Takeout financing scheme may be tweaked

Under the scheme, a part of loans extended by banks to infrastructure projects is taken out by IIFCL

The government might relax the takeout financing norms to allow India Infrastructure Finance Co Ltd (IIFCL) to provide long-term funds as a sole lender after the exit of the lead banker from the project.

“Currently, IIFCL cannot be the lead bank. We have proposed that this should be changed and we be allowed to operate as the sole lender after others exit. Project developers will be able to get long-term funds at a lower cost,” IIFCL Chairman S K Goel said.

Under the scheme, a part of the loans extended by banks to infrastructure projects are taken out by IIFCL. Since banks have short-term funds and infrastructure projects need long-term funds, takeout financing helps projects secure a long-term loan while freeing banks’ funds for new projects.  

An inter-ministerial committee, comprising officials from the finance ministry and the Planning Commission, is reviewing the scheme’s guidelines. The government contends the lead banker is better apprised of the project, being involved with it since the start.    

Currently, IIFCL can give loans for the same tenure as given by lenders to the project. The norms, if changed, will also apply to IIFCL’s UK subsidiary, which will shortly launch the scheme on the lines of the existing scheme. Goel also said the government has approved the limit of 50 per cent for lending to projects set up by private companies (non-PPP projects) from 20 per cent of lending in an accounting year for IIFC(UK). This would enable a larger number of infrastructure projects to avail foreign currency financing from IIFC(UK) for import of capital goods. IIFC(UK) is now targeting fresh disbursements of around $1 billion in 2013-14. It has made gross sanctions of $5.6 billion and cumulative disbursements of $975 million till March 2013.

IIFCL recorded a 47.4 per cent jump in its net profit at Rs 1,000 crore for the year ended March 2013. The growth was led by robust growth in total revenues supported by lower growth in total expenses.

IIFCL is targeting fresh disbursements of around Rs 12,500 crore in 2013-14—a growth of 62 per cent. During 2012-13, the company achieved a business growth of 37 per cent in cumulative gross sanctions and 35 per cent in cumulative disbursements. It made sanctions of about Rs 90,000 crore and disbursed about Rs 30,400 crore till March 31, 2013.