Channel: Companies

16 April, 2010
Indian financial services industry in the UK
Spotlight on India Infrastructure Finance Company Ltd.
 
 
There aren’t many institutions of this kind that have a presence in a country other than its home market. The India Infrastructure Finance Company (UK) Ltd, a wholly owned subsidiary of the parent with the same name in India, was set up in the UK in the February 2008 to provide a USD denominated loans to fulfill the overseas borrowing/expenditure needs of Indian companies that are developing major infrastructure projects in India.
 
The company was set up with an authorised capital of USD 500 million supported fully by the Reserve Bank of India (central bank). Since inception the parent company in India has financed USD 3.74bn to 88 projects. The total project cost of these projects is in excess of USD 29.4bn.
 
IIFC will play a crucial role in the development of infrastructure sector in India says, Dr. N.K. Madan, the CEO of the UK entity. The fact that the finance requirement of these projects is large and that they will all have a foreign exchange expenditure component to it is the main reason why IIFC in the UK was set up. The Government has been quick in making a decision to set up this entity. The announcement was made in the 2007-08 budget of the Government of India and by February 2008 we had a complete set up in the UK with authorisation from the Financial Services Authority (FSA).
 
At the core of this facility lies the belief that:
a. There is a significant infrastructure deficit in India
b. The development of such projects require facilities with long tenures than are generally available from the financial institutions
c. There is an absence of benchmark rates for raising long term debt from the market
d. Institutions are unable to lend because of the asset-liability mismatch such lending would create on their books
e. Such debt could come at a high cost
 
IIFCL is also raising additional capital from the markets in form of local currency bonds with maturity of 10 yrs and above; through multilateral institutions and foreign currency debt through external commercial borrowings.
 
Currently IIFCL is only able to fund projects in the following sectors:
i] Road and bridges, railways, seaports, airports, inland waterways and other transportation projects;
[ii] Power;
[iii] Urban transport, water supply, sewage, solid waste management and other physical infrastructure in urban areas;
[iv]. Gas pipelines;
[v]. Infrastructure projects in special Economic Zones; and
[vi]. International convention centres and other tourism infrastructure projects.
 
The preference is given to projects being developed by public sector companies or to private companies that are developing won through competitive bidding in the public-private-partnership (PPP) model.
 
For more information on how IIFCL could be of help or other lending criteria you may visit:
IIFCL (in the UK):  http://iifc.org.uk and IIFCL in India: www.iifcl.org.

 

 

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