Overseas investors bullish on infra debt funds: Chanda Kochhar

ICICI Bank Chief Chanda Kochhar on Wednesday said Indian infrastructure debt funds are expected to attract huge investor interest in overseas markets, given a marked improvement in economic sentiments here and a low-interest rate environment abroad.

Besides, the evolution of newly-created infrastructure debt funds (IDFs) as key financing vehicles for infrastructure sector is also expected to ease the pressure on banking system, Kochhar told PTI in an interview.

"The improvement in sentiment during the last few months and the continued FII flows in both debt and equity lead us to believe that the IDFs will be successful in raising offshore funds," said the ICICI Bank Managing Director and CEO, who was here yesterday for the launch of India Infradebt Ltd, the country's first IDF under NBFC model.

Infra debt has been set up with an equity capital of Rs 300 crore (about $55 million) with four major financial institutions as its promoters. While, ICICI group holds the highest 31 per cent stake, other promoters are Bank of Baroda (30 per cent), Citi (29 per cent) and LIC (10 per cent).

The Fund can provide funding to the tune of up to $2 billion after roping in debt investors from India and abroad.

On the expected contribution from domestic and foreign investors in the overall targeted size of $2 billion, Kochhar said: "Infradebt is looking to raise half the liabilities from the domestic market and the other half from foreign sources".

Asked whether she was optimistic of foreign investors' interest in Infradebt and other such funds despite concerns over the country's widening trade deficit and continuing FDI barriers, Kochhar exuded confidence in success of IDFs in raising offshore funds.

"Further, since the IDF would be lending to projects which have completed one year of operations after the implementation, the risk profile will be substantially lower, thereby attracting huge investor interest in IDF.

"Also, the continued low interest environment in the offshore markets coupled with the ample global liquidity will also support fund raising by IDFs," she said.

India has set a target of $one trillion towards infrastructure spending during the 12th five-year plan period (2012-17).

Of this, 50 per cent of the amount is proposed to be invested by the private sector and an estimated $350 billion is expected to come through debt contribution.

"While the target ($1 trillion) may appear large, we should remember that a few years ago we would have thought that spending $500 billion would be impossible and we have substantially achieved that level in the 11th plan period.

"So I think we need to set aspirational targets and work towards achieving them with the right policy and administrative measures," Kochhar said.