NaBFID likely to make first fund commitment this financial year, says MD

It is looking at projects in transmission, energy, solar power and roads; is also eyeing a retail bond issuance

The National Bank for Financing Infrastructure and Development (NaBFID) is likely to make its first commitment of funds to a project within the current financial year and is also eyeing a retail bond issuance, managing director Rajkiran Rai G said on Wednesday.

The projects that NaBFID is looking at include transmission, energy, solar power, roads, Rai said, adding that the development financial institution would consider both greenfield and brownfield projects. Rai was appointed as MD of NaBFID in July.

“We are already talking to merchant bankers. Most probably our raising of money will be by issuing bonds. So we may see some bond issuances in this financial year itself,” Rai said at a banking event in Mumbai.

“There is a project pipeline - there is greenfield, there is brownfield, there are lot of NCD issuances, basically completed projects. We will also be looking at retail, I feel that for 10-year, 15-year to 20-year bonds there are enough opportunities, enough appetite,” he said.

Speaking about the interest rates that the NaBFID’s bonds would offer, Rai said that it was difficult to predict a range given the ongoing phase of monetary tightening but that the rates would be similar to those offered by large commercial banks.

“If you look at MCLR of banks today, typically looking at one-year MCLRs, I think we’ll be also close to that. Interest rate-wise we will not be lower than the big commercial banks. We will be close to that,” he said.

“We will create our own benchmarks for the pricing part so that the interest rates are right, so that they are not unviable for the promoter but at the same time the investor also gets the right kind of reward,” he said.

Rai said that the process of acquiring a rating for the NaBFID would be completed by December.

In the Budget for 2021-22, the government said that it would introduce a development financial institution (DFI) to spur investment in infrastructure.

NaBFID aims to provide financial assistance of Rs 1 trillion in the first year of its operations. NaBFID has equity capital of Rs 20,000 crore and a government grant of Rs 5,000 crore.

“In 2023, I feel that insurance pension funds will be typically looking at long-term bonds to the extent of Rs 2.5 lakh crores. Certain regulatory dispensations may be needed because they have exposure limits but there is a good market available,” Rai said.