Credit rating for infrastructure cos soon

NEW DELHI: The government is working out a new credit rating system for infrastructure companies. The finance ministry is in talks with leading credit rating agencies to evolve separate parameters to rate infrastructure companies. This follows the recent interest evinced by a large number of private equity players and pension funds in the sector.

Companies developing a metro rail project or a road project opt for the shell company route to execute the project. Although the promoters belong to established corporate groups with sound track records, the SPVs floated by them do not have financial track record required to get credit rated. Sources feel that this may pose difficulties in getting funding as long term investors like pension funds and private equities may be wary of pumping investments in new ventures.

Credit rating is done on a company’s last three years’ balance sheet. Since these companies or SPVs do not have these records to show, they cannot get rated. Getting a rating is crucial for these companies as most of the funding agencies or private equity investors have stringent guidelines and can invest only in credit rated entities.

The official said the government had already spoken with agencies, including Crisil, to devise new benchmarks for infrastructure companies so that they can access requisite funds. The rating would also cover the private-public partnership model which the government is encouraging in infrastructure sector.

With the infrastructure financial weighing heavy on its agenda, government wants to address all the issues coming in the way of its takeoff. Since the credit rating is a big irritant for companies operating in the sector, the government wants to address the issue, a finance ministry official told ET. Recently, the finance ministry received a proposal from the Citigroup to float an infrastructure fund.

In fact, some foreign pension funds who want to park their money in long-term projects have also shown interest in investing in infrastructure sector in India. The credit rating system would make it easier for them to invest in Indian infrastructure companies. The funding requirement of infrastructure sector is pegged at $320 billion for next five years.