Money & Banking

IL&FS in talks with two Chinese banks for direct funding 

K. R. Srivats Mamuni Das New Delhi | Updated on January 24, 2018 Published on July 09, 2015

Infrastructure lender IL&FS Financial Services is in talks with two Chinese banks to, among other things, obtain direct financial support for the $ 3 billion power project being co-developed at Kutch in Gujarat by the IL&FS Group and China Huaneng Group, one of the top State-owned power producers.

The capital structure for the Kutch power project will be somewhat unique in the sense that IL&FS will count the about 3,000 acres that it will provide as equity contribution to the project, Ramesh Bawa, CEO, IL&FS, told BusinessLine.

For debt financing of this power project, support from these two Chinese banks would be relied upon, he said while declining to name the banks as talks are still on.

If the partnership with these two Chinese banks takes off, the Kutch power project will be the first instance of direct funding support from China coming to a thermal-based power project in India.

The latest attempt to enter into pacts with the two Chinese banks is in addition to the $1 billion financing commitment received recently from the Industrial and Commercial Bank of China (ICBC) to refinance infrastructure projects supported by the IL&FS group.

This comes at a time when IL&FS has taken a strategic decision to rely mainly on foreign markets to raise funds. This plan is being pursued as most Indian banks have met their exposure limits to infrastructure.

On the recent $1 billion tie-up with ICBC Bank, which is the largest bank, to refinance projects, Bawa said both the partners have begun operationalising the memorandum of understanding. “One sanction of $50 million is already there. Right now, we are processing proposals to refinance $400-500 million worth of projects,” he said. The $50 million is likely to be used for an IL&FS Transportation Networks Limited project.

IL&FS is not worried about the location if it gets the right transaction. “If you see our costs, we are the first infrastructure company that acquired a company in China—Chongqing . And it’s making profits as well,” said Bawa.

On whether they will use Chinese equipment in the project with China Huaneng, Bawa said, “Frankly, we don’t have anything against Chinese contractors. You will find more EPC contractors on the power sector than the road sector.” Equipment would be sourced only through international bidding, according to Bawa.

Bawa also highlighted that IL&FS had built a different kind of confidence in the China market and was the first corporate in last three years to have raised funds in China market through CNH bond issues (offshore Renminbi bond market or dim sum market).

IL&FS also has a power portfolio of 13,000 mega watt, of which 50 per cent projects are at construction stage, some are commencing.

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Published on July 09, 2015
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