India Infrastructure Finance 2010: Needed-A human face to infra lending

Infrastructure lending may need a more qualitative assessment approach, different from shorter-term, quantitatively evaluted funding, say experts. The recently held India Infrastructure Finance 2010 conference discussed the various challenges of infrastructure development and financing of these projects.

Although somewhat unsurprising in practice, a rule-of-thumb was clearly underlined by experts on the sidelines of the recent conference on infrastructure finance. Ravishankar, Deputy Chief (Projects) HUDCO, a delegate at the conference, told a reporter, “People, rather than technical feasibility, should be emphasised on. In addition to all the quantitative parameters that lenders use, it is very important to officially factor in the more qualitative elements as well, into the final decision making. This means creating a scale that includes and is indicative of those elements.”

DR Dogra, MD and CEO, CARE Ratings, said, “People behind the projects are more important than numbers.” He stressed upon the enhancing of risk taking ability of both the bodies while executing infrastructure projects. Uncertain results “lend scope to innovative solutions,” Dogra said, and critiqued the current system where IRDA follows the AA ratings alone. Infrastructure projects, he reiterated, need a different approach and there may be a need to finally go down the ratings chart.

On similar lines, Mythili Balasubramanian, CGM and Head, (Structuring, Syndication and Advisory department), IDBI Bank, who presented a case study of the execution of Mumbai Airport projects, pointed out that unless a finance manager senses and responds to idiosyncratic problems pertaining to projects, mere numbers will make no sense in the end.

Chief Guest BP Pandey, Joint Secretary, Ministry of Power, Maharashtra, highlighted the need of unlocking huge area by public and private organisations as demand for land is increasing exponentially and is the need of the hour for leveraging the available area in order to provide space to build power plants.

Sudarshan Mohatta, Vice President, Project Advisory and Structured Finance, SBI Caps, while analysing the structuring of PPP in infra financing, mentioned that the risk-reward ratio is the least for a service contract and highest for a BOOT/BOT project.

G Krishnamurthy, Head (Project Finance), L&T Infrastructure Finance, discussed the various issues in the renewable energy sector. He gave an overview of different sub-sectors like biomass, wind power, small hydro power, co-generation–bagasse and solar power.

Parag Parikh, Chief Financial Officer, Gammon Infrastructure, explained the state of the transport industry in India. He came out with interesting statistics on road, rail, air and port sector. He pointed out few issues like the clearances required when roads are to be built over a railway line. There have been instances when 95 per cent of the road was complete but was waiting for clearance from railway authorities.

Alwyn Bowden, CEO (Projects Business Group), Essar Projects, enumerated the opportunities in the power sector and touched upon the phantom projects which deprive a nation of its precious energy reserves. G Narayanan, Director (Investments), IDFC Project Equity, made a presentation on Government role in supporting PPP in infrastructure.
Paritosh Kashyap, Executive Vice President and Head (Debt Capital Markets), Kotak Mahindra Bank, presented the new model of financing—take-out financing for funding long-term gestation projects. He emphasised the benefits of take-out financing for infrastructure projects.

Harsha Rawal, Director, (Tax), KPMG, provided an overview of the existing structure of infrastructure holding companies and recommended a better structure. She pointed out various issues in migrating from existing structure to the preferred structure. Avinash Narvekar, Partner (Infrastructure/Industrial and Consumer), Ernst & Young, enumerated the challenges in the infrastructure regulatory landscape in each sub-sector of infrastructure. Milind Joshi, Managing Director (Investments), IDFC Project Equity, gave a detailed picture of the FDI scenario in India and focused on the FDI trends in the infrastructure sector.

The day long conference at Mumbai’s ITC Grand Central was organised by ASAPP Media Information Group’s Events Division, and was attended by more than 100 practitioners, developers, finance professionals and policymakers.