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How Rajiv Lall plans to tansform IDFC into a financial co
Rajiv Lall has set himself a Himalayan task: Transform IDFC from a project lender to a financial conglomerate. And convince the world it will work
July 20, 2009, began as just another day in the life of Rajiv Lall, the CEO and managing director of Infrastructure Development Finance Co. (IDFC).
-- The Australian financial conglomerate has used a successful model of using equity for infrastructure financing.
-- Macquarie is known for securitisation of infrastructure from airports, water utilities to retirement funds. -- It typically buys an infrastructure asset, say a toll bridge, using debt and then packages it as a business and raises money through an IPO or a fund
-- Macquarie mitigates its risk by keeping assets under separate entities and not on its balance sheet. -- Later, Macquarie charges these entities a fee for managing the infrastructure. This is regular, predictable income. -- These individual assets serve as fee factories for Macquarie around the world. -- This model works best when interest rates are low and asset prices are going up. However, Macquarie's "financial street-fighters" have managed to ride out many twists and turns. -- For a similar model to work in India, infrastructure finance companies may have to launch funds a la Real Estate Investment Trusts (REITs). IDFC is betting on this.
