India Infrastructure Finance Company Limited (IIFCL) is executing what is being described as one of the market's most aggressive fundraising strategies: $1.4 billion of purely foreign capital.
The move comes as Indian banks are locked in a fierce war for deposits, struggling to gather low-cost retail capital to fund the domestic credit boom. That has made rupee borrowing increasingly expensive for large borrowers like IIFCL.
Infrastructure assets such as highways and mega-ports take 15 to 20 years to generate returns. Domestic banks are reluctant to lock capital up for that long, but overseas pension funds and institutions like the ADB are willing to write 15-year and 20-year checks, letting IIFCL match its long-term liabilities with long-term assets.
Even after accounting for currency hedging costs, dollar-denominated loans from overseas institutions are expected to carry interest rates below 7%, lower than raising equivalent capital in the domestic bond market.
