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Debt Financing Support to Public-Private Partnerships in India Policy and Instruments August 26, 2014 | 9 :00 AM EDT. Discussion: Shyamala Shukla , Senior Consultant, PPP Group, The World Bank Gajendra Haldea , Former Principal Advisor, Infrastructure & PPP, Planning Commission of India.

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Debt Financing Support to Public-Private Partnerships in India Policy and InstrumentsAugust 26, 2014 | 9:00 AM EDT

Discussion:

Shyamala Shukla, Senior Consultant, PPP Group, The World Bank

Gajendra Haldea, Former Principal Advisor, Infrastructure & PPP, Planning Commission of India

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APPROACH AND CONTENTS OF WEBINAR

  • PART I ( 30 minutes)
  • Government support to PPPs in India
  • Debt financing requirements
  • Introduction to the IIFCL
  • Challenges in debt financing
  • Outline of key questions on the above
  • Answers to key questions
  • PART II (10 minutes)
  • Introduction to IDF and discussion
  • PART III (20 minutes)
  • Q&A and concluding remarks
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FINANCING REQUIREMENTS FOR INFRASTRUCTURE IN INDIA

  • Resource requirements for infrastructure: US 600 billion for 2012-2017
  • Public and Private share: 50:50 at US $ 300 billion each
  • Private sector debt requirement: more than US $ 300 billion in five years

Investment in Infrastructure

Source: Second Report of the High Level Committee on Financing Infrastructure, Planning Commission, Government of India

Source: Planning Commission, Government of India, in Deloitte (2012), Indian Infrastructure – A Trillion Dollar Opportunity

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INDIA INFRASTRUCTURE FINANCE COMPANY LIMITED

  • IIFCL was formed in 2006 for long-term debt financing of infrastructure PPPs
  • IIFCL products:
  • Direct lending
  • Subordinated Debt
  • Cumulative performance:
  • Other activities:
  • IIFC (UK) Limited
extended team
Extended Team
  • CHALLENGES IN DEBT FINANCING
  • Tenure of loans confined to 10-15 years
  • Sources of funds concentrated in state owned banks
  • Slow down in growth of commercial bank credit
  • Bank sector exposure limits
  • Company exposure limits
  • Bond financing –fewer issues, capital markets lack depth/volumes
  • Foreign currency borrowing – currency risk
  • Lack of affordable hedging mechanisms
  • Limits to refinancing through ECB

Source: Economic Survey of India 2013-14, Chapter 11, p.209

questions of focus
QUESTIONS OF FOCUS
  • Debt financing - key features of India’s concession framework
  • Bankability of concession framework
  • Indian infrastructure market - the shortfall in debt financing
  • Key features of India’s concession framework - does it provide comfort to lenders?
  • Role of IIFCL in debt financing
  • IIFCL’s role in debt financing
  • Impact during the last few years
  • Capital adequacy issues
  • Sector / company exposure issues
  • Direction of its debt financing portfolio
infrastructure debt funds
INFRASTRUCTURE DEBT FUNDS
  • Policy: RBI and SEBI in 2011
  • Objective: Sourcing long term debt for infrastructure projects
  • Potential investors: Pension/Insurance Funds and others
  • Institutional set-up: NBFC or Mutual Fund
  • Status: 5 IDFs formed so far
  • Further resources on IDFs:
  • http://rbi.org.in/scripts/NotificationUser.aspx?Id=6830&Mode=0
  • http://www.sebi.gov.in/cms/sebi_data/boardmeeting/1360917875498-a.pdf
infrastructure debt funds1
INFRASTRUCTURE DEBT FUNDS
  • Role of IDFs
  • Status of IDFs that have started working
  • Early results