Press release from Business Wire India
Source: Brickwork Ratings
Thursday, October 15, 2009 06:47 PM IST (01:17 PM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges
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Brickwork Ratings Assigns "BWR AAA+ (SO) for India Infrastructure Finance Company Limited's GoI Guaranteed Bonds Issue of INR 2000 crores or INR 20 billion
Bonds Issue Rating: BWR AAA+(SO) ; Outlook : Stable
Bangalore, Karnataka, India, Thursday, October 15, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AAA+ (SO) (Pronounced BWR Triple A Plus (Structured Obligation)) Rating for India Infrastructure Finance Company Limited's (IIFCL) Long Term Bond issue of INR 2,000 crore guaranteed by the Government of India. Brickwork Ratings' 'BWR AAA+(SO)' stands for an instrument that is considered to offer the BEST credit quality in terms of timely servicing of principal and interest obligations. The rating has factored IIFCL's Government of India's ownership, role being played by it in development and financing crucial infrastructure projects and the Government of India's guarantee of IIFCL's proposed Bonds issue in respect of servicing them. BWR has essentially relied upon the audited financial results, projected financial figures, information and clarification provided by IIFCL.
Background
India Infrastructure Finance Company Limited (IIFCL) was incorporated on January 5, 2006 with INR 100 crore of capital, under the Companies Act 1956, as a wholly owned GOI Company. IIFCL has been initiated to provide debt financing for infrastructure projects which typically have long gestation periods. With effect from 14th Jan 2009, IIFCL is notified as a public financial institution under section 4A of the Companies Act 1956.
Financing Infrastructure Projects Scheme
IIFCL provides financial assistance through long term debt, and also by way of refinance to banks and financial institutions once the viability of the project is established. As a matter of policy it lends up to 20% of the capital cost of a project.
IIFCL also plays an important role in Public Private
Partnership (PPP) projects as it has a special mandate from the Government to catalyze infrastructure growth in the country especially through public-private partnership (PPP) route. As a result, out of 86 cases for which they have sanctioned finance, 70 are in (PPP) and going forward this trend of greater assistance to PPP projects will continue.
Resources
IIFCL is wholly owned by the Govt. of India which is infusing equity capital since its inception. In FY09, the Govt. contributed INR 500 crores raising the equity capital of IIFCL from INR 800 crore last year to INR 1300 crore. Further its long term borrowings have been guaranteed by Govt. of India, through provisions made in budget. IIFCL's total borrowings stood at INR 14419.35 crore as on Mar 2009 which increased to INR 15554 crore as on June 2009. As a part of the stimulus package announced by the Govt. in the wake of the global downturn since 2008, and to enable IIFCL to meet the funding needs of infrastructure development, it has been permitted by the Government of India, to issue GOI guaranteed tax-free bonds amounting to INR 10000 crore.
Performance
Within the short time since its inception IIFCL has emerged as an important nodal agency for financing infrastructure projects. Cumulative sanctions amounts INR 18,760 crore as on March 31, 2009 for 107 projects related to roads, power, airports, ports and urban infrastructure.
In FY09, disbursements were INR 3197 crore as compared to INR 1541 crore in FY08. Its total income grew by 428% from INR 120.19 crore in FY2008 to INR 634.86 crore in FY2009. Its income from operations in FY09 grew to INR 626.21 crores from INR 111.89 crores in FY08. PAT increased in FY09 to INR 100.65 crores from INR 24.81 crores in the same period. RoA rose to o.63% in FY09 from 0.57% in FY08.
Management Profile
IIFCL is a 100% owned entity of the Govt. of India. Sh. S S Kohli is the chairman and managing director of IIFCL since inception. IIFCL's board consists of nominee directors from Govt. of India, including the Secretary, Planning Commission, the Finance Secretary, Ministry of Finance, and other experienced professionals drawn from Govt. and the field.
Subsidiary
IIFC (UK) Ltd, the wholly owned subsidiary of IIFCL has commenced operations from 10th April 2008. IIFC (UK) has been set-up with the objective of financing the foreign currency requirement of Indian companies implementing infrastructure projects in India for import of capital equipment and machinery. The subsidiary has sanctioned loans to eight projects with an aggregate loan commitment of USD 1241 million, although in FY2009 no disbursement for any of the approved loan had commenced.
Joint Venture
In 2009, IIFCL has invested INR 24.88 crore in India Infrastructure Fund a venture capital fund promoted by IDFC, Citi Bank and IIFCL. As on 31.03.2009, India Infrastructure Fund has received total a commitment of INR 3589.40 crore.
Rating Outlook:
IIFCL is a 100% owned entity of Govt. of India, promoted to facilitate infrastructure development in the country. Infrastructure projects have long gestation period and financing them is a specialized and complex task. IIFCL has been helping many infrastructure companies in various projects such as developing projects of Roads, Power, Airport, Ports and Urban Infrastructure through its direct project lending and through refinancing schemes. It has a special mandate from the Government to catalyze infrastructure growth in the country through public-private partnership (PPP) route. As a result, out of 86 cases for which they have sanctioned finance, 70 are in (PPP) and going forward this trend of greater assistance to PPP projects will continue. There was no NPA in the books of IIFCL in FY09. However, it is just a three year old Company and projects financed it are under various stages of construction and IIFCL could face the risk of time and cost escalation in some cases. Recognizing this, it has put in place appropriate Risk Management practices and project monitoring systems to enable it to take timely action and it is expected that with such measures IIFCL will be able to keep its assets performing.
Brickwork rating recognizes the strategic importance of IIFCL as a key financial institution and its crucial role of financing infrastructure development in the Government's growth impetus plans. BWR expects this would translate into continuous support from the Government for IIFCL to achieve its objectives.
Copyright ©, 2009, Brickwork Ratings.
Brickwork Ratings has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. Brickwork has taken care to avoid any conflict of interest due to a common director in both the organizations. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.
CONTACT DETAILS
Mukesh Mahor, Lead Analyst Contact, Brickwork Ratings, 1-860-425-2742, mukesh.m@brickworkratings.com
Jubin Pandey, Co-Analyst Contact, Brickwork Ratings, 1-860-425-2742, jubin.p@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
Rajender Walia, Director - Business Development, Relationship Contact, Brickwork Ratings, 1-860-425-2742, rajender.walia@brickworkratings.com
KEYWORDS
CONSUMER, ECONOMY, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES
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