Lenders see a Rs 2-3 lakh cr funding opportunity in FY24

According to Pawan Kumar, Deputy Managing Director, India Infrastructure Finance Company (IIFCL), in a public-private partnership (PPP) project, the government’s spending is approximated at 30-40 per cent and the balance 60-40 per cent is likely to be brought in by the private sector players.Usually, private players bring in their own equity of up to 20-25 per cent and the balance 75-80 per cent is borrowed from lenders.

“As a result of Rs 10 lakh crore expenditure, around Rs 3 lakh to 4 lakh crore private investment are expected to flow in. Private player will bring in up to 25 per cent and the remaining amount (about Rs 2-3 lakh crore) will be borrowed from commercial banks and other lending institutions,” Kumar added.

However, some bankers said they have not made any analysis on the amount or the number of infrastructure projects that can come for financing as these are very initial days. There are also industry players who indicated that the high allocation notwithstanding, there is a possibility that some of the allocated funds might not end up being used given the constraints in the absorptive capacities of government departments.Lenders, however, expect higher demand for financing coming predominantly from sectors such as roads, energy, energy transmission, solar projects and for data centers. “Many of the assets from the road and energy side are getting into the Infrastructure Investment trust (InvITs) structure. InvITs also borrow, so that financing options are also coming up in a big way,” Rai said.

InvITs is a collective investment scheme similar to a mutual fund. It enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return.

Many experts feel that with their cleaner balance sheet, lenders will be able to meet this higher capital demand from the infrastructure sector in the next financial year.

In a recent report, Crisil Ratings said the increased allocation to infrastructure spending in fiscal 2023-24 will also be one of the reasons for higher growth in sales volume of commercial vehicles (CV). The volume is expected to rise 9-11 per cent in FY2024.