INFRASTRUCTURE FINANCING BY FINANCIAL INSTITUTIONS –AN APPRAISAL

8/7/2019 INFRASTRUCTURE FINANCING BY FINANCIAL INSTITUTIONS AN APPRAISAL

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INFRASTRUCTURE FINANCING BY

FINANCIAL INSTITUTIONS AN APPRAISAL

UNDER THE GUIDANCE OF - PRESENTED BY

Prof. Raj Kumar Mayank Anand

FMS ,BHU MBA-IV Sem.

Roll No. 16


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FLOW OF PRESENTATION

INTRODUCTION OF INFRASTUCTURE FINANCING

RESEARCH PROBLEM

RESEACH OBJECTIVE

RESEARCH METHODOLOGY

CURRENT STATUS OF INFRASTRUCTURE

MODELS OF INFRASTRUCTUREFINANCING

FINANCIAL INSTITUTIONS


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INFRASTRUCTURE FINANCING

Any credit facility in whatever form extended bylenders (i.e. banks, FIs or NBFCs) to an infrastructurefacility as specified below falls within the definitionof "infrastructure Finance". In other words, a creditfacility provided to a borrower company engaged in:

developing or operating and maintaining, or

developing, operating and maintainingInfrastructure Facility .


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RESEARCH PROBLEM

This Project is the description of current scenario

of infrastructure development and try to find out

the adequacy of funds for financing the

infrastructure projects by fianancial institutions.


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RESEARCH OBJECTIVE

To study the current status and scenario ofdevelopment of Infrastructure in India.

To Study the various sources of funds available for

infrastructure finance in India.

To study the various models of Infrastructurefinancing used for Infrastructure Projects in India.

To study the pattern of financing of infrastructure by

financial institution and finding the adequacy of

funds available for infrastructure. To study the various innovations in Infrastructure

Financing


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RESEARCH METHODOLOGY

RESEARCH DESIGN :- Exploratory Research

DATA COLLECTION METHOD :-

In this project only secondary data is being used for

reaching at the conclusion . The sources of data arefollowing

Journals on infrastructure

Websites of Financial Institutions like IFCI Ltd., IDFCLtd., IIFCL Ltd, etc.

Website of Planning Commission for funds allocatedfor various infrastructure and 11th Five year plan alsobeing used.

Information from Various Papers and articles alsoused for the project.


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CURRENT STATUS OF INFRASTRUCTURE IN INDIA

SOURCE- MCKINSEY

Indias infrastructure shortfall in key sectors is hampering economic growth

Power: Peak power capacity is 16 percent short of demand, and transmission and

distribution losses vary from 18 to 62 percent across different states.

Ports: Major ports are operating at 95 percent capacity, with demand growing at 10

percent annually.

Roads: Only 2 percent of Indian roads are national highways. The poor quality of

roads results in inefficiencies. For example, trucks cover less than 200 kilometresper day, that is, 25 percent of the global average.

Rail: Track coverage is 35 kilometres per 1,000 square kilometres against the global

average of 100 to 150 kilometres. At 25 kilometres per hour,average train speed is

much lower than Chinas at 150 kilometres per hour.Further, many popular routes

such as Mumbai to Delhi are running at above 100 percent capacity utilisation.Airports: Air travel penetration in India is only a quarter of Brazils, one-fifth of

Chinas and 2 percent of the United States. Airport standards

across the country including metros are well below global benchmarks on

all dimensions.


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SECTOR WISE FUND REQUIREMENT FOR VARIOUS

INFRASTRUCTURE PROJECTS IN FUTURE

Power sector- estimated fund of USD of 150 billion till 2012will be required.

Telecom sector estimated USD 76 billion over the next 5years

Roads & Highways- estimated investment required of USD 90billion in 5 years.

Ports - Total estimated investment required of USD 21billion till 2012.

Civil Aviation & Airports - Total estimated investmentrequired of USD 8-9 billion by 2012.

Petroleum & Natural Gas - Total investment opportunity ofUSD 35-40 billion by 2012

Urban Infrastructure - Total investment opportunity ofUSD 50-55 billion in 5 years


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SOURCES OF FUNDS FOR INFRASTRUCTURE

FINANCE

Source: Conference on Building Infrastructure: Challenges and Opportunities 2010

21%

10%

4%

6%

6%8%

45%

Sources of Funds

Commercial Banks

NBFCs(Including IIFCL)

Insurance Cos

ECBs

Equity

FDI

Budgetary Support

Total Debt: 41%

Total Equity Including FDI: 14%


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FUNDING GAP

.

Source: Conference on Building Infrastructure: Challenges and Opportunities2010

Infrastructure Finance Required in 2010-22 & 2011-12

Sources of Funds Estimated

Requirememnt as per

existing funding

pattern

Estimated

availibility as per

Trends

Funding

Gap

Commercial Banks 2,67,480 2,02,027

NBFCs(Incl IIFCL) 1,24,699 1,00,651

Insurance Cos 52,046 42,330 1,25,685

ECBs 76,984 50,515

Total Debt Funds 5,21,208 3,95,523Equity (Incl FDI) 1,86,456 1,84,571 1,885

Total 7,07,664 5,80,094 1,27,570


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MODELS OF INFRASTRUCTURE FINANCING

Current Model :- Public Ownership

Public Ownership/Private Contracting

Private Ownership

Public-Private Partnership (PPP Model )-

Types of PPP Model Build Own Operate (BOO)

Design-Build (DB):

Build Operate Transfer (BOT)

Build-Own-Operate-Transfer (BOOT):

Buy Build Operate (BBO)

Design Build-Operate (DBO) Design-Build-Maintain (DBM)

Build-Develop-Operate (BDO):

Build-Own-Lease-Transfer (BOLT)

Contract Add and Operate (CAO)

Develop Operate and Transfer (DOT)


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OTHER FINANCING MODEL

Project Financing- 1. The lenders finance the project looking at the creditworthiness of

the project, not the creditworthiness of the borrowing party. The

repayment of the loans is made from the earnings of the project.

2. Project financing is also known as limited recourse financing as

the borrower has a limited liability. The security taken by the

lenders is largely confined to the project assets.

Mezzanine Financing-

Mezzanine debt refers to hybrid instruments that are somewhere

between debt and equity (subordinated to secured debt but senior to

equity in the hierarchy of creditors)


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FINANCIAL INSTITUTIONS PROVIDING FUNDS

FOR INFRASTRUCTURE

India Infrastructure Finance Company Ltd (IIFCL)

IIFCL was incorporated by the Ministry of Finance in

consultation with the Planning Commission for providing

long-term loans for financing infrastructure projects that

typically involve long gestation periods. IIFCL provides financial assistance up to 20% of the project

cost both through direct lending to project companies and

by refinancing banks and financial institutions.


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THANK YOU

INFRASTRUCTURE FINANCING BY FINANCIAL INSTITUTIONS –AN APPRAISAL

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