RBI allows banks, NBFCs to float infra debt funds

Banks and NBFCs will now be able to sponsor IDFs, which can be set up either as Mutual Funds (MFs) or NBFCs, as per the guidelines issued by the RBI on Monday

Mumbai: The Reserve Bank of India (RBI) on Monday issued guidelines on Infrastructure Debt Funds (IDFs) paying the way for banks and non-banking finance companies (NBFCs) to float such funds, a move that will help in garnering long-term resources for the infrastructure sector, reports PTI.

Banks and NBFCs will now be able to sponsor IDFs, which can be set up either as Mutual Funds (MFs) or NBFCs.

“Scheduled commercial banks would be allowed to act as sponsors to IDF-MFs and IDF-NBFCs with prior approval from RBI,” the central bank’s guidelines on setting up IDFs said.

NBFCs with a minimum Net Owned Funds (NOF) of Rs300 crore and Capital to Risk Weighted Assets (CRAR) of 15% has been allowed to set up IDF-MF.

As far as Infrastructure Finance Companies (IFCs) are concerned, they can sponsor IDF-NBFC.

In order to accelerate and enhance the flow of long-term funds to infrastructure projects, finance minister Pranab Mukherjee in his budget speech had announced setting up of IDFs.

A bank acting as sponsor of IDF-NBFC shall contribute a minimum equity of 30% and maximum 49% in the fund, while for IDF-MF, they would have to follow the Securities and Exchange Board of India (SEBI) norms.

Also, investment by a bank in the equity of a single IDF-MF and NBFC should not exceed 10% of its paid up share capital and reserves.

For NBFCs, their non-performing assets (NPAs) should be less than 3% of net advances, should have been in existence for at least five years and earning profits for the last three years.

The investors in IDFs would be primarily domestic and off-shore institutional investors, especially insurance and pension funds which would have long term resources.

IDF-MF would be regulated by SEBI while IDF-NBFC would be regulated by the RBI. Earlier, the SEBI had issued guidelines in this regard.

The government has said that the infrastructure sector requires an investment of $1 trillion during the 12th Five Year Plan beginning next fiscal. Of this, 50% of the funding is expected to come from the private sector.

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SAT sets aside SEBI order on Dalmias buy-back of shares in OCL

Setting aside the order passed by SEBI, the tribunal observed that as the Dalmias already had a majority holding in OCL, such acquisition of share did not attract the provisions of the Takeover code

Mumbai: The Securities Appellate Tribunal (SAT) has set aside an order of market regulator Securities and Exchange Board of India (SEBI) against the Dalmias in the case of alleged violation of the Takeover Code in a share buy-back scheme of their flagship company OCL, reports PTI.

SAT’s order came on a petition filed by the Dalmias against a SEBI order which last year had held that Dalmias had violated the Takeover code as it has not come with a public announcement.

The market regulator had also started adjudication process against Dalmias.

Setting aside the order passed by SEBI, the tribunal observed that as the Dalmias already had a majority holding in OCL, such acquisition of share did not attract the provisions of the Takeover code.

Dalmias had 62.56% share in OCL. After the buy-back of 11,83,708 shares in 2003, the shareholding went up to 75%.

SAT observed that as it was a passive acquisition, there was no change in the control of OCL, which was already with the Dalmias.

“We are in agreement with the learned senior counsel for the appellants (Dalmias) that regulation 11(1) of the Takeover Code was not attracted to the facts of the present case and that they were not required to come out with a public announcement,” SAT said.

The issue came up three years after the closure of the buy-back offer. A company called Jindal Securities had filed a petition before the Delhi High Court alleging the promoters had triggered the Takeover Code through such passive acquisition.

SEBI regulations mandated for a public announcement for acquisition of more than 15% shares as per the then existing rules.

The high court directed SEBI to look into the issue, following which the market regulator had issued notice to the Dalmias in July 2007.

The promoters had submitted before SEBI that they had not acquired any additional share or voting right in OCL and, therefore, the Takeover Code cannot be initiated.

SEBI was not convinced with it and held that Takeover Code was violated. It also noted the fact in its order stating that “the market price of the scrip of the company (OCL) was much more than the offer price, the shareholders of the company would not benefit from the public announcement”.

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IDFC to up forex share in loan book; issues Rs5,000 crore bonds

“At present, out of our total borrowing, forex loans constitute around 8% and we plan to increase it to around 12% in the future,” IDFC executive director Vikram Limaye said on the sidelines of announcing the public issue of its tax-saving long-term infrastructure bonds

Mumbai: Infrastructure Development Finance Company (IDFC) plans to increase the forex loan share in its overall borrowing, to facilitate greater participation from overseas investors, reports PTI.

“At present, out of our total borrowing, forex loans constitute around 8% and we plan to increase it to around 12% in the future,” IDFC executive director Vikram Limaye said here on the sidelines of announcing the public issue of its tax-saving long-term infrastructure bonds.

The bond issue has opened for subscription from Monday till 6th December for retail investors, the company said.

This issue is the first tranche of bonds by the infra firm which aims to raise up to Rs5,000 crore though such an issue in the current fiscal.

In 2010, the company had received the IFC or infra finance company status within the NBFC category from RBI.

The five-year issue carries a coupon of 9%.

Last fiscal, IDFC had raised Rs1,451 crore from over 7.3 lakh retail investors.

About total borrowing basket, Mr Limaye said while around 63% of the money is raised through bonds or debentures, rest is through rupee and forex loans and sub-debts among others.

“All of our foreign loan exposure is fully hedged and we don't see any stress due to current fluctuations,” he added.

Referring to the concerns on asset quality in the power sector, he said his company did not have any exposure to the state electricity boards (SEBs).

While 42%-43% of total loan of IDFC is for the power sector, around 24% is to transportation and telecom sectors each.

“Going ahead, the ratio may change if the policy bottlenecks continue in the power sector. However, we are of the opinion that things will improve in the future,” Mr Limaye said.

IDFC had posted net profit of Rs524 crore for the September quarter, 55% up over the same period last year.

Its total income rose 41% to Rs1,715 crore in the same period up from Rs1,217 crore.

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