NaBFID to tap debt market to raise over $4 billion in FY25 to finance infra projects

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National Bank for Financing Infrastructure and Development (NaBFID) is looking to raise about Rs 40,000 crore (about $4.82 billion) by the end of this fiscal mostly by issuing domestic bonds as the 20-month old financial institution looks to boost its lending to infrastructure projects across the country, deputy managing director Monika Kalia told Moneycontrol in an exclusive interview.

The government-backed entity has so far in the fiscal raised up to Rs 9,000 crore, Kalia said. In FY24, NaBFID's total borrowings were Rs 25,016 crore. This includes Rs 5,500 crore in bank loans and Rs 19,516 crore from non-convertible debentures (NCDs) of two maturities—Rs 10,000 crore of 10 years and Rs 9,516 crore of 15 years.

"This year we have already done (raised via bonds) Rs 8,000 crore to 9,000 crore... We will be coming up with Rs 40,000 crore this financial year," Kalia said.

According to reports, its inaugural bond issue in June this year received bids that were almost five times the size of the base issue, and traders anticipate a similar level of interest for future debt offerings from India's newest infrastructure lender. "Our last issuance was a 20-year bond, which had not been done by any institution in a very long time. It came at a very favorable price for us," Kalia added.

Established in 2021 by an act of Parliament, the infrastructure-focused lender aims to approve loans totalling Rs 1 lakh crore by the end of this fiscal year. Till date, it has disbursed Rs 45,000 crore, with the majority of financing directed towards renewable energy and road projects. To support the financing target, NaBFID will be coming up with more borrowing plans, Kalia said, adding that the company will prefer borrowing domestically unless interest rates in the US start falling.

"We are in touch with various multilateral agencies whether it is World Bank, AIIB (Asian Infrastructure Investment Bank) or ADB (Asian Development Bank), NDB (New Development Bank),we are evaluating various options which are available. We don't want to avail any loan from them because as of now we have enough domestic funds which are coming in," Kalia said.

The lender sees an internal rate of return (IRR) between 12 percent and 15 percent against these infrastructure projects. Asked about equity participations, Kalia flagged that the company will start looking into it once it's 'fully mobilised' and done with hiring.

As of now, NaBFID's exposure spans sectors such as renewable energy, roads, railways, urban infrastructure, ports and airports. Renewables accounted for 30-33 percent of the total disbursements made so far, Kalia said, adding that financing to renewables and roads projects is poised to dominate.

"We are looking at some of the upcoming sectors...whether it is green hydrogen or green ammonia, hybrid renewable energy or energy storage," she added.  The lender is in talks with multilateral agencies such as the World Bank & KEXIM to evaluate financing options which shall only be availed if they are of low cost in nature and which can be blended into our cost of funds and then passed on to the developers of projects in such sectors.

India's green hydrogen and ammonia sectors are on the rise, driven by a strategic push from the government and a surge in industrial interest. The National Green Hydrogen Mission was allocated Rs 600 crore for 2024-25, marking a significant 102 percent increase from the previous year's allocation of Rs 297 crore. This increase is part of a larger financial outlay of Rs 19,744 crore up to FY30, underscoring the government's commitment to fostering this emerging sector.

The boost in funding has ignited enthusiasm among industrial players, with major companies such as Reliance Industries and Adani Group as well as startups investing in green hydrogen technologies to capitalise on both domestic and international opportunities.