KOCHI: Even as it faces an Enforcement Directorate probe, the Kerala Infrastructure Investment Fund Board (KIIFB) is all set to repay the entire funds it raised through the issue of masala bonds by March-end as per schedule.
KIIFB raised Rs 2,150 crore through masala bonds in March 2019 and listed the bond on London Stock Exchange’s International Securities Market on April 1, 2019.
“We will be repaying the money on March 29-30,” said K M Abraham, chief executive officer, KIIFB. The confidence expressed by the CEO that the money will be repaid on time is significant given the cash-crunch the state government faces, resulting in delay in payments of social welfare pensions and disbursement of expenses due to contractors. The Rs 2,150 crore ($312 million equivalent) senior secured fixed-rate bond had a five-year tenure with a 9.723% coupon.
Sources said KIIFB has been maintaining funds in an escrow account for the past several months to ensure prompt repayment when the bonds mature in March-end. KIIFB’s income sources are two-fold. The state government allocates all petroleum cess receipts and 50% of motor-vehicle tax collected to a ring-fenced fund dedicated to KIIFB’s debt servicing.
These allocations amounted to Rs 2,470 crore in the financial year ended March 2023, according to Fitch Ratings. Certain quarters had expressed doubts, especially the opposition parties, about the prospect of a delay or a default by KIIFB on the repayment of masala bonds.
KIIFB, a wholly Kerala government-owned entity created to finance and implement key long-term public infrastructure projects, was the first sub-sovereign entity in India to raise funds through masala bonds. Some of the other Indian companies that have mobilised funds through masala bonds include HUDCO, Indian Railway Finance Corporation, Power Finance Corporation, REC Ltd and HDFC.
As on December 31, 2023, KIIFB disbursed funds totalling Rs 27,177 crore for various infrastructure projects in the state. These include land acquisition for industrial parks (three projects) for Rs 13,988 crore; Kochi-Bengaluru industrial corridor & gift city for Rs 1,198 crore and taking over land from HNL for Rs 200.6 crore.
In total, KIIFB has so far approved 1,073 projects worth Rs 82,426 crore.
Escrow account
Sources said KIIFB has been maintaining funds in an escrow account for the past several months to ensure prompt repayment when the bonds mature