India’s infrastructure financing landscape has transformed over the past few years, driven by strong policy support, regulatory reforms and expanding capital sources. Recent changes in areas such as land acquisition, dispute resolution and environmental clearances have significantly reduced execution risks, thereby improving the bankability of projects. In addition, the Reserve Bank of India’s Project Finance Directions – effective October 1, 2025 – have introduced a more balanced regulatory framework to enhance transparency, governance and risk management. The regulations include minimum lender exposure thresholds, extended timelines for the commencement of operations, and rationalised provisioning norms, collectively easing the pressure on lenders.
Public investment has scaled to record highs, with the Union Budget 2025-26 reaffirming the central government’s strategic focus on infrastructure through a robust capex outlay of Rs 11.2 trillion – around 2.4 times higher than the 2020-21 level. Bank credit to the infrastructure and construction sectors has also surged by 26 per cent over the past five years, from Rs 11.58 trillion in March 2020 to Rs 14.7 trillion in March 2025. Moreover, this expanding financial base is complemented by greater participation from non-banking financial companies, multilateral agencies, private equity firms and strategic investors, each engaging at different stages of the project life cycle based on their risk appetites.
New sources of capital pick up speed
India’s rising fiscal deficit and debt-to-GDP ratio have long highlighted the need for increased private investments in infrastructure. In this context, innovative financing vehicles are now reshaping the ecosystem. Infrastructure investment trusts (InvITs), bonds and equity investments form a trifecta of fiscal strategies driving asset creation. InvITs, in particular, are emerging as a key channel for institutional capital, with cumulative fundraising now surpassing Rs 1 trillion across 26 trusts registered under the Securities and Exchange Board of India (SEBI), four of which are publicly traded. Several road and power transmission assets have already been bundled under this structure, and InvIT-led monetisation is set to accelerate further with the proposed phase-out of the toll-operate-transfer model under the upcoming National Monetisation Pipeline (NMP) 2.0.
Meanwhile, infrastructure bond issuances reached record levels to over Rs 750 billion in 2024-25 as of November. This growth is supported by expectations of rate cuts and declining yields on government securities. Commercial banks spearheaded a record Rs 945 billion in infrastructure bond issuances amid deposit growth lags and surging credit demand, with public sector lenders capturing a 90 per cent market share. Municipal bonds have also seen a revival, with the Greater Chennai Corporation and the Pimpri Chinchwad Municipal Corporation (PCMC) each raising Rs 1 billion. PCMC’s issuance saw a 5.13x oversubscription.
ESG-linked financing has gained strong traction. In 2024-25, ESG bond issuances totalled Rs 87.43 billion across 27 deals, many witnessing robust oversubscription. The renewable energy sector led this segment, driven by issuers such as ReNew, the IREDA and Avaada, while L&T marked a milestone with India’s first listed sustainability-linked bond.
Infrastructure IPO activity surged in 2024-25, with renewable energy developers leading the charge by tapping buoyant equity markets to fund capex-intensive expansion. High-profile listings by players such as NTPC Green Energy, Waaree Energies and Vikram Solar have redefined market benchmarks. High subscription multiples – often in qualified institutional buyer allocations – underline institutional confidence in long-term growth narratives. In addition, a substantial pipeline of cross-sector draft red herring prospectuses has been filed with SEBI.
Together, these developments suggest that the long-standing mismatch between infrastructure growth and available financing avenues is gradually being addressed. Furthermore, there are now various investment vehicles available to meet the needs of different infrastructure sectors.
Infrastructure deals shift into high gear
India’s infrastructure acquisition landscape is now recognised by active capital recycling, platform consolidation and a slight tilt towards operating brownfield assets with predictable cash flows. Deal flow is being anchored by private equity platforms, InvITs and strategic corporates, with sovereign wealth funds, global and domestic pension funds, and multilateral-backed vehicles providing deep pools of long-term patient capital. Despite a moderation in overall PEVC funding, infrastructure continues to command a major share of deal value, supported by large-ticket transactions in renewables, transmission and roads, alongside selective bets in logistics and warehousing. Valuations remain supported by robust yield expectations and stable cash flow visibility, while buyers are adopting the M&A route to secure annuity-like returns, diversify counterparty risk and lock in inflation-linked revenue streams.
In recent months, there has been a surge in high-value transactions across several key sectors. In the energy space, Premier Energies acquired a 51 per cent stake in Transcon for Rs 5 billion in October 2025. This was followed by significant activity in building materials, most notably JSW Paints’ Rs 89.86 billion acquisition of a 74.76 per cent stake in Akzo Nobel India in August. The logistics and electric vehicle (EV) sectors also remained focal points for both strategic acquisitions and venture capital interest. In August, Delhivery announced the acquisition of a 99.87 per cent stake in Ecom Express for Rs 13.69 billion. This momentum continued into November, when EV manufacturer 3EV Industries raised Rs 1.2 billion in a Series A round led by investors such as Mahanagar Gas, Equentis Angel Fund and the Thackersey Group.
InvITs have emerged as pivotal vehicles for balance sheet deleveraging and asset-light growth, driving a significant share of secondary acquisitions in roads and other operational assets. Sponsors are increasingly using platform sales, stake dilutions and asset drop-downs into InvITs to unlock equity, recycle capital into capex-heavy greenfield pipelines, and optimise the weighted average cost of capital. Corporate acquirers in sectors such as cement, building materials and logistics are simultaneously acquiring assets to build scale, deepen vertical integration and enhance operating leverage.
Positive lender stance
Broadly, despite some operational hiccups in the past, lending institutions have aided and accelerated infrastructure development. They remain bullish on the sector’s growth prospects.
Lenders’ perspective on infrastructure projects is increasingly positive, backed by a more mature, contractually robust ecosystem and clearer policy frameworks that have improved project bankability and recovery prospects. Banks, non-banking financial companies (NBFCs), infrastructure debt funds and specialised financiers remain strongly inclined towards infrastructure as a priority segment, but continue to favour proven, standardised asset classes such as roads and renewables, where debt-equity structures, cash flows and documentation are now highly streamlined. At the same time, institutions are segmenting their exposure by project stage and risk appetite, with some investors willing to take construction risk for higher returns while others prefer operational, cash-generating assets and secondary platforms such as InvITs for more stable yields.
However, lenders remain cautious about some emerging sectors where risks are less defined, such as data centres, EV charging, compressed biogas (CBG) and smart metering. Persistent gaps in land acquisition, right-of-way approvals and the narrow definition of eligible infrastructure continue to affect sanction timelines and risk pricing. This calls for RBI clarifications, broader infrastructure definitions, credit guarantees, and stronger viability gap funding and arbitration mechanisms. Across the lending board, there is a clear focus on longer-tenor, cash-flow-backed structures, innovative risk-sharing solutions and credit enhancement tools to deepen financing for new-age segments.
Green light for future infrastructure investments
The infrastructure sector has reached a pivotal inflection point. While legacy hurdles remain, proactive policy shifts have led to the creation of a creditor-friendly ecosystem. After years of debate and discussions, the sector has finally unlocked the institutional, long-term capital necessary to turn infrastructure into a bankable, yield-driven asset class. A wider spectrum of capital providers can now participate across different stages of the asset life cycle, aligning project financing structures with varying risk appetites.
The next leg of this evolution will demand sharper execution discipline. Protecting foreign investor interests, extending road monetisation practices to other asset classes and enforcing contractual sanctity will be critical. Alternative pools of capital must not only complement banks and NBFCs, but also consistently deliver superior risk-adjusted returns. Above all, sustaining and scaling private capital inflows will be central to funding the country’s next wave of infrastructure build-out.
Looking ahead, India is projected to require over $1.4 trillion, or about Rs 143 trillion, in infrastructure investment by 2030, more than double the spending since 2016–17. Investors are expanding their focus to new asset classes such as data centres, e-mobility, CBG, energy storage and waste management. To achieve these ambitions, there is a need to expand retail participation in InvITs, accelerate asset monetisation, promote bond financing and attract higher foreign investor inflows. Financial institutions such as IIFCL and NaBFID will also play a crucial role in deepening project finance markets, particularly for greenfield construction, thereby sustaining the sector’s growth momentum.
The groundwork has been laid. With strong tailwinds behind it, India is set to write the next chapter of its growth story.
Harman Mangat
