Moneycontrol
Feb 20, 2013 08:37 AM IST | Source: Moneycontrol.com

India's first infra debt fund launched

Infradebt, India's first infrastructure debt fund (IDF) is set to kick-start its formal operations. Finance minister P Chidambaram on Tuesday handed over the license to the fund's promoters including ICICI Bank, Bank of Baroda, Citibank and Life Insurance Corporate of India.


Moneycontrol Bureau


Infradebt, India's first infrastructure debt fund (IDF) is set to kick-start its formal operations. Finance minister P Chidambaram on Tuesday handed over the license to the fund's promoters including ICICI Bank, Bank of Baroda, Citibank and Life Insurance Corporate of India.


"The infra debt fund has equity capital of Rs 300 crore," Chanda Kochhar, managing director, ICICI Bank told reporters in New Delhi.


"The non-banking financial company (NBFC) includes independent management with LIC, Bank of Baroda, ICICI Bank and Citibank among the major participants. The infra debt fund projects can finance projects up to Rs 200 crore," she said.


ICICI Bank (together with a wholly-owned subsidiary) is the largest shareholder in Infradebt with 31 percent stake holding followed by Bank of Baroda at 30 percent, Citibank at 29 percent and LIC at 10 percent.


Earlier, Pranab Mukherjee, the then finance minister had announced the setting up of IDFs in his budget speech for the year 2011-2012. The objective was to facilitate the flow of long-term debt into infrastructure projects.


Most of the infrastructure projects are facing fund crunch. Banks drag their feet in lending to long term projects out of the fear of asset-liability mismatch. While more than half of total deposits in the banking industry are with less than one year maturity, infrastructure projects generally keep banks' money blocked for 7-10 years.


"The IDF will be set up either as a trust or as a company. A trust based IDF would normally be a mutual fund (MF) while a company based IDF would normally be a NBFC. IDF - NBFC would raise resources through issue of either rupee or dollar denominated bonds of minimum 5 year maturity," RBI had said in a notification issued on November 21, 2011.


Speaking on this occasion, Chidambaram emphasized the need to meet the financing requirements of the infrastructural deficit. Infrastructure spending in the 12th five year plan is projected at USD 1 trillion against about USD 500 billion in the 11th five year plan. The share of private investment in the total investment in infrastructure has increased significantly from 22 percent in the 10th  Plan to 38 percent in the 11th Plan and is projected at 47 percent during the 12th Plan.

"Infradebt would seek to raise debt capital from domestic as well as foreign resources and would invest in infrastructure projects under the Public-Private Partnership model that have completed one year of operations. Infradebt will expand and diversify the domestic and international sources of debt funding to meet the large financing needs of the infrastructure sector," said the press release issued by ICICI Bank.

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