IIFCL takeout financing scheme in a month

India Infrastructure Finance Co was likely to finalise the takeout financing scheme within a month and might implement it by the first week of March, Chairman and Managing Director SS Kohli said today.

“We have already had two meetings with various stakeholders in this (takeout financing scheme) regard. The scheme is likely to be finalised in a month,” he said.

IIFCL has appointed rating agency Crisil as consultant for the scheme.

“The scheme has been discussed with the stakeholders — Indian Banks’ Association, Insurance and Regulatory Development Authority of India, Pension Fund Regulatory and Development Authority and the ministry. The draft scheme is already under the consideration of the government,” he said.

In the Budget (2009-10), the government had announced IIFCL would prepare the takeout financing scheme in consultation with banks.

Under the scheme, the state-owned lending institution will take over some infrastructure loans of banks on its books. Takeout financing, a globally accepted practice of releasing long term funds for financing infrastructure projects, can be used effectively to address the asset liability mismatch of commercial banks. It can also be used effectively to free up capital for financing new projects.

Kohli acknowledged that public sector banks are facing asset-liability mismatches as loans for infrastructure projects have an average tenure of 10 years.

“Infrastructure projects require loans of over 10 years and that’s another reason for the asset liability mismatches banks are facing,” he said adding that over the last few months banks have raised more deposits in the short term.

In a customary pre-policy meeting last week, banks had sought concessions from the Reserve Bank of India for lending to the infrastructure sector.

Focus areas
With the National Highways Authority of India (NHAI) having restarted the bidding out process for highways, Kohli said there is a “good opportunity” for IIFCL to fund more such projects.

In the current financial year, NHAI is planning to bid out 49 road projects totalling about 507 km and entailing a cost of Rs 51,148 crore.

Having funded Tata Power’s Mundra and Reliance Power’s Sasan ultra mega power projects, Kohli said IIFCL plans to fund more UMPPs as and when they come up for financial closure.

Disbursals target
Targeting a cumulative loan book target of over Rs 9,000 crore by March 31, Kohli is hopeful that IIFCL will achieve it.

“Out of 125 projects that we have sanctioned loans for, financial closure has been done in 121. We have disbursed around Rs 7200 crore for various projects. Hopefully by the end of March, the loan book should cross Rs 9000 crore,” he asserted.

For the 2009-10 financial year, IIFCL plans to disburse Rs 4900 crore.

“So far, we have disbursed Rs 2400-2500 crore. We will be able to disburse Rs 2000-2500 crore more in January-March,” he said.

IIFCL plans to disburse Rs 7000-8000 crore in 2010-11 financial year.