Infrastructure Development Finance Company (IDFC), India Infrastructure Finance Company (IIFCL), Citigroup and Blackstone, which had recently joined hands to float a $5 billion dedicated infrastructure fund, has sought the RBI’s approval to raise $3 billion from overseas markets over the next three years.
The fund’s corpus is expected to comprise $2 billion of equity capital — to be contributed by promoters and other investors — and $3 billion in long-term debt financing. The two Indian promoters of the fund, IDFC and IIFCL, are required to seek the central bank’s approval prior to tapping international markets for debt, as per the external commercial borrowings (ECB) regulations.
Given that the ECB guidelines allow an individual company to raise only up to $500 million a year, the RBI would have to make an exception in the case of this infrastructure fund. Industry sources said that IDFC and IIFCL has already approached RBI for permission to raise $3 billion over the next couple of years.
“As part of the MoU signed with between IDFC, IIFCL and Citigroup, $3 billion in debt has to be arranged for the infrastructure fund. Thus, an enhancement in the ECB limit for the Indian companies has been sought,” a source said. To begin with, IDFC, Citi and Blackstone will together deploy $250 million as equity capital, while IIFCL will invest close to $25 million.
The remaining equity is expected to be deployed by international and domestic institutional investors. The equity financing programme will be managed by IDFC, while the debt will be channelled through IIFCL in several tranches. The fund will invest in greenfield and brownfield projects primarily in roads, power, airports, ports and industrial and commercial infrastructure.
Recently, UK-based private equity firm 3i signed an MoU with IIFCL to invest over $5 billion in infrastructure projects in India. Ports, roads, airports, logistics, power and water supply are among the areas identified by the PE player for investment.
Source : Economic Times