einstitute.worldbank.orgDebt Financing Support to Public-Private Partnerships in India Policy and InstrumentsAugust 26, 2014 | 9:00 AM EDTDiscussion:Shyamala Shukla, Senior Consultant, PPP Group, The World Bank Gajendra Haldea, Former Principal Advisor, Infrastructure & PPP, Planning Commission of India

APPROACH AND CONTENTS OF WEBINARPART I ( 30 minutes)oGovernment support to PPPs in IndiaoDebt financing requirementsoIntroduction to the IIFCLoChallenges in debt financingoOutline of key questions on the aboveoAnswers to key questionsPART II (10 minutes)oIntroduction to IDF and discussionPART III (20 minutes)oQ&A and concluding remarks

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GOVERNMENT SUPPORT MECHANISMS FOR PPPs IN INDIASupport Instrument Description• Bankability of Concession Framework

Non-recourse financing; termination payments; mitigation of risks; revenue shortfall loans• Grant VGF• Guaranteed offtake Offtake guaranteed in the power sector, guaranteed tonnage in grain storage projects• Land Nominal lease amount; commercial exploitation• Debt IIFCL• Others Infrastructure Debt Funds

FINANCING REQUIREMENTS FOR INFRASTRUCTURE IN INDIAResource requirements for infrastructure: US 600 billion for 2012-2017Public and Private share: 50:50 at US $ 300 billion eachPrivate sector debt requirement: more than US $ 300 billion in five years

Source: Planning Commission, Government of India, in Deloitte (2012), Indian Infrastructure – A Trillion Dollar OpportunitySource: Second Report of the High Level Committee on Financing Infrastructure, Planning Commission, Government of India

Investment in Infrastructure

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INDIA INFRASTRUCTURE FINANCE COMPANY LIMITED IIFCL was formed in 2006 for long-term debt financing of infrastructure PPPs IIFCL products:• Direct lending• Subordinated Debt Cumulative performance:

Other activities:• IIFC (UK) Limited

Product No. of Projects Amount Rs. cr Amount US $ mDirect lending 299 54,148 9,000

Extended Team

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CHALLENGES IN DEBT FINANCING Tenure of loans confined to 10-15 yearsSources of funds concentrated in state owned banksSlow down in growth of commercial bank credit•Bank sector exposure limits•Company exposure limitsBond financing –fewer issues, capital markets lack depth/volumesForeign currency borrowing – currency risk•Lack of affordable hedging mechanisms•Limits to refinancing through ECB Source: Economic Survey of India 2013-14, Chapter 11, p.209

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QUESTIONS OF FOCUSDebt financing - key features of India’s concession framework •Bankability of concession framework•Indian infrastructure market - the shortfall in debt financing•Key features of India’s concession framework - does it provide comfort to lenders? Role of IIFCL in debt financing •IIFCL’s role in debt financing•Impact during the last few years•Capital adequacy issues•Sector / company exposure issues•Direction of its debt financing portfolio

INFRASTRUCTURE DEBT FUNDS

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o Policy: RBI and SEBI in 2011o Objective: Sourcing long term debt for infrastructure projectso Potential investors: Pension/Insurance Funds and otherso Institutional set-up: NBFC or Mutual Fundo Status: 5 IDFs formed so far

Further resources on IDFs:http://rbi.org.in/scripts/NotificationUser.aspx?Id=6830&Mode=0http://www.sebi.gov.in/cms/sebi_data/boardmeeting/1360917875498-a.pdf

INFRASTRUCTURE DEBT FUNDS

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o Role of IDFso Status of IDFs that have started workingo Early results

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Questions??

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