IIFCL gets Reserve Bank’s approval to finance InVITs

The state agency that offers long-term financial assistance to viable infrastructure projects has received approval from the Reserve Bank of India to back InVITs and will spend about ₹4,000 crore in this segment this fiscal, a person familiar with the development said.

IIFCL is working on detailed norms for making the investments and is in talks with project implementing agencies and investors, the person said on condition of anonymity.

The finance ministry and to IIFCL did not respond to emails seeking comment.

The InVIT structure allows developers to pool their completed projects under these trusts and reduce debt servicing costs by refinancing or monetising completed projects. Project completion is a major risk for infrastructure projects due to uncertainties over issues such as environment and land acquisition. The diversity of completed assets enable InVITs to raise finance at a lower cost.

On a standalone basis, IIFCL has sanctioned about ₹1.5 trillion to 620 projects under direct lending, takeout finance and refinance, disbursing about ₹75,000 crore till 31 December 2020. The company reported a sharp rise in net profit to ₹285.27 crore in FY21 from ₹50.9 crore in the previous year.

The move to tap InVITs comes at a time the government is making a major push at infrastructure development, a key element of India’s economic recovery strategy.

InVITs are emerging as a key instrument in the infrastructure sector offering more liquidity and flexibility for developers. The finance ministry said in the FY22 Union budget that debt financing of InVITs and real estate investment trusts by foreign portfolio investors will be allowed to further ease access of finance to InVITS and real estate investment trusts or REITs, and augment fund availability for infrastructure and real estate sectors. InVITs are also playing a key role in the government’s asset monetization plan.