IIFCL to more than double bond purchases in FY23

MUMBAI: The India Infrastructure Finance Company (IIFCL) is set to more than double its investments in bonds and investment trusts as new projects, such as roads, smaller ports and airports, are bid out for construction next fiscal.

The state-backed infrastructure financing company invested about Rs 1,000 crore in bonds and Rs 325 crore in infrastructure investment trusts (InvITs) so far this year for the first time.

“We expect to see a quantum jump in our bond investments next fiscal year,” said P R Jaishankar, managing director, India Infrastructure Finance Company (IIFCL). “We are strategically working toward fine-tuning our business model that promotes focused investments in bonds and InvITs in addition to the existing product lines such as direct lending or takeout finance.”

The Reserve Bank of India (RBI) permitted IIFCL to invest in bonds and infrastructure trusts in October last year. Accordingly, IIFCL has begun to invest in those instruments from January this year.

So far, it did not invest beyond the triple-A category, the top grade. During 2022-23, the company expects bond investments to at least double. IIFCL can invest in the coming years in bonds rated above AA.

Jaishankar declined to comment on individual investment plans.

PowerGrid Corporation formed the largest chunk in the bond portfolio, at Rs 500 crore, with PNC Infratech obtaining about Rs 150 crore in subscriptions from the infra financing giant.

IIFCL also invested Rs 325 crore in the bonds sold by KKR-controlled InvIT Virescent Renewable Energy Trust.

“We are seeking to promote very long term bonds in line with global standards,” said Jaishankar.

Earlier, the company used to lend directly to projects via loans. The organisation will continue to be engaged in credit enhancement, which is a cushioning factor that helps special purpose vehicles to improve credit ratings of a project, thereby promoting access to the bond market.

IIFCL aims to emerge as a credible long-term institutional debt investor, in addition to Employees’ Provident Fund Organisation (EPFO) or LIC of India. Although it has a long way to go to match the mammoth corpus of those two top domestic institutional investors, it has made a beginning as a dedicated investor for a capital-starved country that has a huge infrastructure funding requirements.

“IIFCL began to invest in different infra bonds, which in turn makes space for borrowers and helps in market making,” said a senior debt market executive at a private bank.

The state-backed organisation has an outstanding borrowing of about Rs 38,000 crore, of which, it tapped around 41 percent funding from multilateral or supranational institutions, and around 50 percent through domestic bonds.

Banks, according to Jaishankar, are good at assessing greenfield projects. So they can fund them until a project is commissioned.

“Thereafter, the funding can be raised through bonds, where we can invest,” he said.