IIFC Plc, the UK subsidiary of India Infrastructure Finance Company (IIFCL), has received the first tranche of $250 million from the Reserve bank of India (RBI), according to a report in Business Standard. The funding comes as a part of the government's plan to use $5 billion of India’s forex reserves for infrastructure development.
Initially, the government would give a guarantee for $250 million bonds with a tenure of 10 years at London Interbank Offered Rate (Libor). IIFC Plc would then lend the money to the Indian companies at around 400 basis points over Libor. It has already sanctioned $1.06 million to seven projects. The seven projects include two ultra mega power projects (UMPPs), Tata Power’s Mundra and Reliance Power’s Sasan. Other projects that have been sanctioned loans include two metro rail projects and three power projects.
The central bank plans to release a second tranche of similar amount after this tranche of $250 million is used up. IIFCL has also received an approval from the government for raising Rs 40,000 crore through tax free bonds. The company has already raised Rs 7,369 crore through the first round of private placement.
It is in the process of raising the second tranche of Rs 2,631 crore. The company has already mopped up Rs 2,200 crore in the ongoing issue. The funds would be used by IIFCL to refinance 60% of the loan given by the banks and financial institutions to infrastructure companies, said the report.
IIFCL was incorporated on January 5, 2006, to provide long term financial assistance to infrastructure projects including roads, railways, seaports, airports, inland waterways, power, urban infrastructure,gas piplines, SEZs and Tourism.