The Japan Bank for International Cooperation (JBIC) is looking at providing equity funding to private sector projects in India instead of debt support for public sector entities.
The principal Japanese overseas funding agency is also shifting its focus on the Indian market from China following political tensions with its Asian neighbour.
“We are going to shift our investment or finance from debt to equity. We will raise the percentage share of equity investment… it takes time to have enough funds to pay back debt. Equity investment will help upgrade cash flow generated from a project,” Tadashi Maeda, JBIC head of corporate planning and special advisor to the Japanese cabinet, told Business Standard.
JBIC, which has already set up a special fund for projects in the Delhi Mumbai Industrial Corridor (DMIC), also plans to create a green investment fund not limited to India but mainly for India, with other partners such as the International Finance Corporation, the World Bank’s private lending arm.
“The fund will mainly target India and South East Asia. It will start with a corpus of roughly $200-300 million. Renewable energy will be part of it but it will not be restricted to renewable,” said Maeda who was here to attend a one-day Global Eco-Business Forum in India.
India has been a recipient of Japanese overseas development assistance. “Now India is going up in terms of income and, therefore, the Indian market will also be shifting from a recipient of public funds to more private-public partnership type so that our major target will not be on public sector but private sector. It is a normal trend,” said Maeda.
In 2011-12, JBIC plans to increase the equity investment portion to $2 billion from $200 million. Maeda said though the amount to be allocated to India was not finalised, the country is potentially the second-largest market for Japanese investment, after China.
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“There have been some tensions with China and we expect that some investment will be shifted from China to other countries, probably to India,” he added.
As part of its strategy for India, JBIC wanted to promote export of clean technology and energy-efficient infrastructure. It has already committed to exporting technology to DMIC and creating an eco-city, a new concept of urban development under which green technology and energy management devices are installed through smart grids and smart housing.
Maeda also hinted at investment in joint ventures between Indian and Japanese companies besides providing debt support through credit lines to local banks such as ICICI. “We are now looking at new growth strategy by high riding exports energy efficient systems — high-speed railways, nuclear power plants, coal to liquid, carbon capture sequestration, cogeneration projects.”
On cooperation in the nuclear sector, Maeda said Japan had a strict clause on non-proliferation. “Therefore, some of the government officials are reluctant to take the bold step to transfer technology to a country which is not member of the Nuclear Non-Proliferation Treaty but now the US and Europe are going ahead and therefore, we have set a dialogue.”
The Japanese government had launched negotiations with India and they wanted to speed up this negotiation. Japanese export to India would be through US alliance. “Probably, we will need alliance with US companies for investment because of proliferation and security reasons.”