New Delhi: The Asian Development Bank (ADB) will provide partial guarantees to rupee-denominated bonds issued by Indian companies, a move that will facilitate investment by insurance and pension funds in the infrastructure sector.
The $128 million bond guarantee facility, developed jointly with the India Infrastructure Finance Co. Ltd, will help improve the rating of infrastructure projects and help infrastructure companies replace expensive bank funding with cheaper sources of finance.
Most infrastructure projects are currently rated at around BBB-. An ADB guarantee will encourage investment by pension and insurance funds that were unable to invest until now due to low credit ratings.
The GMR Group’s bond offer will be the first to benefit from the credit guarantee. The 12.5-year bond, expected to hit the market soon, could refinance the Rs.320 crore of bank loans that the group has.