Agreement with the National Investment and Infrastructure Fund comes amid reports about an alarming fall in new project investments
India’s largest commercial bank, State Bank of India (SBI) and the country’s sovereign infrastructure fund, National Investment and Infrastructure Fund (NIIF) have announced a partnership to provide capital to infrastructure projects, amid reports about an alarming fall in new investments in projects in the country.
SBI and NIIF on Monday inked a memorandum of understanding (MoU) on this new initiative, which envisages providing equity investments, project funding, bond financing, renewable energy support and take-out finance for operating assets.
“The objective of this initiative is to aid in filling the gap at a time when the availability of equity and debt financing for infrastructure has moderated,” SBI said in a statement.
“The initiative will address concerns relating to availability of equity and long term debt funding options to large scale projects thereby stimulating infrastructure development”, Rajnish Kumar, chairman, SBI added.
According to the latest data by the project-tracking database of the Centre for Monitoring Indian Economy (CMIE), Indian companies, across both private and public sectors, announced new projects worth $6.3 billion in the June 2019 quarter, 81 percent lower than what was announced in March quarter and 87 percent lower than the same period a year ago.
The investment in new projects in the April-June quarter is a 15-year low, according to the project monitoring firm.
“The availability of post-construction take-out equity and debt financing for developers and builders of infrastructure projects will play an important role in the infrastructure development cycle in India,” Sujoy Bose, managing director and CEO, NIIF, has said.
NIIF’s partnership with SBI will allow us to design large-scale long-term financing solutions to address this need, he added.
The initiative will help SBI and NIIF to review opportunities to unlock capital from operational projects, thereby creating room for fresh lending, and addressing asset-liability mismatches.
In addition to focusing on takeout financing, including through the IDF route, the partnership will also explore new avenues of financing renewable energy projects.
During the last financial year 2018-19, SBI through its specialised Project Finance & Structuring Business Unit have extended financial assistance of about $7.4 billion to 47 infrastructure projects.