IL&FS Financial Services Limited (IFIN), the investment banking arm of IL&FS Group, one of India’s largest infrastructure development and finance companies, is planning to further increase diversification in the overseas markets and reduce its dependence on domestic lenders.

“My plan this financial year is to achieve a target of $500 million, including masala bonds, masala loans, ECBs,” Ramesh Bawa, MD and CEO of IL&FS Financial Services said in the interview with BusinessLine .

As the infrastructure sector is passing through difficult times with the pace of investments being slow, IL&FS focus has shifted towards foreign lenders, whose perception of India has been improving overall, Bawa notes. In the past two years, IL&FS has raised funds from China, Japan, Australia, South Korea and the UK, Bawa said, with largest borrowing so far being the $1 billion arrangement from the Industrial and Commercial Bank of China.

IL&FS has raised several rupee-denominated, or masala loans, starting with $50 million loan from Export Development Canada (EDC) secured under the Rupee ECB facility, followed by $30 million from Mauritius-based AfrAsia Bank Ltd and SBM (Mauritius) Bank Ltd .

“Another 2-3 proposals are under consideration which we should be able to close shortly,” Bawa said, adding IL&FS pioneered the concept of raising rupee-denominated loans from foreign banks.

Having a tenure of three years with an interest rate of around 8.65-8.7 per cent, masala loans eliminate currency risk and allow deploying money without having to convert it into the local currency.

Reducing debt

However, the funds IL&FS is able to raise overseas are not enough to meet the company’s existing requirement.

“So we are trying various domestic initiatives like Infrastructure Investment Trust (InvIT), masala bonds, domestic bonds. We are trying to raise the money in different way then raising the money from the banks”.

The main focus for the company, in the current financial year, remains reducing the group’s debt estimated at around ₹70,000 crore, both by divestment and refinancing. According to Bawa, the company should be able to reduce 10-15 per cent by refinancing.

One of the exercises to achieve this target will be raising up to $300-400 million through Infrastructure Investment Trust (InvIT). The company is still exploring options on whether it will be a private sale of units or a public issue, however, it will be a single issue (earlier, IL&FS Transportation, the road development arm of the group, was planning to launch a ₹4,200-crore InvIT).

“ To begin with, we are putting only four-five matured assets. But ours will not be a one-time exercise, but a continuous one, where we keep on adding assets,” Bawa said. He added despite the delay, there is no question of going back and IL&FS should complete the transaction in July.

“We were supposed to be in the market around this time, but one thing which I’m not able to hide is the performance of the first players that had come to the market has not been very encouraging,” Bawa said. According to him, the global investors are a bit discouraged looking at the performance of the two-three issues which have come in the market and are available at discount.

IL&FS is among several infrastructure players that have been planning to use InvIT route to deleverage. Two trusts that got recently listed on the bourses, namely IRB InvIT promoted by IRB Infrastructure Developers and India Grid Trust sponsored by Sterlite Power Grid Ventures, are currently trading below their issue prices raising doubts about the instrument among both infrastructure players and investors.

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