IIFCL, a wholly-owned Government of India company, was set up in 2006 to provide long-term financial assistance to commercially viable infrastructure projects primarily developed through Public-Private Partnership (PPP) through the Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle called India Infrastructure Finance Company Ltd. (IIFCL), broadly referred to as SIFTI. Since September 2013, IIFCL has been registered with the Reserve Bank of India (RBI) as an NBFC-ND-IFC.
As a long-term lending institution, IIFCL is amongst the most diversified public sector infrastructure lender in terms of eligible infrastructure sub-sectors and product offerings. It has the mandate to finance both greenfield and brownfield projects, through various products like Direct Lending, Subordinate Debt, Takeout Finance, Refinance, Credit Enhancement Guarantee, InvITs
and Bonds, across all infrastructure sub-sectors as notified by the Government in the harmonized Master List of Infrastructure sub-sectors. These broadly include transportation, energy, water, sanitation, communication and social & commercial infrastructure.
In May 2019 and March 2020 the Government of India has infused equity of Rs. 500 Crore and Rs. 5,298 Crore respectively in IIFCL. As a result, on 31st March 2022, IIFCL’s authorized and paid-up capital stood at Rs.10,000 Crore and Rs.9,999.92 Crore respectively.
IIFCL has been working on its vision to provide innovative financing solutions to promote and develop world-class infrastructure in India.
The company’s mission has been to adopt best practices in financing infrastructure, develop core competencies in facilitating infrastructure development and develop a team of highly engaged employees to deliver services in a professional manner and to the satisfaction of all stakeholders.
IIFCL has been offering its financial support to the infrastructure sector through the following products/services:
Senior Debt: As part of a consortium, IIFCL provides long-term funds to commercially viable infrastructure projects, taking an exposure of up to 20% of Total Project Cost (including Subordinate Debt, if any). IIFCL accords an overriding priority for lending under this Scheme to Public-Private Partnership (PPP) projects that are implemented by Private Sector Companies selected through a competitive bidding process.
Subordinate Debt: IIFCL provides subordinate debt up to 10% of the project cost (as part of its exposure of up to 20% of Total Project Cost). This is an unsecured debt and is typically treated as Quasi-Equity by lenders.
The Takeout Finance Scheme of IIFCL is aimed at addressing the Asset Liability Mismatch (ALM) and exposure constraints faced by banks by providing capital relief to the banks. This helps banks to free up their funds for investing in new infrastructure projects. Under this scheme, IIFCL can lend up to 30% of Total Project Cost (including Direct Lending). Disbursement in case of Takeout Finance generally takes place one year after the actual Commercial Operation Date (COD).
Under the Credit Enhancement Scheme, IIFCL provides partial credit guarantee to enhance the credit rating of bonds issued by infrastructure companies to AA or higher for refinancing of existing loans through capital markets. IIFCL can undertake Credit Enhancement to the extent of 20% of Total Project Cost (40% of Total Project Cost with backstop guarantor) subject to a maximum of 50% of the total amount of Bond Issue. Credit Enhancement enables channelization of long term funds from investors like insurance and pension funds in such bonds.
IIFCL became the first organization to successfully operationalize the Credit Enhancement Scheme in 2015-16.
IIFCL provides refinance to banks and other eligible Financial Institutions (FIs) for their loans to infrastructure projects.
IIFCL has been at the forefront of providing innovative financing solutions for the infrastructure sector and has widened its scope by including investment into infrastructure project bonds as part of its mandate. Through this, investment is mainly made in AAA and AA rated infrastructure bonds and the main objective is to promote the long term infrastructure debt markets in the country.
In addition, IIFCL has also expanded its product mix to include Infrastructure Investment Trusts(InvITs).
So far, IIFCL has sanctioned nearly 650 projects with a total project outlay of Rs 11.30 Lakh Crore. It includes about 500 PPP projects, which is nearly 28% of India’s PPP projects. It is involved in providing financial assistance to the development of about 29,000 Kms. of Roads (~17% of India’s
NH Capacity) and is the largest lender to HAM Projects with sanctions of ~Rs. 12,000 Crore to 70 Projects of NHAI.
In the energy space, IIFCL’s financial support has enabled the development of ~65 GW of installedcapacity, which is ~17% of India’s installed capacity. In the ports sector, IIFCL has supported thedevelopment of ~800 MTPA of capacity, which is roughly 52% of India’s Major Port Capacity.Overall, the Company has provided financial assistance to projects with a potential to create over1.5 crore direct and indirect jobs. Majority of IIFCL’s projects are in rural areas that helps inboosting rural economy and leads to employment generation.
IIFCL’s sanctions and disbursements in FY22 surpassed that of previous years’ high record and reached Rs. 25,120 Crore and Rs. 10,455 Crore, with a YoY growth of 20% and 10%, respectively. IIFCL’s asset quality has improved significantly over last two years, with Net Non-Performing Assets and Gross Non-Performing Assets ratios falling to ~3.65% and ~9.22% as on March 2022, from 9.75% and 19.70% as on March 2020. Provision Coverage Ratio also increased to ~62.75% from 61.24% over the same period. IIFCL’s net worth has improved significantly to Rs. 11,737 Crore from Rs. 10,306 Crore over this period.
IIFCL has always been an advocate of innovative financial products to cater to the huge funding requirements of the infrastructure sector. Taking its developmental role further, IIFCL has for the first time ever, ventured into investment in Infrastructure Bonds issued by project companies. IIFCL has invested roughly Rs. 975 Crore in Project Bonds, which include Rs. 325 Crore of bonds issued by a renewable energy InvIT. During 2022-23, IIFCL plans to significantly increase its investments in Bonds and InvITs.This would not only lead to further improvement in IIFCL’s asset quality, but also boost the availability of longer-tenor debt finance for infrastructure projects. IIFCL is also eyeing lending opportunities to Infrastructure Investment Trust (InvIT) this year and aims to further strengthen its balance sheet and improve asset quality.
In view of advancement in technologies that allow real-time or near real-time monitoring of projects, it is imperative to leverage the services of Lender’s Independent Engineers (LIE) that physically tracks project performance along with an Online Project Monitoring System (OPMS) that uses Drones & GIS technologies etc. to monitor the progress of projects on real time basis. To strengthen the monitoring and surveillance systems through digitalization, IIFCL has become India’s first lender to have introduced an Online Project Monitoring System (OPMS). It is the first of its kind in India for real-time project monitoring during the construction phase.
IIFCL has introduced this system as an effective tool for ensuring progress-linked disbursement in infrastructure projects. This will mitigate the limitations faced by the extant monitoring process and bring about a paradigm shift in the way project monitoring is being done by lenders presently.
IIFCL has been working on bringing in a market-oriented dynamism in all its activities. This process will be conducted alongside an improved credit policy, segmented risk-based pricing,
enhanced efforts for recovery and active treasury management and digitalization of monitoring of projects for ensuring progress linked to disbursements in projects.
IIFCL aims to increase its Takeout Finance portfolio going forward with an objective to leverage the expected surge in operational projects. Apart from this, IIFCL plans to significantly increase its investments in Bonds and InvITs. Moreover, IIFCL aims to offer products at competitive rates and raise funds through domestic borrowings and Bilateral/Multilateral Institutions.
IIFCL intends to lend to new and upcoming sectors and contribute positively to the Government of India’s initiative as spelled under National Infrastructure Pipeline (NIP), National Monetisation Plan (NMP) and Gati Shakti.
With his rich experience of around 35 years in Development Banking and Financial domains, Mr. P. R. Jaishankar is presently serving as the Managing Director of IIFCL and is the Chairman of IIFC (UK) Ltd, IIFCL Asset Management Company Ltd (IAMCL) and IIFCL Projects Ltd (IPL).
Before his current position, Mr. Jaishankar has held various key positions such as Executive Director of National Housing Bank, Director & CEO of IIFCL Projects Ltd. (IPL), Chairman (Board of Trustees) of IAMCL, and Director of the India Mortgage Guarantee Company (JV of NHB, Genworth, IFC and ADB)
He has been actively engaged in assisting the Government in its various Committees on sectoral policies, which includes leading the initiative for the First Dedicated Credit Enhancement Company for the infrastructure sector. He has been a member of the Project Finance Group of the Inter Ministerial Steering Committee (IMSC) for financing of infrastructure investment under the National Infrastructure Pipeline (NIP) announced by the Government of India. He is also a member of the Managing Committee of the Indian Banking Association (IBA). He structured the first ever Mortgage Securitisation transaction in India along with a number of other structured financial solutions such as Credit Enhancement, Takeout Finance and Reverse Mortgages.
Mr. Jaishankar holds a Master's degree in Technology from IIT, Delhi and is an MBA (Finance) from FMS, Delhi University.