IIFCL to take ECB route to raise $500m

KOLKATA: Standard Chartered Bank (StanChart) will lead arrange India Infrastructure Finance Co’s (IIFCL) $500-million external commercial borrowing (ECB) plan. The resources will be raised for a period of 10 years.

IIFCL chairman and managing director SS Kohli said, “The resource will be used for financing some major infrastructure
projects in the country. We have engaged StanChart as lead arranger to the fund raising exercise.”

When contacted, StanChart’s managing director and head (wholesale banking) Bala Swaminathan said, “We are raising $500 million 10-year paper for IIFCL to fund its infrastructure projects and will work with a few other banks on this. We expect the pricing to be very fine as the exposure will be guaranteed by the central government.”

During 2007-08, IIFCL, a wholly-owned special purpose vehicle of the central government for core sector lending, intends to sanction some 46 projects, aggregating Rs 15,000 crore and disburse nearly Rs 3,000 crore. A major chunk of this Rs 3,000 crore funding requirement will be met through overseas borrowings.

IIFCL’s paid-up capital is Rs 100 crore. It sanctions loans up to 20% of the project cost. Out of the 46 projects which are under the IIFCL’s consideration, 31 are road development ventures, 12 are power projects, two are port-related infrastructure ventures, while one is an airport project.

To ensure proper usage of funds, IIFCL has appointed Icra to work out a detailed business roadmap. “Icra is expected to submit the report within a month. It will also recommend an HRD strategy suited to our needs,” Mr Kohli said. Apart from some of major infrastructure projects, IIFCL is also working with the municipal corporations and urban local
bodies to develop urban infrastructure projects.

“Given the rapid pace in urbanisation, the urban infrastructure sector requires enhanced focus. Municipal corporations and urban local bodies require an improvement in internal systems to cope with project development, contractor appointment, project implementation and creation of a sustainable operation and maintenance framework,” Mr Kohli said.

In this light, IIFCL, along with IDBI, Canara Bank and IL&FS, have recently created a Rs 3,000-crore pooled municipal debt obligation (PMDO) facility. The fund will be channelised for urban infrastructure development.

The underlying strategy is to create an environment, wherein urban local bodies, state governments and other stakeholders will embark on a series of reforms to improve their credit worthiness and bankability of urban infrastructure projects. The chosen structure has been initiated as a pure debt facility to be pooled from the term loan sanctions
by the lenders.