State-owned India Infrastructure Finance Company Ltd (IIFCL) plans to raise up to Rs 14,100 crore though long-term taxable and tax-free bonds. The proceeds from bond offerings would be used to finance projects across various segments of infrastructure in the country.
India Ratings and Research agency has assigned AAA rating to these bonds. It has also assigned AAA with stable outlook.
The ratings reflect Ind-Ra’s expectation of a high probability of continued timely support to IIFCL from the government of India (GoI), which wholly owns IIFCL. The GoI has extended guarantees to 76.3 per cent of IIFCL’s borrowings as at end-FY13 (year ended March).
The GoI has issued unconditional and irrevocable guarantees for IIFCL's earlier-rated debt instruments, which cover the full and timely payment of principal and all interest accrued.
The agency expects IIFCL to remain of high importance to the GoI, given its policy role of meeting the long-term financing needs of the infrastructure sector, which is a high priority for the government.
IIFCL also continues to receive capital support from the government. The government injected Rs 400 crore in FY13. The company could face challenges in maintaining its asset quality, given its unseasoned portfolio in the power and roads sectors, and the harsh operating environment for Indian infrastructure.
At FYE13, its restructured/rescheduled assets were 11.7 per cent of loans (FYE12: 5.3 per cent). Sixty-five per cent of the projects that IIFCL has funded are under-construction and thus exposed to construction/execution risks.
IIFCL’s FY13 profitability increased sharply year-on-year (return on average assets; FYE13: 3.32 per cent; FYE12: 2.25 per cent), led by its high loan growth (30 per cent year-on-year).
The profitability was also supported by low funding costs stemming from the government-guaranteed borrowings, and low operating costs.
