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L&T Infra Debt Fund in talks to refinance Rs 1,000 cr worth of road projects

Business Standard :  October, 2014

Mumbai: After firming up funding for road projects worth Rs 1,000 crore, L&T Infra Debt Fund Ltd, the project refinancing arm the L&T Group, is working to sanction funds of a similar magnitude in the quarter ending December.

Shiva Rajaraman, chief executive, L&T IDF, said this financial year is the first full year of operations for the company and it has already approved financing for 10 proposals for about Rs 1,000 crore.

"We have signed a tripartite agreement for Rs 170 crore and made two disbursements. The remaining disbursements would be made after signing tripartite agreements, for which the approval process initially took six weeks. National Highways Authority of India's approval process has now been streamlined and has become relatively smoother and quicker," he said.

After signing agreements with the sector regulator and the project operating entity, IDF subscribes to bonds issued by operator.

The existing lender, in-turn, gets money from the company. IDF can refinance infrastructure projects (roads, ports and airports) which have been operational at least for a year.

Rajaraman said the funding support is given for public-private partnership projects as well as annuity projects.

L&T IDF is currently in talks with project companies to sanction funds on a similar scale. The disbursements for it could happen by March 2015.

Bonds have helped extend the tenor of financing for projects, thereby improving the debt service coverage ratio (DSCR), the key indicator of viability.

Lower interest rates have enabled an improved DSCR and thus viability.

L&T IDF has also provided 10-15 year fixed rate financing, which removes uncertainty on interest rates for the entire period.

The project execution risk is minimal for operating units. The repayments and redemption matches the cash-flow of the projects.

On the fund raising by L&T IDF, its chief executive said it had raised long-term funds worth Rs 250 crore through redeemable non-convertible debentures in the quarter ending June, 2014.

It raised Rs 100 crore by issuing redeemable preference shares in the quarter ended September 2014. L&T IDF is an infrastructure debt fund set up under the NBFC route, sponsored and promoted by L&T Infrastructure Finance Co. Ltd. L&T IDF commenced with a share capital of Rs 304 crore.