International Finance Corporation has invested Rs 667 crore ($103 million) in L&T Infrastructure Finance Company Ltd by subscribing to India’s first issue of green bonds.
This is in line with IFC’s strategy to support renewable energy infrastructure in the country and also develop the capital markets, the World Bank’s private-sector arm said in a statement.
L&T Infrastructure, a wholly owned unit of L&T Finance Holdings Ltd, will use this money to lend to solar power projects. The company has been increasing its focus on renewable energy, which comprises 37% of its total portfolio of Rs 22,774 crore, IFC said.
“This partnership with IFC will further diversify our funding profile and demonstrates the strength of our project appraisal and risk assessment capabilities for renewable energy lending,” Virender Pankaj, CEO, L&T Infrastructure Finance, said in the statement.
The bond issue comes after the Securities and Exchange Board of India came out with norms governing green bonds in May. Green bonds are those whose proceeds are used for projects or assets of renewable energy, clean transport, sustainable water or land management, climate change adaptation and energy efficiency.
“This green bond subscription will serve as a catalyst for corporates to issue green bonds and provide the impetus for financiers to stay invested for a longer-term, which is essential for long-gestation, capital intensive infrastructure projects,” said Jun Zhang, country head for IFC in India.
IFC also said it had earlier invested $50 million in Yes Bank and $75 million in PNB Housing Finance Ltd via instruments that would qualify as green bonds but were floated before the SEBI finalised its norms.
IFC’s green bets
India’s renewable energy sector has seen a lot of activity over the past couple of years after the government set ambitious capacity addition targets. The government aims to achieve 175 GW of renewable power generation capacity by 2022. This includes 100 GW of solar and 60 GW of wind power capacity. India’s renewable energy capacity is currently around 44 GW.
IFC has both a direct investment practice and indirect exposure to Indian companies as a Limited Partner (LP) to local private equity and venture capital funds.
The World Bank arm had launched a green bond programme in 2010 to help push investments in private sector projects that support renewable energy and energy efficiency.
IFC has, with the Tata Group, created the first private sector ‘green investment bank’ in India—Tata Cleantech Capital Ltd. In May, IFC said it planned to invest $40 million in Tata Cleantech. Overall, it has given $170 million in wholesale investments to financial intermediaries that support the climate change programme in the country.
Among its other bets in the renewable energy sector, IFC last year committed an equity investment of up to $125 million in Hero Future Energies Pvt. Ltd.
Last year, IFC decided to facilitate debt funding worth around $177 million to Ostro Energy Pvt. Ltd, a renewable energy platform backed by emerging markets-focused private equity major Actis.
Earlier this year, IFC said it planned to invest $15 million in Clean Max Enviro Energy Solutions Pvt Ltd, a renewable energy service company.
In total, IFC has invested about $1.2 billion in climate-friendly projects through direct investments in India, in the last five years, it said.