), has about Rs 91,000 crore capex for the expansion of airport infrastructure, envisaged for the civil aviation sector till FY2025.

CRISIL said during its flagship India Infrastructure Conclave 2023 held in New Delhi that India to allocate nearly Rs 143 lakh crore for infrastructure till FY2030, more than twice of Rs 67 lakh crore spent in the previous year’s from fiscal 2017 onwards. With a focus on nation’s green ambitions, investments in sustainable initiatives are slated to rise five-fold, touching Rs 36.6 lakh crore. 

During the conclave Union Minister for Road Transport and Highways unveiled the CRISIL Infrastructure Yearbook 2023 which also introduces CRISIL InfraInvex. An index active since 2017 and measures the investment potential of select infrastructure sectors and includes environmental sustainability to show its rising significance in investment decisions.

It was stated that CRISIL’s analysis predicts growth in average project sizes and an influx of mega-scale ventures in the next infrastructure phase. Roads and power will continue to dominate, and emerging sectors, such as EVs, solar, wind, and hydrogen, will increase.

It also anticipates India’s inaugural sovereign green bond issue to increase domestic bond market interest for green bond issuances, this will reflect the growth in global demand for sustainable assets. 

It has been reported that the United Arab Emirates is considering investing around USD 50 billion in India, its second-largest trading partner. The countries have been looking to improve bilateral ties over the decade, and to increase non-oil bilateral trade to USD 100 billion. 

Deals being discussed include stakes in infrastructure projects and state-owned assets. Investments could be from sovereign wealth funds such as Abu Dhabi Investment Authority, Mubadala Investment Company and ADQ. 

Infrastructure major L&T has secured the contract to build the greenfield Bhogapuram International Airport at Bhogapuram in Andhra Pradesh. L&T Construction has been awarded a contract by GMR Visakhapatnam International Airport Limited for the engineering, procurement, and construction (EPC) of the Bhogapuram International Airport.

The new airport is situated about 50 km from Visakhapatnam in Bhogapuram, and will serve as an alternative to the existing airport in Vizag. GMR Visakhapatnam International Airport Ltd (GVIAL), a 100 per cent subsidiary of GMR Airports Ltd (GAL), is the concessionaire for the development and operations of Bhogapuram airport near Visakhapatnam.

It has been reported that Ayana Renewable is looking to sell a majority stake of 100% in the green energy company, with a targeted equity valuation of around USD 2 billion. It is also seeking to raise around another USD 400 million as primary equity infusion to finance the company’s growth. Standard Chartered has been mandated to manage the sale of the equity for the company which has 5 Gigawatt renewable energy portfolio. 

The US-based Mercom Capital said that the global corporate funding in energy storage segment fell 31 per cent to USD 15.2 billion during the January-September 2023. The research firm said in its latest report that the segment had attracted USD 22 billion worth of investments during the 9 month period last financial year. The funding includes VC, debt and public market financing.

It was further added that in India, a lithium-ion battery manufacturer raised USD 2.4 million in pre-series funding. The public infrastructure finance company REC Ltd approved a funding of USD 730.8 million to Greenko to develop a 1,440 MW pumped storage project.

IL&FS is considering monetising some its road assets, since it is facing challenges to transfer those to an infrastructure investment trust (InvIT). It had planned to transfer around a dozen road assets to the InvIT, Roadstar Infra Investment Trust (RIIT). It had transferred five of the assets earlier, however transfer of five more is delayed due to legal challenges by lenders and other issues. 

In addition, transferring of one asset is progressing, and it has excluded one asset from the transfer process. It is now assessing alternative methods to monetise these assets, as part of the group’s debt resolution programme, it has a target of Rs 61,000 crore. It has also decided to list RIIT, which has already acquired five assets from IL&FS Transportation Networks.

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