IIFCL loan book signals slowdown

The company has no funding proposal at present; fund mobilisation is also sluggish.

In line with the rest of the economy, the infrastructure sector has been witnessing a "slowdown" in the last three months.

This can be seen in the sharp decline in the number of projects seeking funding by India Infrastructure Finance Company Ltd (IIFCL), floated by the government to provide long-term funds to the infrastructure sector.

"We have seen a slowdown since January. As of now, we don't have any project awaiting approval," said IIFCL Chairman and Managing Director Surinder Singh Kohli.

Earlier, the company used to have half-a-dozen or more projects under vetting at any time.

Other infrastructure financing companies are yet to report a slowdown though there is an expectation of a low growth over the next 12 months "relative to the torrid pace of growth seen over the previous year".

While the demand for funds is sluggish "" despite the estimated $500 billion India requires for infrastructure development by 2012 "" there has been a slowdown in mobilisation of funds for lending. For instance, the $5-billion Indian Infrastructure Initiative that IIFCL was involved in is yet to see some progress.

The initiative had two components "" a debt fund of $3 billion and an equity fund of $2 billion backed by the likes of Infrastructure Development Finance Company (IDFC), Citigroup and Blackstone.

The debt fund has been hit by the restrictions on external commercial borrowings announced by the Reserve Bank of India (RBI) last year to curb capital inflows while the sub-prime crisis has taken its toll on the promoters of the equity fund like Citigroup. IIFCL has committed $25 million to the equity fund.

One of the promoters of the equity fund that Business Standard contacted, however, said the fund was planned as two sequential equity funds of $1 billion each and "the first of these two is very much on track". There is, however, no indication of when this fund will be closed.

Meanwhile, the company is set to kick off the operations of its London subsidiary as part of a plan to leverage $5 billion of India's forex reserves of over $300 billion for infrastructure funding. This capital will be disbursed by the RBI in 20 tranches of $250 million each.

IIFCL is on track to meet the targeted loan disbursements and loan sanctions for the 2007-08 fiscal year, says Kohli. The company is set to close the year with loan approvals of about Rs 17,000 crore spread over 70 projects, with disbursed loans of about Rs 1,300 crore.