Industrial Development Bank of India (IDBI) has disbursed Rs 160 crore in loans to Tata Communications, the cellular licensee in Andhra Pradesh. The advance is structured as a `bridge facility' till the time the cellular company is able to convert it into a long-term loan. The IDBI disbursement is part of the company's fund-raising exercise in the southern circle.
In January, the Tata company had closed a $110 million (around Rs 400 crore) debt deal. The $70 million foreign component of the loan was raised without recourse to the promoters (Tatas and Bell Canada) and was priced at 187.5 basis points above Libor (London inter-bank offered rate). The deal, arranged by Bank of America and Toronto Dominion, was the first in which an Indian financial institution has a significant exposure.
ICICI and IDBI have together sanctioned about Rs 14,000 crore in loans to projects in power, telecom and ports sectors.
In September, a senior IDBI executive had said, "About one-third of our total sanctions are going into infrastructure. Of the Rs 5,780 crore loans approved in the first quarter this year, about Rs 1,900 crore was given to infrastructure." This trend continued into the second quarter.
Most of this, however, has been extended to power projects. The exposure to power has increased to 11-12 per cent of the FI's total assets. Given that IDBI has a total asset base of around Rs 60,000 crore, the 15 per cent sectoral cap on lending (prescribed by the Reserve Bank) leaves it just Rs 1,800- 2,400 crore to extend to the power sector.
Therefore, the FI is pitching for a hike in the 15 per cent sectoral cap governing FI term-lending advances. Under the exposure cap that limits FI and bank lending to various sectors, the financial intermediaries are not allowed to lend more than 15 per cent of their assets to any particular sector.
On the other hand, the constraints imposed by the sectoral cap have not yet become a problem for other FIs. Sources in Industrial Finance Corporation of India say the FI's exposure is "nowhere near the cap" and it has sufficient comfort before reaching the limit. ICICI has lent 6-7 per cent to power projects, according to an estimate made earlier this year.
IDBI has been active in picking up infrastructure bonds floated by telecom service companies. Such bonds are eligible for tax breaks under Section 10 (23g) of the Income Tax Act. Last year, Reliance Telecom had placed a significant chunk of its Rs 600 crore bond issue with IDBI.
Under the section, income by way of dividend, interest and long-term capital gains from investments in infrastructure projects in sectors like power, telecom, surface transport and urban infrastructure are exempt from paying tax.
