The Finance Ministry has further liberalised the external commercial borrowing policy in an attempt to provide a greater boost to investments in this sector. Following the new move, infrastructure companies can avail themselves of borrowings of up to $500 million a year, as against the existing limit of $100 million, for rupee expenditure under the approval route.
“Considering the huge funding requirements, particularly for meeting rupee expenditure, it has been decided to enhance the existing limit of $100 million to $500 million a year for the borrowers in the infrastructure under the approval route,” the Finance Ministry said in a release issued on Monday evening.
The enhanced limit of up to $500 million comes with a rider that borrowings in excess of $100 million should have a minimum average maturity of seven years. This comes in just at a time when the government came up with the revised investment guidelines for 3G in the telecom sector. The latest changes will particularly benefit telecom operators who will participate in the 3G auctions slated for October-November this year.
Also, the Government has hiked the interest spread ceiling on ECBs, with minimum average maturity of over seven years, by 100 basis points to 450 basis points over six months London interbank offered rate (LIBOR). The move to modify the all-in-cost ceilings comes in line with the widening credit spreads in the international financial markets.
Infrastructure Funds Splash In India
Infrastructure is being increasingly recognised as a distinct alternative asset class. Anubha Shrivastava, Portfolio Director, South Asia, CDC Group, the U.K. government’s Fund of Funds told VCCircle in a separate interview, “There is a compelling story for infrastructure in India and we are interested in exploring this asset class a little further”.
Among other global funds, Morgan Stanley Global Infrastructure Partners has also appointed their man, Gautam Bhandari on ground to make investments across the infrastructure value chain in India. JPMorgan & Chase Co., has up a $2 billion fund to invest in Indian infrastructure projects such as roads, ports and power.
Global buyout fund Kohlberg Kravis Roberts & Co (KKR), which recently decided to list on the NYSE, said it is considering investing in infrastructure sector in India and China. Goldman Sachs is raising a targeted $7.5 billion fund and will look at investing in India. As for India specific funds, Citigroup Inc., and Blackstone Inc are planning a $5 billion fund for India (of which Citi has already raised $500 million).
Macquarie Capital Group Ltd. and State Bank of India are co-raising a $2 billion infrastructure fund, while 3i Group of UK has already raised a $1.2 billion fund. ICICI Venture is following suit with a $1 billion fund.