The bond market is developing well in India, says Chhatwal
InvIT and REIT are a big boon for infrastructure financing in India, and bond markets needs to accept this, says Gurpreet Chhatwal, MD, CRISIL Ratings Ltd.
There is significant change in how infrastructure is financed, and stakeholders are becoming more comfortable, he added.
“The bond market is developing well in India and is dominated by some large players. Both InVIT and REIT have data streams in the public domain.”
Chhatwal felt that the Indian bond market cannot really fund infrastructure. A few central counter-parties can get money but it is not easy for the private sector.
This could be a perception problem because traditional bond market investors have seen significant losses from infrastructure, he observed.
Speaking at FIBAC 2022, Chhatwal was of the opinion that better data will crowd in investments.
“Infrastructure is a common goal. The Government needs to enable that. But obviously the Government can’t spend all the money. You need private sector participation.”
The national infrastructure monetization pipeline is estimated to be worth US$80 billion.
Rajkiran Rai, MD & CEO, National Bank for Financing Infrastructure and Development (NaBFID), observed that certain projects had taken off very favourably, and there were lots of opportunities for banks.
Yet many areas were still taking off, the key example being the Railways. Other infrastructure finance projects included urban infrastructure, healthcare, tourism and inland connectivity.
“The pipelines are there but we need to convert these projects to bankable projects,” he said.
The bond market is dominated by insurance and pension funds while the infrastructure industry had its task cut out, to create a favourable ecosystem.
“Only then would lenders bring in equity. Infrastructure funding needs long term assets such as 20-year bonds. For bond markets to thrive, liquidity is needed in secondary markets,” he said.
The National Infrastructure Pipeline is about creation of new assets and involves extensive green field and brown field development of assets, noted Prasad Gadkari, Executive Director and Chief Strategy Officer, NIIF.
Looking at the situation from a macro perspective, he underlined the skill needed to assess project financing risks.
The big sectors under this pipeline are energy, urban infrastructure and railways.
“The National Monetisation Pipeline is worth about US$80 billion and is less risky because it involves mainly operating assets,” said Gadkari.
The pipeline includes transmission lines, highways and airports. There were also specific opportunities under green financing.
Hence, banks could actually pick and choose from the various opportunities available. NIIF is tailoring its strategy according to the investment profile.
“India is a land of opportunities,” averred Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA). With its relatively lower level of development, it presents very good scope for investment.
He also stressed, “No infrastructure project can grow without help from the Government.” This is because they are meant for the public, and need Government support. But the Government cannot be the only funder. Hence what is needed is a basket of funds. Once underway, infrastructure can be a great source of employment in the country. fiinews.com
