 "IDFC to slash stake in infra debt fund to 49%")
Infrastructure finance company IDFC Ltd is planning to cut stake in IDFC Infrastructure Debt Fund (IIDF), its wholly-owned subsidiary, to 49 per cent. Sources said IDFC was in talks with foreign investors in this regard.
IDFC, which is set to turn into a bank in October next year, has to cut its stake in IIDF to 49 per cent in a year to meet regulatory requirements.
IIDF is raising Rs 1,500 crore through non-convertible debentures (NCDs) to buy out loans to road projects. Icra has assigned the proposed debenture offering an ‘AAA’ rating, with a stable outlook.
According to Reserve Bank of India (RBI) norms, an IDF, formed under a non-banking financial company (NBFC) structure, should only invest in debt securities of public-private partnership infrastructure projects that have completed at least a year of commercial operations.
Currently, IIDF is focusing on road projects backed by the National Highways Authority of India (NHAI). It is planned assets worth Rs 800-1,000 crore will be transferred from IDFC’s balance sheet to IIDF in three-six months.
Icra’s rating of IIDF’s NCDs factors in the comfortable liquidity position in the medium term, as RBI norms state an IDF-NBFC can raise funds by issuing bonds of a maturity period of at least five years. As the investment is in projects completing at least a year of commercial operations, the repayment is likely to start immediately.
Icra said as the income of an IDF-NBFC was exempt from tax, it could park excess funds in fixed deposits or liquid mutual funds and get acceptable returns.
IDFC, which is set to turn into a bank in October next year, has to cut its stake in IIDF to 49 per cent in a year to meet regulatory requirements.
IIDF is raising Rs 1,500 crore through non-convertible debentures (NCDs) to buy out loans to road projects. Icra has assigned the proposed debenture offering an ‘AAA’ rating, with a stable outlook.
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The role of infrastructure debt funds (IDFs) has become increasingly important, as banks are finding it difficult to have additional exposure to infrastructure projects. They are also staring at asset-liability mismatches, as deposits used to finance projects are short-duration ones but loan repayments are spread over long periods.
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According to Reserve Bank of India (RBI) norms, an IDF, formed under a non-banking financial company (NBFC) structure, should only invest in debt securities of public-private partnership infrastructure projects that have completed at least a year of commercial operations.
Currently, IIDF is focusing on road projects backed by the National Highways Authority of India (NHAI). It is planned assets worth Rs 800-1,000 crore will be transferred from IDFC’s balance sheet to IIDF in three-six months.
Icra’s rating of IIDF’s NCDs factors in the comfortable liquidity position in the medium term, as RBI norms state an IDF-NBFC can raise funds by issuing bonds of a maturity period of at least five years. As the investment is in projects completing at least a year of commercial operations, the repayment is likely to start immediately.
Icra said as the income of an IDF-NBFC was exempt from tax, it could park excess funds in fixed deposits or liquid mutual funds and get acceptable returns.