20 Noteworthy Financings: Innovative debt and equity structures

Innovative debt and equity structures

In the past two decades, the infrastructure sector has witnessed significant financing activity in terms of bank lending, bond issuances, financial closures, initial public offerings (IPOs), private equity deals and multilateral funding. Indian Infrastructure has identified 20 landmark deals that brought about major changes in the infrastructure financing landscape…

Financing of the Mumbai-Pune expressway

In 1998, the Maharashtra State Road Development Corporation raised over Rs 9 billion to finance the Mumbai-Pune expressway and flyovers in Mumbai. This paved the way for government-backed and infrastructure-backed debt structures for financing.

Delhi-Noida Direct Flyway financing

For the first time in the country, the financing of an infrastructure project involved a combination of debt and private equity investment. The $87.12-million project was financed on a debt-equity ratio of 2.33:1. Noida Toll Bridge Company Limited became the first company to launch an IPO for a greenfield infrastructure project in 1999 and also the first company to launch an IPO with a takeout financing arrangement.

Private equity investment in Bharti Airtel

Private equity investments of around $300 million by Warburg Pincus in Bharti Televentures Limited (between 1999 and 2001) paved the way for the telecom revolution in India. In 2005, Warburg Pincus completely exited from Bharti Televentures.

Tirupur water project financial closure

The Tirupur water supply project was the first water project in the country to be funded on project finance, non-recourse basis. Financial closure was achieved in 2002 for the first build-own-operate-transfer project in the water sector.

IDFC’s India Development Fund

The India Development Fund, with a corpus of Rs 8.4 billion, was the largest domestic infrastructure private equity fund in India. This private-public fund was set up in 2004 with the support of the Ministry of Finance. The fund was fully exited at a net internal rate of return of 32 per cent.

World Bank’s assistance to the PMGSY project

The World Bank provided a loan worth over $1.8 billion for the Pradhan Mantri Gram Sadak Yojana (PMGSY). This is the biggest multilateral aid that has been extended to India since 2005. Some of the states under the project are Bihar, Himachal Pradesh, Jharkhand and Meghalaya.

Incorporation of IIFCL

Incorporated in January 2006, India Infrastructure Finance Company Limited (IIFCL) commenced operations in April 2006. Set up as a financial SPV, IIFCL provides financial support to the infrastructure sector through direct lending, takeout financing, credit enhancement scheme, and refinance scheme.

Delhi airport financing

When Delhi airport’s Terminal 3 (T3) was conceived in 2006, the debt-equity ratio for the project was 1.25:1, with equity Rs 40 billion and debt of Rs 50 billion. The equity component was financed by way of an unsecured loan or quasi-equity of Rs 31.32 billion. The loan component of the debt amounting to Rs 36.5 billion was financed by a consortium of 12 banks. Further, the cost escalation to Rs 123 billion was funded through equity contributions from all shareholders including the AAI on a pro-rata basis. The airport also received a foreign currency loan of $350 million.

Coal India Limited’s IPO

Coal India Limited launched a mega IPO to raise over Rs 15 billion in 2010. This is India’s largest IPO and was oversubscribed by around 15 times. The company made a spectacular debut on the bourses by listing at a 20 per cent premium.

Hyderabad metro financial closure

Achieved in six months, the financial closure of the Hyderabad metro project is among the largest fund tie-ups for PPP projects. In 2011, the financial closure for $2.64 billion was achieved. The project was funded with a debt-equity ratio of 70:20 and a VGF of 10 per cent. A consortium of 10 banks sanctioned the entire debt requirement and the equity component for the project was infused by L&T.

Tata Power’s debenture issue

Tata Power Limited launched a perpetual debenture offering of Rs 15 billion in 2011, the first of its kind in India, to secure long-term funding.

IL&FS’ first mutual-fund based IDF

Launched in February 2013, this is India’s first infrastructure debt fund (IDF) launched through the mutual fund route. It is managed by IL&FS Infra Asset Management Limited and has raised around Rs 19 billion (as of March 2018) under its various schemes.

First masala bond issue

The International Finance Corporation issued the first masala bond in November 2014 and raised Rs 10 billion to support infrastructure development in India.  The masala bonds marked the first rupee bonds listed on the London Stock Exchange.

LIC investment in railways

The agreement for an investment of Rs 1.5 trillion by the Life Insurance Corporation of India (LIC) was hailed as the first step by Indian Railways in becoming profitable and commercially viable. In March 2018, the Indian Railway Finance Corporation raised Rs 50 billion from LIC through a bond issuance.

First credit enhanced bond

In September 2015, IIFCL announced India’s first credit enhanced infrastructure bond, issued by Renew Wind Energy (Jath) Limited, for an amount of Rs 4.51 billion.

IRB’s InvIT issue

IRB Infrastructure Developers became the first firm to launch an infrastructure investment trust (InvIT) in May 2017. The company, through a public offer of its InvIT, raised over Rs 50 billion. In 2017-18, the InvIT reported a net profit of Rs 2.32 billion, declaring a dividend of Rs 3 per unit to its investors.

Pune municipal bond issue

The Pune Municipal Corporation (PMC), in June 2017, raised Rs 2 billion through municipal bonds for a water supply project, becoming the first municipality to raise funds through this route after a gap of 14 years. The bond sale is part of a Rs 22.6 billion borrowing plan of the PMC and is spread over five years.

NIIF’S first investment

The National Investment and Infrastructure Fund (NIIF) signed an investment agreement worth $1 billion with the Abu Dhabi Investment Authority (ADIA) in October 2017. With this, ADIA became the first institutional investor in NIIF’s Master Fund.

TOT Macquarie deal

The Macquarie Group won India’s first toll, operate and transfer (TOT) project at a bid of Rs 96.81 billion in March 2018. This was one of the largest foreign direct investments in public infrastructure in India. NHAI had expected to receive around Rs 62.5 billion from the first TOT bundle.

NHAI loan from SBI

NHAI, on August 3, 2018, signed an MoU with the SBI for a long-term loan of Rs 250 billion. This is the largest funding ever arranged by the authority in a single tranche. It is also the largest long-term unsecured loan ever sanctioned by SBI.

(The above listing is in chronological order.)