India Infrastructure Finance Company (IIFCL) has kicked off work on a $1 billion (Rs 4,600 crore) medium term note programme to raise resources for funding power, road, port and airport projects.
The New Delhi-based financial institution was in the process of appointing legal counsels for setting up the programme, said sources close to the development.
The funds are expected to be raised in two tranches of $500 million (Rs 2,300 crore) each, though the details and the timing are yet to be worked out.
While State Bank of India, ICICI Bank and Axis Bank recently raised funds as part of the MTN programme, Bank of Baroda postponed its plans of a bond issue as spreads widened. The cost of borrowing depends on the prevailing rate in the London inter-bank offered rate (Libor), the global benchmark rate, and the spreads. The spreads, which reflect the risk perception, had widened in the wake of fears of fresh defaults in Europe. Bank of India is also in the process of raising funds through overseas bond issues.
Over the last few months, SBI, the country’s largest lender, has raised $850 million (Rs 3,910 crore) through fixed-rate senior notes under the MTN programme. In the first tranche of $750 million (Rs 3,450 crore), the coupon rate was 4.50 per cent. These bonds, which kicked off interest among other players, have a maturity of five years. ICICI Bank, too raised $750 million (Rs 3,450 crore) in November through a bond issue that was primarily used for repayment of bond maturity earlier in the month.
Sources said that IIFCL was not in a hurry to launch its MTN programme as it had sufficient resources at its disposal including the Rs 10,000 crore for refinance and funds raised from multilateral institutions such as World Bank and Asian Development Bank.
Last month, the financial institution tied up $2.4 billion (Rs 11,040 crore) from the two agencies. During the last financial year, the company had disbursed Rs 3,200 crore to various projects and had also doubled its target for 2009-10.