Informist, Wednesday, May 15, 2024

--IIFCL MD: Planning GIFT City branch by FY25-end
--CONTEXT: IIFCL MD Jaishankar comments in an interview to Informist
--IIFCL MD: See GIFT City branch helping in raising resources
--IIFCL MD: Continuously evaluating FX borrowing options
--IIFCL MD: Yen-denominated bonds remain favourable for Indian cos
--IIFCL MD: Aim to borrow around 300 bln rupees FY25
--IIFCL MD: May raise 10-15% of 300 bln rupees via green bonds FY25
--IIFCL MD: Plan external borrowings of around 50 bln rupees FY25
--IIFCL MD: Premium on green bonds still not evident domestically

By Sagar Sen and Priyasmita Dutta

NEW DELHI – India Infrastructure Finance Co Ltd is planning to open a branch in Gujarat International Finance Tec-City to help the state-owned infrastructure financier raise resources, its Managing Director P.R. Jaishankar said today. The infrastructure lending company plans to operationalise the branch by the end of the current financial year.

"The GIFT City, the Delhi and London (India Infrastructure Finance Company (UK) Ltd), they will form a triad to raise resources for India Infrastructure Finance Co Ltd. On one side, you have the consultancy and advisory. And as and when we set up our company, they will do the financing. They will raise finances and they will deploy," Jaishankar told Informist in an interview.

"We have to take the Reserve Bank of India's approval for that," he said. "GIFT City is an answer to almost all the financial, all the international financial hubs." IIFCL Projects Ltd, which is a subsidiary of IIFCL, set up a branch office in GIFT City last year and is providing project appraisal and advisory services.

Jaishankar said IIFCL is actively looking at various instruments including external commercial borrowing to keep the cost of borrowing under control. "Foreign currency borrowings are such that one has to evaluate one's position in each currency from time to time. And as and when one gets that right mix of currency, interest rate and spreads, we have to enter into positions. So, it is a continuous evaluation for us," he said.

IIFCL will be keen to raise funds through debt instruments denominated in dollar, yen, and euros. "Yen has been one of the currencies which has been very, very favourable for Indian borrowers. And it still continues to be so, though it has appreciated a little against the dollar. But still it continues to be more favourable for the Indian rupee," Jaishankar said.

In April, the Japanese yen had fallen to 160-per-dollar, its lowest level since 1990, owing to a surge in the dollar index. However, so far this month, it has recovered almost 3% from the 34-year low, due to the Bank of Japan's heavy intervention through dollar sales in the foreign exchange market.

Earlier in the day, after detailing the company's financial results for 2023-24, Jaishankar said with increasing disbursements and an increasing presence in the infrastructure lending space, there is a requirement for the company to diversify its borrowing plan to mitigate the high cost of lending in a high-interest rate scenario.

IIFCL aims to raise around 300 bln rupees in the current financial year through a mix of various debt instruments. "How we have to decide the mix will depend upon their cost-effectiveness, the way in which they give their structures as compared to the domestic environment. But we are in the evaluation process and we have already raised about 15 bln rupees," he said.

Informist had in April reported that the state-owned infrastructure financier is trying to diversify its sources of raising external debt and is negotiating with investors from a number of Asian countries. Jaishankar confirmed the development and said, "We are still talking to them. We still have not got the final approval."

"We are expecting some very, very fine pricing as compared to the domestic and the other institutions in the foreign market as well. We still have not completed that. But once we complete that, then we will go full throttle on it. If we get a very fine rate, obviously, we will increase that (portion of money raised from Japanese market)," he said. Overall, the IIFCL expects to raise up to 50 bln rupees through external borrowings.

In order to drive funding to the sustainable sector, the infrastructure financier is looking to raise green bonds domestically as well as in the overseas market. "We have already formulated the framework for green bonds. The only issue is that there is no greenium in the Indian environment. The premium for green bonds is still not evident."

The government got a greenium of 0-3 basis points on the green bonds issued in the financial year ended March. Greenium refers to the premium investors are prepared to pay for green bonds due to its impact on sustainability. Green bonds give lower returns to investors while offering certain regulatory incentives, which make them attractive to foreign investors.

"We are agnostic about whether we have to issue for getting investors from domestic environment or global environment," he said. "As long as it is cost-effective and it is auguring well with the appetite for our own projects in India, we will go ahead with that," Jaishankar said.

Out of the overall 300 bln rupees planned borrowing for the current fiscal, IIFCL expects to raise 10-15% of it from green bonds, he said.

The company is also exploring the possibility of credit risk insurance. "We have already done the pilot, we have done the framework. If we have some existing insurance companies to take that up, that is better. We are talking to some of them. We are talking to Oriental Insurance Co Ltd, New India Assurance Co Ltd, let us see who accepts that," Jaishankar said.

The company is also in discussions with some multilateral agencies and concessioning authorities to help borrowers with structuring and coordination role besides their financial role, he said.

Set up in 2006, IIFCL provides long-term financial assistance to infrastructure projects. The company plans to get listed on the bourses in the next one year.

IIFCL reported a net profit of 15.52 bln rupees for 2023-24 (Apr-Mar), up 44% on year. The lender sanctioned loans worth 423.09 bln rupees in 2023-24, up 44% from the previous year, while disbursements were up 62% on year at 223.56 bln rupees. End

Edited by Akul Nishant Akhoury

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