During a time when India’s growth story, backed by infrastructural development, is being discussed across the globe, lending issues once again have plagued the sector.
According to sources, infrastructure majors are deterred from participating in the new projects. Companies such as Lanco, Gammon Infrastructure Projects Ltd, GMR, GVK, and Jaypee, among others, have voiced their lending concerns at the recent meetings held between the industry leaders and the government, sources said.
“In the last two months, we have informed the government at various stakeholder meetings that the developers are unable to get access to funding, which is putting us away from participating in (new) projects. We have been told that the government will take up this issue with banks soon,” said a senior board member of an infrastructure company on condition of anonymity.
Senior managers and directors of other infrastructure firms, who did not wish to be identified, confirmed about the lending issues and the on-going talks with the government to HT.
In order to get the projects going, the Centre has been trying hard to revive the key infrastructure sector by giving an extra push. Finance minister Arun Jaitley, too, at the recent Future of Asia conference, organised by the Japanese media corporation, Nikkei, said that New Delhi needs immediate investments of at least $1 trillion to build roads, ports, airports and power stations, as it seeks to expand economy. He added that the government is hoping that the private companies will contribute half of this amount.
Industry leaders, however, say that though the government is expecting the private sector to invest, but financing issues have become the biggest challenge for them.
“Banks have become very cagey when it comes to infrastructure lending. Infrastructure loans have dried up in the recent past. Over and above the earlier issues such as stressed balance sheets, which the companies are addressing via strategic debt restructuring, new issues of project valuations and risks, are now becoming a concern too. If the trend continues, it will lead to another lull in the infrastructure sector, which started showing some recovery… Talks are on with the government,” said Vinayak Chatterjee, chairman, Confederation of Indian Industry (CII) national task force for infrastructure, and chairman of consulting firm Feedback Ventures.
Analysts say that the new avenues of funding, which could bridge the funding gap such as National Investment and Infrastructure Fund (NIIF), and Infrastructure investment trusts, or InvITs, too are taking time leading to further delays.
“Banks are becoming very cautious in lending to the infrastructure sector. Given that India now has to maintain the growth momentum, it is important to note that the government alone will not be funding entire infrastructure development. Thus, banks will have to lend to the private sector, which will push these companies to get back in the construction mode. Noting that a lot of these companies have leveraged balance sheets, and banks are also not in a healthy position, the new avenues such as NIIF and InvITs are the only options, which the government should now take seriously without any delay,” said Vishwas Udgirkar, senior director at consulting firm Deloitte Touche Tohmatsu India Pvt Ltd.
The NIIF is the country’s first sovereign wealth fund, which would invest in greenfield, brownfield and commercially -viable stalled projects, and will be set up with an initial corpus of Rs 40,000 crore.
InvIT are financial instruments that companies can use to raise funds for their projects.