Financiers are increasingly interested in RE and sustainable projects
The recent budget places a strong emphasis on infrastructure development and spending. Have you observed an increase in funding for these projects?
The government has been significantly ramping up its investment in infrastructure, making it a priority in an unprecedented way. This comprehensive approach covers various sectors and is crucial for the nation’s growth. However, for these efforts to be fully realised, they must be supplemented by private sector participation. The scope for growth in infrastructure is vast, given the current economic aspirations and the potential that lies ahead.
How is loan distribution currently structured across different infrastructure segments, and what is the focus on renewable energy?
There’s a growing interest among financiers and industry players in renewable energy and sustainable projects. This is a crucial area as we move towards a greener economy. IIFCL has developed a green sustainable financing framework, which outlines our commitment to supporting projects that are environmentally friendly and sustainable. We are in the process of finalising a green and sustainable financing strategy, which will provide a more structured and objective approach to financing these projects. Once completed, we will formally announce our plans, which we believe will significantly impact the market.
Could you shed light on your activities in other infrastructure segments?
Besides renewable energy, IIFCL continues to focus on a wide array of infrastructure sectors. These include roads, highways, bridges, and various forms of power and energy projects. While we have a growing emphasis on renewable sources like solar and wind, we also support waste-to-energy projects. Additionally, we are involved in funding infrastructure for airports, ports, urban sanitation, water supply systems, urban transportation, and mass rapid transit systems. Our portfolio also includes projects related to railway stations and other aspects of urban development, reflecting our comprehensive approach to infrastructure financing.
What types of infra projects does IIFCL typically finance?
IIFCL was established in 2006 to support the Public-Private Partnership (PPP) model, addressing the need for long-term financing in infrastructure development. Initially, it focused on sourcing and providing long-term funds, with multilateral organisations being a significant funding source. The primary projects financed by IIFCL included Greenfield infrastructure projects, particularly in the road sector, followed by the power sector. As time progressed, the scope expanded to include other sectors like airports, ports, and various emerging sectors. Currently, private investments are encouraged to complement public investments in these sectors, with the success of each sector depending on the momentum set by industry-specific programs and concessions.
I understand you’re also moving into the affordable housing sector. Can you provide more details about this initiative?
We are keen on entering the affordable housing market, which is considered an integral part of the infrastructure sector. Affordable housing addresses a critical need for many citizens and aligns with our broader goal of contributing to comprehensive infrastructure development. Our involvement in this sector will not only support housing needs but also stimulate economic growth and create job opportunities.
Please elaborate on the specifics of memorandum of understanding (MoU) with GuarantCo.
The MoU was signed between IIFCL and a GuarantCo—a private sector multilateral arm funded by the United Kingdom, Sweden, Switzerland, and Australia. This organisation specialises in credit enhancements, offering a range of products tailored to different stages of infrastructure projects. Our collaboration aims to introduce these credit enhancement tools to Indian infrastructure players, providing them with the necessary support to scale up projects. India is currently at a stage where infrastructure financing requires robust credit enhancement mechanisms to manage risks and attract more investment.
What are the sources of funds for IIFCL?
IIFCL sources about 40-42 per cent of its funds from multilateral organizations, which is beneficial for the infrastructure sector due to the availability of long-term funds (20-25 years) at cost-effective rates. Additionally, the organisation relies on the banking system and the bond market for financing, with all borrowings being market-oriented. IIFCL also has equity capital of approximately Rs 100 billion from the government, contributing to a net worth of around Rs 135 billion.
What are the main challenges that infrastructure developers face today and how is IIFCL addressing them?
Over the past decade, the landscape of infrastructure development has evolved significantly. Previously, infrastructure projects were mainly concentrated in areas like roads and certain power projects. However, due to a series of government reforms, we now see a more diversified approach, with public-private partnerships expanding into various sectors, including transportation, urban development, and more. Despite these advancements, challenges remain, such as the need for a tri-party agreement involving lenders and the establishment of comprehensive infrastructure laws to ensure the proper enforcement of contract provisions. The government is actively engaged in these areas, and we anticipate continued improvements in the regulatory and operational environment.
Do we have enough trained manpower or is that going to be a challenge?
As a nation develops rapidly and ambitiously, some things naturally progress ahead of time. While we have skilled workers, we need to enhance and expand these skills. This means scaling up at the university, technical, and vocational levels. More capacity building is necessary as projects become increasingly multidisciplinary. In 2006-07, major infrastructure projects were primarily focused on roads, with Rs 4-5 billion being considered a significant project size. Today, we have diversified into sectors like mass rapid transit, ports, and airports, which involve complex engineering, architectural, IT, and digital elements. The goal is to provide better facilities for greater efficiency.
With the increasing unit cost and project sizes, and the complexity of multidisciplinary issues—whether legal, financial, or technological—India needs to strengthen its capacities, particularly in its universities, to keep up. There's still much more to be done.
In your speech you mentioned about data centres. Is this an area where IIFCL is also providing funding?
We recognise the growing importance of data centres as part of the digital infrastructure landscape. We have already sanctioned several projects in this space and are looking to expand our involvement as more high-quality projects emerge. Data centres are essential for supporting the digital economy, and we are committed to financing initiatives that align with this objective.
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