With India witnessing a bulk flow of capital into the infrastructure space, panellists at the VCCircle Limited Partners Summit 2022 have pointed out that the country now needs more of a long term equity capital investment.
The panel comprised Pawan K. Kumar (IRS), Deputy Managing Director, India Infrastructure Finance Co. Ltd (IIFCL); Milind Joshi, India Partner, Global Infrastructure Partners, and Gaurav Kapoor, Head Capital at the British High Commission.
Currently, while India has long term capital available as compared to other emerging markets through banks and specialised financial institutions, but in terms of longer equity capital there are no long-term providers of capital like pension, insurance or sovereign wealth funds and it is one of the challenges in infrastructure space, Joshi said.
“Insurance and pension funds in India could also look at the sector and regulators can allow them to put more money as equity. But given the overall pace that we have seen over the last years is such that we need it's just a matter of time before the space attracts more domestic capital,” he added.
Government-owned IIFCL, Kumar said, will invest around Rs 2,500 crore in the form of debt and bonds. While it is also working closely with several international funds to deploy this capital.
“The investors whether it is domestic or international are driven by risk and reward ratio but the point is being a government institution, our focus has been being conservative in terms of the returns but more aggressive in terms of the developmental nature of the projects.
So being 100% government, we do have that advantage or we can try to pass on see the indirect benefits of development, which we are doing as a result of that project, so we broader vision in that sense,” he said
Over the last three years, according to Kumar, government-backed institutions such as the IIFCL, National Infrastructure Investment fund (NIIF) and others have done 57 projects with gross sanctions of over one lakh crore and have disbursed Rs 20,281 crore until the end of December.
Kumar says it is time for a tripartite agreement like in the road sector one of the challenges is lenders are not there in agreements between authority and developers, so tripartite agreements can take care of lenders. Also, a speedy dispute resolution mechanism can help in lenders interests.
According to Kapoor, ESG (environmental social and governance) norms are a way of smart investments, following this can help ease future audits and due diligence risks in later stages.
“Every investment professional should have ESG skills, it is second nature for us…It is not like ESG or compliance is a separate function but is very central to the investment mandate,” he added.
