Infrastructure Development Finance Corporation (IDFC) is negotiating with the World Bank for a back-stop facility to meet long-term finance requirements of infrastructure projects.
IDFC chairman Deepak Parekh said this arrangement would either be in the form of a credit line or guarantee support. This will allow IDFC to extend long-term finance with maturities up to 30 years without any fear of asset-liability mismatch. In the event of a mismatch, IDFC can either draw from the credit line or take advantage of the World Bank guarantee.
He said IFDC had also worked out takeout financing for a series of projects with State Bank of India. This arrangement will provide liquidity support for SBI's infrastructure lending operations. He said the price of such finance would, however, depend on the creditworthiness of the counter-party involved in the operation. The total allotment for this kind of operations was about Rs 300 crore, he added. The projects for which such support was provided include Bharti Telecom's basic telephony project.
He said all the takeout support provided was worked out on a recourse basis and not linked to any project risks.
This means IDFC will take a risk only on SBI and is not associated with any project-specific risk. In this kind of financing, IDFC will meet the liquidity requirements of the bank in the event of any asset-liability mismatch.
The returns on such liquidity support are low and IDFC is not earning an attractive spread. Therefore, he said, in the Videocon power project, IDFC would be providing debt support on a consortium basis with nationalised banks.
IDFC, he said, had sanctioned about Rs 400 crore in the form of direct lending, guarantees, and takeout support for infrastructure projects.
Earlier, addressing the members of Confederation of Indian Industry (CII), Parekh said finding investments in infrastructure projects was unlikely to be easy, since investors were basically risk sensitive. Consequently, the initial rush for all investments was in the telecom sector, he added.
However, finding funds for long-gestation projects like roads or ports was not likely to be difficult if the government was prepared to consider methods like shadow tolls or earmarking funds for development of projects. And if the private sector was coopted into managing such funds, it would be prepared to come forward to meet the funding requirements, he added.
