MUMBAI: The Indian Renewable Energy Development Agency (IREDA) will be opening its IFSC unit shortly that will help the green-energy-focused public sector financier mop up funds at much cheaper rates and thus lower its loan prices, a top official has said.
The IREDA had a runaway success in the capital market when it got listed last November and the shares have rallied more than sevenfold.
“We hope to get permission to open a unit in Gift City at the International Financial Services Centre (IFSC) in Gandhinagar in the next two to three months. Once the permission is in we aim to complete the process very shortly,” Pradip Kumar Das, chairman and managing director, told TNIE.
“Once we open the unit, we will tap all sorts of bonds, primarily green and social bonds from there. Given our latest S&P ratings, we are confident we can raise funds at a much lower rate now,”
Das also said, the discussions with the government on stake dilution are at an advanced stage, wherein it wants the government to pare up to 10 per cent. This will give at least Rs 4,500 crore of equity capital to the company, he added. Last month the board approved an equity raising plan worth Rs 4,500 crore.
"The process is in advanced stages, so maybe within a couple of weeks we will get the final news on that," Das said.
On other fundraising plans, Das said, the company needs at least Rs 24,000 crore of funds this fiscal to fund the loan sanctions.
IREDA also expects to be included in the list of companies that can raise funds through bonds covered under 54EC of the Income Tax Act, Das said. According to the Income Tax Act, investors making capital gains on the sale of immovable property can invest in 54EC bonds to save on long-term capital gains tax.
These are special bonds issued by infrastructure companies like REC, Power Finance Corp, the National Highways Authority, and Indian Railway Finance Corp.
He, however, said the quantum of funds to be raised from this instrument is yet to be decided. Though such bonds offer a lower rate of interest at 5.25 per cent, investors benefit from the tax exemption enjoyed by these instruments.
Investors can invest up to Rs 5 lakh in a financial year in these bonds, which have a lock-in period of five years.
It can be noted that S&P Global Ratings had last month assigned 'BBB-' long-term credit rating to IREDA (on par with the sovereign rating; extant norms do not allow any government-owned entities to be rated higher than the sovereign), with a stable outlook. This rating will enable it to expand its reach in the international debt market, tapping into attractive sources of funding and supporting its borrowing plan.
"We need to maintain the rating. While getting such a rating is very important, it is even more important to sustain the rating. So we're going about it very responsibly. Wherever we can get cheap money from overseas, we will tap it as this rating, will bring down the borrowing cost,” Das said.
“All development finance institutions and multilateral organizations have been associated with us since 1997 but, we haven't borrowed from them because the landed cost is high," he added.