IDFC to borrow more abroad

In a bid to diversify its liability portfolio, Infrastructure Development Finance Company (IDFC) plans to go for external commercial borrowings (ECBs) and issue retail bonds in a bigger way during the next financial year.

The company, which received the ‘infrastructure non-banking finance company (NBFC)’ status from the Reserve Bank of India (RBI) in July 2010, was planning to fully use the borrowing limits under the ECB route and raise up to Rs 5,500 crore during 2011-12, said executive director Vikram Limaye.

According to RBI guidelines, infrastructure NBFCs are allowed to raise up to 50 per cent of their net worth through ECBs under the automatic route.

“We are planning to raise $250 million in the current quarter through ECBs under the automatic route. As part of our strategy to diversify liabilities, we will tap this route in a much bigger way and try to maximise our limits in the next financial year,” Limaye told Business Standard.

IDFC’s net worth stood at Rs 11,390 crore on December 31, 2010, which means it can raise more than Rs 5,500 crore through ECBs under the automatic route.

In February 2010, to help lenders mobilise funds at a lower cost and get flexibility in infrastructure lending, RBI created a separate entity for NBFCs — infrastructure finance companies (IFCs).

Apart from the ECB relaxation, IFCs are not subject to borrower limits, which restrict NBFCs from lending more than 10 per cent of owned funds to a single borrower and more than 15 per cent to a group of borrowers.

“Before the special status, we had to depend on domestic sources for most of our borrowings. Now, apart from the cost benefits, which are subject to market dynamics, the most important thing is to be able to access a much larger pool of lenders across the world,” said Limaye.

“Even if the costs are same as domestic funding, ECBs will be a permanent component in our borrowings,” he added.

During the first nine months of the current financial year ended December 31, total borrowings of IDFC stood at Rs 36,633 crore, compared to Rs 24,312 crore in the corresponding period a year ago.

More retail bond issues
IDFC will also come up with more retail bond issues, both in tax-free and non-tax-free segments, in the coming financial year.

“Going forward, the borrowing mix will change, and we are going have more retail bond issues, including the tax-free bonds we launched recently,” Limaye said.

In the current financial year, IDBI plans to mop up Rs 3,400 crore through tax-free infrastructure bonds in two tranches.