India Infra Fin hires banks for $500mn loan

India Infrastructure Finance , the state-owned lender that set up a fund with Blackstone Group LP and Citigroup Inc, plans to borrow $500 million from a group of banks in its first overseas loan.

The New Delhi-based company has hired BNP Paribas SA, Calyon and Standard Chartered Plc to raise the 10-year, government-guaranteed loan, said S S Kohli, chairman and managing director at India Infrastructure. It will use the funds to finance roads, airports, power plants and other infrastructure projects in the South Asian nation.

Prime Minister Manmohan Singh estimates India needs to invest $320 billion by 2012 on infrastructure to lift annual growth to 10 per cent by 2012 from 9.4 percent in the year ended March 31.

Foreign investors poured about $60 billion into China in 2006 alone, compared with an investment of about $50 billion in India since 1991, when the South Asian nation began opening its economy.

"The central bank has approved the loan plan and we expect to bring in part of the loan proceeds in about two months,'' Kohli said in interviews June 1 and today.

The loan is part of a Rs 100 billion ($2.5 billion) program to raise funds in India and overseas. The company is talking to multilateral lenders such as the World Bank, Kohli said without elaborating. It has sanctioned as much as Rs 92.4 billion to finance 47 projects, according to its website.

India Infrastructure signed an agreement in February with New York-based Citigroup, Blackstone and Mumbai-based Infrastructure Development Finance Co. to start a $5 billion fund to build roads, ports and other utilities. The fund will invest $2 billion in equity and the remainder in debt.

"We decided to raise an overseas loan because of the cost advantage on such funds," Kohli said. "We may return to the overseas loan market if conditions are found favorable."

Rising domestic interest rates make it more attractive for Indian companies to borrow funds abroad. India's central bank has increased borrowing costs nine times since October 2004 to curb inflation stoked by economic growth. The bank on March 30 raised its overnight lending rate to a 4 1/2-year high of 7.75 percent.