Budget should make infra projects investor friendly: IIFCL MD PR Jaishankar

In an interview with Nikesh Singh, IIFCL managing director PR Jaishankar talks about the way ahead for the key infra financier

India Infrastructure Finance Company (IIFCL), the wholly-owned government enterprise that provides long-term finance to viable infrastructure projects, is all set to launch its first-ever green bonds next month worth Rs 1,000 crore. In an interview with Nikesh Singh, IIFCL managing director (MD) PR Jaishankar talks about the road ahead for the key infra financier. Edited excerpts:

What are your expectations from the upcoming Budget?

The Budget should make infrastructure projects investor friendly. There is a need for structural reforms in the sector to include lenders as a primary party in the concession agreements to make it tripartite. Currently, it is bipartite in nature and comprises the concessioning authority and developers, but excluding lenders.

IIFCL had plans to issue green bonds. At what stage is the proposal and how much do you plan to raise?

IIFCL expects to raise Rs 1,000 crore through its first issuance of green bonds in February this year. The funds will be used for infrastructure projects in areas of solar and wind energy. The projects would also include other renewables as well. The funds raised by IIFCL will be used in areas notified by the Centre for its sovereign green-bond scheme. This includes energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management. The funds would also be used for pollution prevention and control, green buildings, sustainable management of living natural resources and land use. There will be no taxation benefits for investors and it will be rupee denominated. IIFCL also has plans to invest big time in the green bonds that are to be issued by the Centre. We will be raising Rs 2,500 crore bonds, including green bonds, by the end of FY23.

What will be the impact of the recent hike in benchmark policy rates on your business?

This will increase the cost of funds for a certain time period. IIFCL is not overtly concerned about this as we have got enough liquidity and provisions to prevail over this. IIFCL is not considering any aggressive hike in interest rates. This comes even though global headwinds have affected the growth of our infrastructure financing to a certain extent.

What are IIFCL's plans for diversifying into alternative investment funds (AIFs)?

Our strategy is to have AIFs as partnering with IIFCL’s own objective of financing government infrastructure. We are in discussions with prospective stakeholders for investment in AIFs. This comes as global as well as domestic investors get attracted and more funds come into infrastructure. IIFCL can use this to offload its high-quality assets. The proceeds will be used in financing projects of national importance.

How do you see IIFCL’s loan book growing in FY24?

IIFCL will more importantly focus on sanction and disbursement of loans to the infrastructure sector. We will aim to grow this at 30-40 per cent from the last financial year. We are already on our way to achieve this target by the end of this financial year. Loan book growth may be moderate as we are more into sanctions and disbursements. Our aim is to develop on all fronts by providing financing to all sectors. We want to expand our products, continue profitability and improve asset quality.

What are your plans for IIFCL's overseas subsidiary? How is it doing?

IIFC (UK) returned to profitability during FY20. During FY22, profit after tax tripled to $19.09 million compared to the year before. This year, the subsidiary expects to post at least 20 per cent more profit than last year. So far, in the last two years, the subsidiary has managed to recover about $220 million out of its NPA portfolio of about $470 million. The subsidiary is continuing its efforts and expects recovery of an additional $70 million by the end of FY23. This has put the subsidiary in good state as far as the asset portfolio is concerned. The subsidiary is looking to raise its own resources in addition to the $5 billion line of credit available from the Reserve Bank of India (RBI).

It has diversified its portfolio from power to oil and natural gas, renewable energy and institutional refinance, making the balance sheet more resilient.

Indian Railway Finance Corporation (IRFC) and IIFCL recently signed a pact to strengthen cooperation in financing railway infra projects. Have you shortlisted any project for co-financing?

IIFCL has refinanced IRFC for certain railway projects. Together, we are continuing to foray into areas where IRFC can help us with its expertise. It is a mutually-beneficial exercise. Refinancing of IRFC is the primary target but in the future, co-financing will also take place.

What is the role of IIFCL as the presiding body of SCO-IBC (Shanghai Cooperation Organisation Interbank Consortium)?

The long-term financing of projects is the key theme that India wishes to take forward in this forum. India has taken the initiative of capacity building to promote its influence in the group. The marquee infrastructure initiative of IIFCL is aimed at capacity building, where all the members of the group will participate.