ICRA : Infrastructure sector -Significant policy initiatives supporting execution, alternate funding avenues necessary for sustainable improvement

Indian credit rating major ICRA’s conference in Hyderabad on the Infrastructure sector in India, witnessed overwhelming  participation from a host of eminent personalities from the Government, corporate and banking and financial services.

Delivering the key note address at the conference, Mr. K. Ramakrishna Rao, Principal Secretary (Finance), Government of Telangana, emphasised the need for developing infrastructure in the country and the need for Government and private agencies to come together for this end. He also mentioned how the Telangana Government has been focussing on creating infrastructure assets and to this end it has been consistently increasing its budgetary allocation for key segments like irrigation and water supply.

Commenting on the new credit rating system for the infrastructure sector, Mr. Rao said: “I hope the new credit rating system for the infrastructure sector would help address some of the weaknesses in the current rating system and improve funding availability for the viable infrastructure projects.”

Post the keynote address, during the session on ‘Funding challenges for infrastructure sector,’ Mr. Shubham Jain, Vice President, ICRA, gave a brief presentation on ‘Emerging Trends, New Challenges, and Outlook for Financing in Infrastructure Sector.’ During this, Mr. Jain highlighted the need to develop alternate funding avenues as currently banks and NBFCs are overburdened by infrastructure credit which, amongst other factors, limits their ability for fresh lending. Mr. Jain also elaborated on ICRA’s approach for rating Infrastructure Investment Trusts (InvIT), and the new Expected Loss (EL) based credit rating scale for the sector.

Commenting on the emerging funding avenues, Mr. Jain said: “It is encouraging to see multiple initiatives being taken by the Government and regulators to improve the funding availability for the Infrastructure sector. Emerging avenues like Masala Bonds, InvITs, and NIIF have the potential to significantly improve the infrastructure funding landscape in India. However, these being new products would require consistent regulatory support and investor acceptance. Some initiatives like Infrastructure Debt Funds, take-out financing did not perform as was initially envisaged and the learning from the same also needs to be incorporated in the new products”.

The presentation was followed by a panel discussion on funding challenges for the infrastructure sector in which industry experts from SBI Capital, SBI CAG and Mytrah Energy participated.

The second session of the seminar was on ‘Government Policies and Initiatives – Actual Implementation on Ground’. Mr. K. Ravichandran, Senior Vice President, ICRA, emphasised how policy measures have helped in improving the pace of execution in many sectors like Roads and Railways over the last few years. He, however, cautioned that this is not the time to be complacent and there are lingering issues which need to be addressed. According to Mr. Ravichandran: “The Government needs to look at resolving legacy issues, reducing litigations, and strengthening the dispute resolution framework. So far, the improvement on the ground has been driven by public sector funding. For more sustainable improvement, private sector participation needs to be encouraged by optimal allocation of risks and returns.”

This presentation was followed by a panel discussion on the topic in which veterans from SBI CAG, Capital Fortunes and L&T ECC participated.

About ICRA Limited: ICRA Limited was set up in 1991 by leading Indian financial/investment institutions, commercial banks and financial services companies as an independent and professional Investment Information and Credit Rating Agency. Today, ICRA is a full-service Credit Rating Agency with its shares listed on the BSE and the National Stock Exchange. ICRA is majority-held by the Moody’s Group, which has 50.06% equity ownership stake in the company.