IIFCL, ADB to provide part-guarantee for road projects led by GMR in Andhra Pradesh

MUMBAI: A GMR floated SPV for construction of roads in Andhra Pradesh will raise Rs 316 crore from the bond market on the back of guarantee issued jointly by India Infrastructure Finance Corporation ( IIFCL) and Asian Development Bank ( ADB).

GMR Jadcherla Expressway, an SPV floated by GMR which had the mandate from National Highway Authority of India to construct highway project of 53 km of road between Farukhnagar-Jadcherla in Andhra Pradesh. The company had initially borrowed from banks to finance the project. Now the company is replacing the loan by borrowing the money through the bond market.

S K Goel, CMD of IIFCL said that ADB and IIFCL have entered into a partnership to provide guarantee on bond issues. Currently, they will guarantee for 24% of the bond amount to the GMR led SPV which in turn will enable the company to enhance its rating for the bond from single A to double AA, said Goel.

According to executive director, Harsh Kumar Bhanwala, GMR led SPV will tap the bond market just around the time the reset clause of the loan is triggered so that, as per the agreement, it would not be required to pay pre-payment penal for prepayment of the loan. He said that IIFCL is also evaluating credit guarantee for a road project led by L&T and another company engaged in renewable energy.