Infrastructure firms seek cheaper funds

Infrastructure firms seek cheaper funds
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First Published: Fri, Jul 03 2009. 11 40 AM IST
Updated: Fri, Jul 03 2009. 11 40 AM IST
Mumbai: Indian infrastructure firms are looking towards the government for increased spending on the sector and opening up routes to access cheaper long-term funds when the finance minister Pranab Mukherjee presents the budget on 6 July.
The economic slowdown has weighed on growth in the sector and firms say lenders are unwilling to fund projects which are needed to improve the country’s creaky infrastructure and help buoy long-term growth in Asia’s third-largest economy.
“The need of the hour is cheaper long-term funds,” Anuj Nautiyal, chief executive of BNP Paribas Real Estate India, said.
“Indian financial institutes have a 5-6 years funding horizon and by that time only 60-70% of the project is done and the infrastructure company needs to restructure finances in the middle of the project.”
India needs $500 billion of investment into its roads, railways, ports and airports in the five years to 2012, the government has estimated. About $150 billion of that was to have come from the private sector.
“Public initiatives are constrained by factors like inadequate shelf of bankable projects and shortage of long-term finance for projects,” the government’s Economic Survey for 2008-09, said on Thursday.
Measures to facilitate public-private partnership investments will figure in the budget, Angel Broking said in its preview, “otherwise execution will prove to be a damp squib.”
The Economic Survey, which also makes policy recommendations, however, said finance availability was only one of the conditions for investment.
The survey pointed out that project delays were also caused by land acquisition issues, lack of raw materials and other inputs.
Enablers for infrastructure finance companies to raise cheaper funds will be looked for too, industry watchers said.
Angel Broking said it expected private non-banking financial companies (NBFCs) to tap funds from the India Infrastructure Finance Corp Ltd, which has been mandated to raise and lend to banks Rs400 billion for infrastructure projects.
“Also, some relaxation is expected in allowing NBFCs to borrow from abroad to finance the local projects,” the brokerage said in a note to clients.
Construction companies such as Larsen & Toubro, IRB Infrastructure Developers and Hindustan Construction Co Ltd are also looking for tax breaks on interest earned on infrastructure loans.
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First Published: Fri, Jul 03 2009. 11 40 AM IST