Indian firms agree to takeout financing scheme

India Infrastructure Finance Company, Life Insurance Corporation of India and India Development Finance Corporation have agreed to take out up to 50% of an infrastructure project’s debt to unblock some $6bn of new funding.

Three of India’s most prominent financing companies have signed a memorandum of understanding to free up bank debt for new infrastructure projects by agreeing to take out up to 50 percent of a project’s debt, India’s Finance Ministry said in a statement.

India Infrastructure Finance Company (IIFC), Life Insurance Corporation of India (LIC) and India Development Finance Corporation (IDFC) will buy a project’s debt up to a maximum respective ratio of 20:20:10, totalling 50 percent of a deal’s existing debt.

The scheme’s objective is to “facilitate banks to take more exposure in new projects, which in turn will help in bridging the gap in infrastructure financing to a great extent”, the Finance Ministry stated.  Indian finance minister Shri Pranab Mukerjee said the takeout financing agreement could help unblock some 30,000 Crore (€4.6 billion; $6.2 billion) of new financing.

India is planning to spend $1 trillion to modernise its infrastructure over the course of its 12th Five Year Plan – the government’s five-year economic plan for the country starting in 2012. That is double the amount allocated under India’s previous five-year economic plan.

To find out more about India’s infrastructure plans, be sure to check Infrastructure Investor India: A Country Briefing, published in May 2011.