1. einstitute.worldbank.org Debt Financing Support to Public-Private Partnerships in India Policy and Instruments August 26, 2014 | 9:00 AM EDT Discussion: Shyamala Shukla, Senior Consultant, PPP Group, The World Bank Gajendra Haldea, Former Principal Advisor, Infrastructure & PPP, Planning Commission of India

2. APPROACH AND CONTENTS OF WEBINAR PART I ( 30 minutes) o Government support to PPPs in India o Debt financing requirements o Introduction to the IIFCL o Challenges in debt financing o Outline of key questions on the above o Answers to key questions PART II (10 minutes) o Introduction to IDF and discussion PART III (20 minutes) o Q&A and concluding remarks

3. 3 GOVERNMENT SUPPORT MECHANISMS FOR PPPs IN INDIA Support InstrumentDescription Bankability of Concession Framework Non-recourse financing; termination payments; mitigation of risks; revenue shortfall loans GrantVGF Guaranteed offtake Offtake guaranteed in the power sector, guaranteed tonnage in grain storage projects LandNominal lease amount; commercial exploitation DebtIIFCL OthersInfrastructure Debt Funds

4. FINANCING REQUIREMENTS FOR INFRASTRUCTURE IN INDIA  Resource requirements for infrastructure: US 600 billion for 2012-2017  Public and Private share: 50:50 at US $ 300 billion each  Private sector debt requirement: more than US $ 300 billion in five years Source: Planning Commission, Government of India, in Deloitte (2012), Indian Infrastructure – A Trillion Dollar Opportunity Source: Second Report of the High Level Committee on Financing Infrastructure, Planning Commission, Government of India Investment in Infrastructure

5. 5 INDIA INFRASTRUCTURE FINANCE COMPANY LIMITED  IIFCL was formed in 2006 for long-term debt financing of infrastructure PPPs  IIFCL products: Direct lending Subordinated Debt  Cumulative performance:  Other activities: IIFC (UK) Limited ProductNo. of ProjectsAmount Rs. crAmount US $ m Direct lending29954,1489,000

6. Extended Team 6 CHALLENGES IN DEBT FINANCING  Tenure of loans confined to 10-15 years  Sources of funds concentrated in state owned banks  Slow down in growth of commercial bank credit Bank sector exposure limits Company exposure limits  Bond financing –fewer issues, capital markets lack depth/volumes  Foreign currency borrowing – currency risk Lack of affordable hedging mechanisms Limits to refinancing through ECB Source: Economic Survey of India 2013-14, Chapter 11, p.209

7. 7 QUESTIONS OF FOCUS Debt financing - key features of India’s concession framework Bankability of concession framework Indian infrastructure market - the shortfall in debt financing Key features of India’s concession framework - does it provide comfort to lenders? Role of IIFCL in debt financing IIFCL’s role in debt financing Impact during the last few years Capital adequacy issues Sector / company exposure issues Direction of its debt financing portfolio

8. INFRASTRUCTURE DEBT FUNDS 8 o Policy: RBI and SEBI in 2011 o Objective: Sourcing long term debt for infrastructure projects o Potential investors: Pension/Insurance Funds and others o Institutional set-up: NBFC or Mutual Fund o Status: 5 IDFs formed so far Further resources on IDFs: http://rbi.org.in/scripts/NotificationUser.aspx?Id=6830&Mode=0 http://www.sebi.gov.in/cms/sebi_data/boardmeeting/1360917875498-a.pdf

9. INFRASTRUCTURE DEBT FUNDS 9 o Role of IDFs o Status of IDFs that have started working o Early results

10. einstitute.worldbank.org Questions?? 10