The Hindu Business Line : New initiative launched in infrastructure financing

Action plan
The plan is to deploy about $2 billion in equity capital.
About $3 billion in long term debt financing with maturities exceeding 10 years.

New Delhi, Feb. 15

NEW INITIATIVE: The Finance Minister, Mr P. Chidambaram, with (from left) Mr Sanjay Nayar, CEO, Citi Group-Inc, Mr S. S. Kohli, CMD, IIFCL, Mr Deepak Parekh, Chairman, IDFC, and Dr Rajiv B. Lall, MD & CEO, IDFC, during the signing ceremony to launch `The India infrastructure financing initiative', in the Capital on Thursday. — Ramesh Sharma

Infrastructure Development Finance Company Ltd (IDFC), Citi Group Inc, India Infrastructure Finance Company Ltd (IIFCL) and Blackstone Group have come together to launch `the India infrastructure financing initiative.'

This is a collaborative effort to deploy about $5 billion in capital for infrastructure projects within the country. The plan is to deploy about $2 billion in equity capital and $3 billion in long term debt financing with maturities exceeding 10 years. The equity-financing programme would be managed by IDFC and would invest in green field and brown field operating projects primarily in roads, power, airports, ports and industrial and commercial infrastructure.

IDFC, Citi and Blackstone would together invest $250 million, while the balance is to come from reputable international investors as well as selected domestic institutional investors, including IIFCL. The debt financing would be channelled through IIFCL in several tranches over the next three years for projects appraised by IDFC and also certain banks/financial intermediaries.

The agreement was signed by Dr Rajiv B. Lall from IDFC, Mr Sanjay Nayar from Citi, Mr S.S. Kohli from IIFCL and Mr Robert L. Friedman from Blackstone.

New benchmark

The Finance Minister, Mr P. Chidambaram, in whose presence the signing ceremony was conducted, said the initiative was an important milestone in thesearch for innovative solutions to meet the vast challenge of financing the development of India's burgeoning infrastructure sector.

The IDFC Chairman, Mr Deepak Parekh, said the initiative stemmed from the India-US CEO forum. It had set a new benchmark for collaboration between domestic partners such as IDFC, foreign financial institutions and the Government of India to solve India's infrastructure financing problems.

Later, Mr Nayar told presspersons that Citi's contribution in the equity pie was likely to be as high as 10 per cent of the overall equity fund.

The debt fund of $3 billion would be drawn by IIFCL over three years in several tranches. The equity component of $2 billion (which includes $1 billion of quasi-equity) would be raised over 18 months. Mr Lall later told newspersons that most of the equity would be raised from abroad and the process was expected to be launched within the next two weeks.

It was also indicated that the debt portion would be utilised for capital good equipment imports. "This initiative will enable entrepreneurs from India to access funds required for implementing large infrastructure projects, especially those in the power sector," said Mr Parekh.

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