India Infrastructure Finance Co Ltd (IIFCL) plans to appoint a consultant to advise the company on treasury operations and deployment of surplus funds, Chairman and Managing Director S S Kohli said.
The consultant will advise IIFCL on cost-effective options for raising resources, deployment of surplus funds and on alternatives for hedging foreign currency and interest rate exposure on its borrowings.
“It will take two to three months to appoint the consultant,” Kohli said.
The consultant will also offer advisory services on mark-to-market valuation of outstanding derivatives, periodic valuation of forward, option and swap and other derivative contracts, fair value of products and hedge accounting in line with Generally Accepted Accounting Principles/Institute of Chartered Accountants of India norms and International Financial Reporting Standards.
It will advise the state-owned lending institution on its rupee bond issue by suggesting an appropriate borrowing structure and market rate band. IIFCL also plans to raise $1 billion through a medium-term note issue over the next two years to fund power, road, port and airport projects.
A medium term note is a debt raising instrument that usually matures in 5-10 years. Its term may be less than one year or as long as 50 years. They can be issued on a fixed or floating coupon basis.
Recently, some Indian banks, including State Bank of India and Axis Bank, had tapped the MTN route to raise funds. Having raised Rs 10,000 crore through tax-free bonds last year, IIFCL is looking to disburse the amount from June onwards.
As part of the first fiscal stimulus package, government had authorised IIFCL to raise Rs 10,000 crore through tax-free bonds by March 31 for refinancing bank lending to public-private partnership-based highways and port projects.
IIFCL will provide refinance of up to 60 per cent loans provided by banks to these projects at 7.85 per cent interest rate. Banks will further lend the funds at 10.35-10.50 per cent.
The company was unable to disburse the amount, as the global economic meltdown forced banks not to avail the refinance facility.
Amid the meltdown blows following the collapse of Lehman Brothers, interest rates hit a high of 14-15 per cent, making lending for infrastructure projects unviable.
