ICICI-led Infradebt fund launched; to start lending by Mar-end

Four financial institutions, led by ICICI Bank, Tuesday launched a USD 2 billion (about Rs 10,000 crore) Infrastructure Debt Fund (IDF), which would finance its first project by the end of next month.

Updated: Feb 19, 2013, 20:59 PM IST

New Delhi: Four financial institutions, led by ICICI Bank, Tuesday launched a USD 2 billion (about Rs 10,000 crore) Infrastructure Debt Fund (IDF), which would finance its first project by the end of next month.

"This is the first IDF in the form of NBFC and will commence operations very soon. The capital of Rs 300 crore has been contributed," ICICI Bank CEO and Managing Director Chanda Kochhar said.

Besides ICICI Bank, the other sponsors of the India Infra Debt Ltd are Bank of Baroda (BoB), Citi and LIC. The ICICI group has 31 percent, BOB - 30 percent, Citi - 29 percent and LIC - 10 percent.

After the formal launch of the fund by Finance Minister P Chidambaram here, Kochhar told PTI that the company, India Infra Debt Ltd (also known as Infradebt), is looking to raise half the corpus from the domestic market and the other half from foreign sources.

Talking about the fund flow to the IDF, Kochhar said: "The structure is that after Rs 300 crore equity capital, it can then raise tier 2 capital, it can raise further funds in the form of debt and it will look at all those infrastructure projects that have completed implementation."

Projects have been identified which have completed minimum one year of operation, she said, adding that the first deal will be made by the end of the current fiscal.

This fund can finance projects of up to USD 2 billion, Kochhar added, exuding confidence that IDFs can emerge as additional channels for infrastructure funding.

Speaking about the IDF, CEO of Citi India Pramit Jhaveri said: "There are large pools of global and domestic capital looking for attractive investment prospects. India Infradebt is a unique platform to match these funds and their appetite for long term and stable investments with the compelling India infrastructure opportunity."

Concerned over poor infrastructure, the government last fiscal allowed to form IDF to step up investment in the infrastructure sector, which requires USD 1 trillion in the 12th Plan. Of the total proposed investment, about 50 percent is expected to come from the private sector and the debt contribution is expected around USD 350 billion.

"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," the Finance Minister said.

To mobilise the resources of this level, Chidambaram said that many more institutions are required to share this responsibility.

Emphasising upon the need to meet financing requirements of the infrastructural deficit, Chidambaram asked the promoters of the Infradebt to provide sound management to make projects successful.

This is the fourth IDF after the launch of the ones by IL&FS, IIFCL and SREI.

The Finance Minister said that financing investments of this order, with significant participation from the private sector, will require adoption of innovative ways of funding.

He said the government has initiated several major steps in this direction including formation of the Cabinet Committee on Investments (CCI) with Prime Minister as the Chairman to expedite decisions on approvals for implementation of projects to improve the investment environment.

The government is also promoting Public-Private- Partnerships (PPPs) as an effective tool for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services, Chidambaram said.

The government has also allowed the issue of Tax Free Bonds amounting to Rs 54,500 crore for 2012-13, almost double from Rs 30,000 crore in 2011-12. These bonds have mobilised much-needed, long-term funds for infrastructure development, he added.