State-owned India Infrastructure Finance Company Ltd (IIFCL) has identified three to four projects in the road and power sectors for conducting a feasibility study of its credit-enhancement scheme. The scheme is likely to be launched by July this year.

In the pilot phase, the company will provide guarantee of up to 50 per cent on infrastructure bonds issued by companies such as GMR group and Lanco Infratech Ltd, among others. The guarantee will enhance credit ratings of these bonds to AA or even higher, thereby attracting investments from insurance companies and pension funds. This would, in turn, create a better market for infrastructure bonds in the country.

Speaking to Business Line , Mr S K Goel, Chairman, said, “Our Board has approved the scheme and we are waiting for the Government nod for the same.”

The company is hopeful of receiving the Government nod for its credit scheme by the end of June. “Once we receive the Government's approval, we will launch the scheme by the end of July,” he said.

The infrastructure-funding institution is working with Asian Development Bank and World Bank for the scheme. “ADB has identified about four projects and we will be providing guarantee of not more than 50 per cent to the bonds issued by these companies,” he said.

ADB would reinsure to the extent of 50 per cent to the guarantee offered by IIFCL, while World Bank would provide fund support in case any liability arises, he added.

The average ticket size of the bonds to be guaranteed would be about Rs 600-1,000 crore. IIFCL plans to put in Rs 5,000 crore in its credit-enhancement business over the next twelve months.

“IIFCL will get 50 per cent of the savings that infrastructure companies will have in interest rates through bond issue. We will charge 0.75 per cent fee of the guaranteed amount. ADB will get 50 per cent of what IIFCL receives from the infrastructure companies, depending on the re-insured amount,” he said.

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