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CRISIL rates India’s first NBFC infra debt fund


Infradebt, India’s first infrastructure debt fund set up as a non-banking financial company (IDF-NBFC), has received CRISIL AAA/Stable rating for its Rs5 billion debenture issue. This rating sets the stage for Infradebt, which received its license in February 2013, to raise long-term resources to lend to completed infrastructure projects. At a time when finances are difficult to come by, analysts feel, the move will enhance availability of funds for infrastructure projects through the Indian debt market.

Arvind Mayaram, secretary, department of economic affairs, ministry of finance, who was present during the handing over of the credit rating, said that infrastructure debt funds (IDFs) are going to play a key role in the financing of the overall requirements of Infrastructure funding. “We require about $1 trillion for infrastructure sector out of which 50 per cent (i.e. about $500 billion) have to come from private sector. Therefore, we have to provide multiple instruments to the private sector to raise funds,” Mayaram added.

He said that Infra debt Fund is a robust instrument for this purpose.

Pawan Agrawal, senior director, CRISIL Ratings, said, “IDF-NBFCs will benefit all stakeholders in India’s infrastructure domain. The enhanced access to long-tenure funds at lower costs will improve the equity returns to infrastructure developers. Refinancing of bank loans by IDF-NBFCs will also help release bank resources to fund new infrastructure projects.”

An IDF-NBFC is a new vehicle designed to facilitate the flow of low-cost, long-term funds from domestic and global debt investors, to capital-intensive infrastructure projects. IDF-NBFCs will provide long-term funds to operational infrastructure projects, enabling them to refinance their existing bank loans. An innovative credit enhancement mechanism will allow IDF-NBFCs to bridge the gap between the low-risk appetite of long-term debt investors and the relatively higher risks associated with infrastructure projects.

“IDF-NBFCs will also facilitate development of the bond market by providing a good investment opportunity for long-term bond investors in high-quality paper, aligned with their risk appetite and time horizon,” he added.

According to CRISIL’s definition of complexity levels, this instrument is categorised as ‘simple’.

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June 2020
10 Jun 2020