Infrastructure Finance Company

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Infrastructure Finance Company (IFC) as per the RBI

Enterslice provides assurance services by examining and analyzing the conditions of the infrastructure finance company to provide an independent assessment of governance, risk management, growth advisory, tax implications, compliance, due diligence and funding from the potential investors by presenting them an actual report of the company. The services by our professionals will help in the operational and management of IFC to prevent risks. We help you analyze the companies to attract funding for infrastructure purposes through financial, compliance, system security, and due diligence engagements. Our multidisciplinary teams deliver high-quality audits and innovation to provide value and transparency to offer exceptional services for your business. Enterslice helps in the Registration or incorporation of the Infrastructure Finance Company, complying with the laws and guidelines of the RBI. We work as trusted professional advisors to bring appropriate perspectives that help your business with decision-making and mitigating the risks.

Foreword about Infrastructure Finance Company (IFC)

An infrastructure finance company is a financial institution engaged in the business of providing a loan to companies doing Infrastructure in various infrastructure sectors. It has to be registered as an Infrastructure Finance Company by the Reserve Bank of India (RBI). An NBFC needs to meet the following conditions: at least 75% of its total assets must be dedicated to infrastructure loans, it must have a minimum net owned fund of 300 crores, a credit rating of ‘A’ and equivalent from a recognized rating agency, and a capital to risk-weighted asset ratio of 15% with Tier 1 capital at 10%. In the end, the final report must be supported by the statutory auditors at the end of the financial year. The RBI has permitted an IFC status to Indian Renewable Energy Development from Investment and Credit Companies to take higher exposure in RE financing.

Benefits of Opting Enterslice’s Services

Compliances

Enterslice provides a service of audits by checking the compliance of IFCs to the laws, rules, regulations, notifications, etc., for the functioning of the finance company for Infrastructure. Our team keeps a check and evaluates to determine whether your business aligns with existing regulations in that business.

Due Diligence

Enterslice provides the services of due diligence by collecting and assessing all of the necessary papers and information to give the investors an idea to analyze any risks about the companies or help the companies follow a systematic procedure for smooth functioning in the competitive world.

Decision Making

With the help of our team, in due diligence, you will get a pool of information that can contribute towards enhancing your decision-making, and our experts will help you in every possible manner while performing comprehensive research to mitigate risk and make proper decisions for proper functioning.

Infrastructure Finance Project: Major Sources of Funding

Public Finance

Enterslice helps IFC to attract funding from the government, sub-nationals and development institutions because these funding are some of the biggest sources of funding for Infrastructure Financing in various ways such as tax collections, tolls, etc., are funded in huge numbers for the infrastructures which have social values for the community.

Supra National Financial Institutions

Enterslice helps the IFC maintain financial stability by attracting funding from world banks, international monetary funds, Asian development, etc., for infrastructure projects such as urban projects like metro rails, bridges, etc. The internal rate of return required by these financial institutions is lower than that required by private institutions.

Private Finances

Enterslice attracts funds from private companies, which has emerged as the principal source for attracting private investments in Infrastructure. A wide range of financial instruments, such as debts or equity, for example, from mutual funds, etc., are used as a channel to save the money of the general public for infrastructure projects.

Public Private Partnership (PPP)

Enterslice helps IFC to get funding from the PPP model, which is used for infrastructure funding because of the partnership between government and private sectors where the government brings lands and other resources, and private parties collect money to generate revenue from infrastructure projects.

 

Engaging in Infrastructure Projects Advisory

Engaging in Infrastructure Projects Advisory involves guiding the Infrastructure Finance Company in the development of Infrastructure.

Project Identifications

Enterslice helps Infrastructure Finance Company identify the projects for development and funding, and this is a process of offering financial resources to implement specific projects or initiatives. We identify the projects to develop a proposal for the most appropriate set of projects with specific budgets or funds to address specific development goals. 

Feasibility Studies

We conduct a comprehensive study or research to assess the technical, financial and legal aspects of proposed projects. We conduct a detailed analysis that considers all of the critical aspects of an Infrastructure Finance Company’s proposed projects to determine the likelihood of success.

Regulatory Compliance

Enterslice helps the Infrastructure Finance Company adhere to laws, regulations, standards, and other rules set forth by the RBI and the government to maintain the development of the Infrastructure Finance Company in the market to help in the development of every infrastructure sector.

Financial Structuring

Our team of experts helps in the process of structuring the finances for the funding of the particular infrastructure sectors for more profits and safeguarding investors' investments. We help to balance the equity and debt that the IFC uses to fund the infrastructure sectors. Our financial structuring plans help us use the finances accordingly and get them backed by the collateral.

Financing Needs of Infrastructure Projects at Different Stages

Planning

Enterslice helps IFC with Infrastructure projects, which require planning to execute projects because there are requirements for large capital and many different parties are expected to work together, funding, checking of compliance, due diligence, drafting of contracts and agreements, strategies, risk assessment etc., are required to choose projects for funding but before that, the IFC needs to get registered as per the guidelines mentioned by RBI, banking regulations and other laws to work efficiently for infrastructures because long term of financing of the projects happens during this phase. Enterslice has an experienced team to assist the IFC by providing strategies and planning for functioning.

Execution

Enterslice helps the IFC in the longest phase of projects by attracting various stakeholders or investors to fund the IFC for the development of Infrastructure. The Infrastructure Development Finance Company (IDFC) provides finance and advisory services for infrastructure projects as well as asset management and investment banking for the execution of infrastructure projects, so our team of experts in Enterslice helps the IFC in attracting investment and providing structured financial solutions to execute the financing for the Infrastructure within a budget and develop a financial plan. This phase is where mismanagement of the projects occurs, so Enterslice helps the IFC choose a debt investor who can provide additional capital for Infrastructure at that stage.

Operations

This is the stage where the projects have been completely executed, and the debt and equity investors can exit the projects, but since the projects are ongoing and many other investors have invested in the IFC for the particular projects, the IFC needs to operate or scrutinize their exposures to the projects at any cost and plan strategies to mitigate the risk. Infrastructure projects have different financing needs at different stages, so Enterslice provides strategies to maintain the operations for the IFC in the development of the Infrastructure.

Position for Infrastructure Financial Company in the Market

Enterslice has modern digital technologies to analyze the target audience from digital identities to attract the attention of investors for the IFCs because the financial infrastructure market includes both public and private companies that provide funding for the Infrastructure. As of December 31, 2022, the infrastructure finance companies grew in line with the system and maintained their market share at around 54%. A World Bank report states that India will need to invest an average of around $55 billion per year into the urban Infrastructure in its needs to meet the fast-growing urban population, which means that the investment of $825 billion for the next fifteen years has to be invested in urban Infrastructure. As the Indian economy opened up, the government embraced infrastructure finance companies to expand their scope in the key infrastructure sectors by providing financing and other infrastructure developments. In FY 2023, the government focused on ESG to mobilize resources for the environmental Infrastructure and allow the NBFCs to fund activities such as renewable energy, etc. In 2030, investment will undergo a drastic change because the increase in digital technologies, such as currencies or identities, will help people around the world invest and attract more investors.

Registrations or eligibility norms of an Infrastructure Finance Company

The registration procedure for an IFC typically involves obtaining approval from the Reserve Bank of India.

Preparation

Enterslice team will conduct a thorough feasibility study to ensure the viability of the IFC and develop a detailed business plan outlining the proposed activities, infrastructure sectors to be financed and the projected financials.

Incorporation

The IFC is incorporated under the Companies Act, 2013 and complies with norms by RBI, such as a minimum of 75% of the total assets should be invested in infrastructure loans, the Capital to risk-weighted assets ratio (CAAR) of the company should be 15% with Tier I capital at 10%, and the minimum crediting rating of the company should be ‘A’ or equivalent by any other accrediting agencies.

Minimum Net Owned Fund

The company should have a minimum net worth of 300 crore rupees to be maintained by the infrastructure finance companies, and the net owned funds should include paid-up equity capital, free reserves, and redeemable preference shares.

Application to RBI

The application for Registration needs to be submitted to RBI and the regional office of the Department of Non-Banking Supervision of RBI.

necessary papers Required

The necessary papers required include an MOA, AOA, details of directors, business plans, shareholders, promoters, audited financial statements and detailed infrastructure project reports.

Approval of Certificate of Registration

After completing all the requirements and procedures, the RBI will issue a Certificate of Registration to operate an Infrastructure Finance Company.

Operational Commencement

After obtaining the certificate of Registration, the Infrastructure Finance Company can commence its operation with approved business plans.

Financial Selection Advisory

Enterslice helps in various aspects such as investment appraisals by attracting potential investors in investing in the IFC from the public or private sectors by recommending various investment plans and debt management tools to safeguard the money, performing due diligence in the functioning and funding the infrastructure sectors, making financial models by forecasting a future status of the infrastructure sectors. Our team of experts helps structure debt and equity in such a manner to avoid the risk of losses and maintain the development or growth of the IFCs by blackening the collateral securities to clear the debts or invest as additional capital in the infrastructure sectors. We monitor the performance of the operations or management of the IFC and the infrastructure sectors which are funded.

Growth Advisory for the Infrastructure Financial Company

The backbone of the Indian economy, the infrastructure sector is essential in improving the nation’s overall development. Enterslice helps determine the market by analyzing and performing thorough research on the infrastructure sector's market and its performance in India. After analyzing the market, we make strategies for the IFCs to fund or invest in those infrastructures whose development will provide a high rate of profits in the future. Our digital transformation in lending services, investing in Fintech solutions, or leveraging data analytics will help IFCs maintain growth. Our main focus is to maintain customer relationship management (CRM) or Know your Customer (KYC) for IFCs.

Implementation of Taxation for the Infrastructure Finance Company

Transfer Pricing Compliance

Enterslice has developed comprehensive transfer pricing Paper works tools that can help the Infrastructure Finance Company streamline its internal process and generate a reporting structure to support transfer pricing Paper works requirements. So, the related transfer pricing compliance methods of the infrastructure finance companies need to be followed while funding or investing as per the arm's length methods, so our team of experts helps IFCs comply with the transfer pricing methods for taxation.

Tax Planning

Section 80 IA of the Income Tax Act has a provision for a tax deduction for infrastructure sectors or businesses involved in developing, maintaining or operating. However, our professionals help IFCs plan taxation policies to achieve tax benefits and file a return or pay annual taxes as per the requirements and provide actual tax reports for the infrastructure finance companies. We perform tax planning to make sure there is tax efficiency so that we ensure all elements of a financial plan for IFCs.

Corporate Tax Compliance

Enterslice helps Infrastructure Finance Companies comply with corporate tax policies by analyzing the profits of the company to pay the corporate tax on that taxable income. Compliance with the corporate tax focuses on governance and regulations as the company is growing in the infrastructure sectors. However, our professionals guide the IFCs to not pay double taxes, avoid tax evasion and comply with the corporate tax guidelines stated by the Government of India.

Significance of the Indian Renewable Energy Development Agency (IREDA) getting the Infrastructure Financial Company Status

High Exposure

The IFC status will provide IREDA with high exposure in RE Financing, and RBI gives IFCs the same amount of attention as the NBFCs by giving them more benefits and facilities to maintain growth in the market.

Attract Investors

The IFC status will help the company attract or access investors for funding at competitive rates of fundraising, and this will increase the investors' confidence, enhance the company's value, and generate a positive impact in the market.

Infrastructure Development

The IREDA is promoting, developing and finances new and renewable sources of energy, and it finances all RE technologies in solar, wind, energy efficiency biofuel, etc. It plays a role in the development of RE sectors.

Contribution to Government

The IREDA keeps contributing to the government of India's targets of 500 GW installed capacity of non-fossil fuels by 2030, which will also enable it to maintain the IFCS as a leading financier position of RE Space.

Services to IFCs for maintaining Compliances

Data Protection and Privacy

The IFCs deal with a vast amount of sensitive data, including personal information, credit scores, etc., so Enterslice maintains data protection and privacy of all the data.

Environmental and Social Compliance

The increase in infrastructure sectors makes it important for the IFCs to comply with environmental and social compliance so our experts can keep a check to promote harmonization of its policies with financial institutions or investors.

Legal and Contractual Compliance

Enterslice ensures that the Infrastructure finance company complies with laws and that the parties comply with the contract's norms and procedures. We do periodic reviews of the existing contracts to determine compliance.

Audit and Internal Controls

Enterslice helps the IFCs in auditing of financial, statutory, internal, etc., and controls the management and operations functioning of the Infrastructure Finance Companies.

Role of IFCs in the Development Finance Landscape

The IFCs play a major role in the social and economic development of the country with emerging economic growth by advising, funding and assisting on the infrastructure development projects with the help of private sector investment, project financing, advisory services, etc., to reduce global poverty, supporting sustainable economic, social and institutional development and promoting regional cooperations and integrations. Our team helps to mitigate the risk by promoting innovations, investment plans of equity and debts and maintaining the environmental, social and governance of the IFCs. Our experts facilitate the PPP and bridge the gap between the public and private sectors. Enterslice takes steps to attract international infrastructure investors for the IFCs to maintain global connectivity.

necessary papers required for the Registration of IFCs

The important necessary papers are required for the Registration of the IFCs, and the rest of the necessary papers are required for NBFCs to register in India.

  • Incorporation necessary papers
  • Board Resolutions
  • Business Plan
  • Financial Statements
  • Credit Information Report of Promoters
  • Due Diligence Report
  • Infrastructure and Technology Arrangements
  • Projects Details
  • Environmental and Social Compliance Frameworks
  • Compliances Undertaking

Capital and other norms requirements by RBI

In lending to

The lending to any single borrower at 10% and 15% to any single group of borrowers of its own funds is 25% of owned funds for a single borrower of owned funds and 50% of any single group of borrowers of owned funds.

In lending and investing

A single party will receive 5%, and a single group of parties will receive 10% of their own money or 30% or 50% of their own funds.

In investment for both

The directions state that the investment in shares of another company should not exceed 15% of its owned funds, and for a single group of companies, it should not exceed 25% of its owned funds.

Roles of Micro Finance Company in Infrastructure Sectors for Rural Development

The main focus of microfinance companies is to serve the needs of poor people to motivate them to invest in the development of economic and social activities. Microfinance companies provide services to the marginalized sections of society which are deprived of getting those services even with so many growth and development policies and practices, and they provide small loans to SMEs or startups for economic and social development and to maintain the flow of the economy in the market. Focus on rural development requires infrastructure credit growth and providing small loans where the risk factors of non-repayment are low, due to which microfinance becomes the base for the country's economic development. Its support and extensive growth ultimately led to the country's rural economic development.

Risk Advisory to Infrastructure Finance Company

Enterslice helps the Infrastructure Finance Company in mitigating risk by identifying the risk related to infrastructure projects or preventing the company from internal risk by controlling internally. We help in the research or analysis of infrastructure projects to prevent future losses or any risk. Our team will help attract investors by blackening their investments to avoid marked and currency-related risks from making business plans in the future. Our professionals ensure that the IFCs are maintaining regulatory compliance and predict credit risk. The liquidity risk will be managed by our experts to ensure that cash needs are continuously met in various ways, such as ensuring diversified funding sources or by cash flow forecasting.

Enterslice’s Road to Success

Enterslice is one of the most highly regarded experts for the incorporation, advisory, risk and growth management for the Infrastructure Finance Companies. Our experts are a part of the various sectors, and they share their understanding and competence to aid effortless work across channels. In addition to risk management and controls, our professionals offer expertise in advisory. Enterslice’s in-depth financial, analytical, and economic proficiency has helped clients with better decision-making to provide 100% satisfaction.

Frequently Asked Questions

An infrastructure finance company is one of the categories of NBFC or a financial company that specialises in lending money or funding to infrastructure projects.

Yes, the India Infrastructure Finance Company Limited is an NBFC that is incorporated to offer long-term financial support to infrastructure projects through Special Purpose Vehicles (SPV).

It is a separate entity with its assets, liabilities and legal status that is incorporated to undertake a specific business purpose or activity such as asset securitization, joint ventures, and property deals or to isolate parent company assets, operations or risks.

The Indian Renewable Energy Development Agency (IREDA) has obtained status from the RBI.

The list of NBFCs registered with the RBI as of March 31 2023 is 9443.

The SREI has successfully offered solutions to its clients in Assets Finance and leasing in the infrastructure sectors.

The RBI superseded the boards of SREI Infrastructure Finance Limited and SREI Equipment Finance Limited in October 2021 due to governance concerns and failure to repay defaults.

With the approval of NCLT, the National Asset Reconstruction Company Limited has taken over the SREI.

NARCL is registered with RBI as an Asset Reconstructions Company under Securitization and Reconstruction of Financial Assets.

They offer debt advisory and debt arranging, capital raising, corporate, project and strategic advisory services.

Financial market infrastructure provides the settlement and recording of financial transactions.

IFC provides long-term finance to infrastructure projects in transportation, energy, water, education, social, and communication sectors, etc., for Infrastructure.

Larsen & Toubro (L&T) is the largest infrastructure company in India.

Infrastructure loans mean credit facilities extended by NBFCs to a borrower for exposure in the infrastructure sectors.

PF is for the long-term financing of infrastructure and industrial projects that are profitable.

The term credit facility means a term loan, projects loan subscriptions to bonds, debentures, preference shares, and equity shares in a project company acquired as a part of project finance for a long-term facility to a company engaged in developing, operating and maintaining Infrastructure.

Microfinance institutions are organizations that offer financial services to the population with low income, and they seek status from RBI to get access to funding.

A company has to be incorporated under the Companies Act 2013, and it can be a private as well as public company and gets registered under the Reserve Bank of India.

The IDF-NBFC is formulated to facilitate the flow of long-term debt into infrastructure projects.

The PPP is a public-private partnership model that is widely used in infrastructure funding, where public and private companies contribute to the funding. For example, government brings in land and other resources, and private companies bring technical expertise.

Any NBFC, including an IFC, can sponsor an Infrastructure debt fund.

It allows the pooling of money from individuals directly to invest in Infrastructure.

The infrastructure financing provided by the company allows the funding of the projects with reliable sources.

A key benefit of project finance is that it allows for the allocation of risks to those parties who are best to manage them.

There are three main types of NBFCs: Assets finance companies, investments companies and Loan companies. 

 

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