Over the past year, India has remained committed to infrastructure asset creation by leveraging innovative sources such as bonds and infrastructure investment trusts (InvITs). Non-banking financial companies and developmental institutions have become active in the lending space, with equity funds flowing in from global pension funds and sovereign wealth funds. The public-private partnership model has helped attract domestic and foreign investment. This comprehensive financing strategy has yielded significant economic and monetary returns for the sector.
Indian Infrastructure looks at some of the key developments in the infrastructure finance sector over the past year…
IPO moves
- The initial public offering (IPO) market maintained a steady momentum in 2023-24, driven by favourable fundamentals.
- The largest issuance was by JSW Infrastructure Limited, valued at Rs 28 billion. This was followed by Indian Renewable Energy Development Agency Limited’s listing worth Rs 21.5 billion with a strong subscription of 38.8 times.
- InvITs played a significant role in boosting activity. Two notable public issues were launched by Cube Highways Trust ($638 million) and Intelligent Supply Chain Infrastructure Trust ($366 million).
Bond issuances
- Commercial banks set the stage for record-high infrastructure bond issuances during the year.
- State Bank of India alone raised around Rs 200 billion via 15-year infrastructure bonds.
- In recent issuances, Canara Bank, Bank of India, Bank of Maharashtra and HDFC Bank tapped the market and raised Rs 100 billion, Rs 50 billion, Rs 8.11 billion and Rs 74.25 billion respectively.
- The National Bank for Financing Infrastructure and Development raised Rs 100 billion via its maiden issuance of listed bonds with approval to raise a total of Rs 300 billion via long-term bonds.
Multilateral funding
- In 2023-24, till December, the Asian Development Bank committed over $2.6 billion in sovereign lending, and till October, the Asian Infrastructure Investment Bank provided over $10 billion in addition to committing $58.4 million to the Sustainable Energy Infra Trust (SEIT).
- The Japan International Cooperation Agency (JICA) achieved a historic milestone by signing the largest loan amount of JPY 400 billion for the construction of the Mumbai-Ahmedabad High Speed Rail (V).
- In January 2024, the New Development Bank signed a loan agreement worth $500 million (Rs 41.44 billion) for the Gujarat Rural Road Programme.
- In July 2024, the World Bank sanctioned $1.5 billion to support low-carbon energy development.
Deal dynamics
- The sector continues to be favoured by private equity and venture capital investments. In 2023, it attracted around $11.6 billion (a year-on-year increase of 28 per cent) across 57 deals.
- Key deals include Brookfield’s acquisition of ATC India Tower for $2 billion, GQG’s investment worth $1.1 billion in Adani Power for an 8 per cent stake, KKR InvIT’s acquisition of 12 road assets for $1.08 billion and Brookfield’s investment worth $1 billion in Avaada Energy.
- Electric vehicle start-ups focusing on battery swapping and charging infrastructure secured substantial funding, such as Battery Smart ($65 million), ElectricPe ($8.29 million), Turno ($6 million) and RACE Energy ($3 million).
- In December 2023, Fairfax India Holdings Corporation acquired an additional 7 per cent stake in Bangalore International Airport Limited from Siemens Project Ventures GmbH for $175 million.
- In July 2024, Welspun One raised Rs 22.75 billion from investors for its second fund to develop warehouses.
InvITs/REITs momentum
- Fuelled by the prospects of stable returns, fundraising via InvITs and real estate investment trusts (REITs) touched Rs 171.16 billion, a 14-fold year-on-year surge.
- In its largest monetisation initiatives, the National Highways Authority of India’s InvIT raised around Rs 160 billion. In January 2024, SEIT raised Rs 22.62 billion through an initial offer of its units. Further, during 2023-24, IndiGrid raised a total of Rs 10.7 billion.
- Additionally, the market saw the first-ever offer for sale by an InvIT, the Data Infrastructure Trust, raising Rs 20.71 billion.
Other key developments
- The Reserve Bank of India released draft guidelines for financing under-construction infrastructure projects, seeking to strengthen appraisal mechanisms, ensuring timely completions and discipline in consortium funding, and preventing the creation of non-performing assets.
- India Infrastructure Finance Company Limited recorded disbursements of Rs 223.56 billion, an annual increase of over 60 per cent. The loan sanctions grew by 45 per cent to Rs 423.09 billion.
- REC Limited clocked the highest-ever loan sanctions and disbursements at Rs 3.58 trillion and Rs 1.61 trillion respectively.
- The National Investment and Infrastructure Fund collaborated with JICA to launch a $600 million fund for promoting investments in India’s environmental sustainability and low carbon emission strategies.