THE SENIOR ANALYST
Jan 2014
Concessionaire and the Project Authority for
ensuring a compulsory buyout with termination
payment in the event of default in repayment by
the Concessionaire. Only banks and Infrastructure
Finance companies can sponsor such IDF-NBFCs,
while they are regulated by RBI.
the asset-liability mismatch. This allows freeing
up bank’s money and encouraging them to lend
more to infrastructure projects as their exposure
is limited. The idea of offering so-called takeout
financing at the pre-bid stage was initially
proposed by the Planning Commission. To
IDF-MF
IDF NBFC
Regulator
SEBI
RBI
Leverage
Can't issue bonds or debt papers
Can leverage by issuing bonds
Tax Transparency
No such limit as MF units are capital 15% of risk weighted assets
itself
Credit
enhancement
guarantees
No such provision
Currency risks
Rupee denominated units will result May issue bonds in both rupee and foreign
into currency risk for foreign investors currencies thus reducing the risk for
foreign investors
Presently, there are four IDFs registered with the
Securities and Exchange Board of India (SEBI) viz.
ICICI Prudential Infrastructure Debt Fund, Birla
Sunlife
Infrastructure Debt
Fund, IDBI
Infrastructure Debt Fund & IDFC Infrastructure
Debt Fund.
The first project to be refinanced from the fund is
the Jaiprakash Group’s Zirakpur-Parwanoo
project. It is hoped that more such funds will
emerge and play a key role in meeting the future
requirements of infrastructure projects.
B.Takeout Financing:
It is a financing scheme developed by
government under which banks lend to
infrastructure projects but sell a part of that loan
to a third party after a certain period of time.
Thus there is a third party involved which takes
out the infrastructure loan from Bank’s Balance
sheet to its own. By selling a part of the loan to
an institution that has long term funds banks are
able to reduce lending thus preventing itself from
Provision can be made to attract different
categories of investors
achieve this end, Government of India in 2010 set
up India Infrastructure Finance Company (IIFCL), a
state owned enterprise, providing take out
finance scheme.
Initial proposal: As per the initial proposal IIFCL
would take over up to 75% of an individual bank's
loan or 50% of the residual project cost on to its
own books. The loan could be repaid over a 15year time period and only those projects that had
a residual debt tenor of at least six years or those
which are yet to achieve financial closure will be
eligible for the scheme. The project developer,
IIFCL and the lender would enter into a tripartite
agreement, which would include the rate of
interest on the take out amount. IIFCL could take
over the loan after four years from the
commencement of the project.
Though the proposed scheme addressed the
issues of asset liability mismatch, it received
mixed response from bank. This is because, IIFCL
would charge an annual transaction fee of 50
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