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Informist, Monday, Jun. 1, 2026

 

--IIFCL MD: See borrowing cost rising by 10-15 bps in FY27 vs 7.03% FY26

--IIFCL MD: To raise funds primarily from domestic, overseas bond mkt FY27

--IIFCL MD: May raise funds via 5-10-year domestic bonds in June

--IIFCL MD: May raise funds from World Bank's MIGA in Jul-Sept

--IIFCL MD: To consider Japanese market, GIFT City for offshore funds

--IIFCL MD: Won't seek FX hedging cost waiver for foreign borrowing

--IIFCL MD: Need INR 30 bln-INR 35 bln growth capital over next 18 mos

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI – State-owned India Infrastructure Finance Co. Ltd.'s borrowing cost is likely to rise by 10-15 basis points in the current financial year due to higher bond yields, Managing Director Rohit Rishi said. The company will diversify its funding sources and is "well prepared" to offset the additional costs arising from higher borrowing rates, Rishi told Informist. 

 

The cost of borrowing for the non-banking financial company marginally declined to 7.03% in FY26 from 7.05% in FY25. Based on Rishi's comments, the financier's cost of borrowing in FY27 is likely to be between 7.13% and 7.18%. The yield on the 10-year benchmark government bond has risen more than 35 basis points to 7.02% since the outbreak of the war between the US and Iran at the end of February.

 

The company's board has approved a fundraising plan of INR 350 billion for 2026–27 (Apr-Mar), over double the INR 150 billion raised in FY26. 

 

According to Rishi, the company will raise funds predominantly through bond issuances this year, both domestically and overseas, as well as from multilateral institutions such as the World Bank Group's Multilateral Investment Guarantee Agency. The mix will, however, depend on the cost-effectiveness of each instrument, he said. "If you ask me today, domestic appears to be a better market to raise funds when compared to overseas," he said. "Because presently, hedging costs are also quite elevated. But it is a dynamic market; it can change very quickly." 

 

The annualised cost of hedging dollar borrowings into rupees is currently around 10%. Given this situation, IIFCL will draw funds from an already sanctioned credit line and raise resources through a domestic bond issuance in June, he said. "And for the next quarter (Jul-Sept), we will explore overseas bond issuance or some credit lines against MIGA (Multilateral Investment Guarantee Agency) guarantee," Rishi said. 

 

IIFCL, which is wholly owned by the government, was established in 2006 to provide long-term financial assistance to infrastructure projects. The company's primary mandate is to finance both greenfield and brownfield projects through direct lending, takeout finance, refinancing, and credit enhancement across infrastructure sectors. The infrastructure lender disbursed INR 330 billion in FY26, up 16% on year, and sanctioned INR 580 billion, up 13% on year. In FY27, IIFCL aims to sanction loans worth INR 750 billion and disburse around INR 390 billion.

 

While the company has not yet firmed up the quantum of funds it will raise from the domestic market, the tenure of the issuance will be for 5–10 years. "At the end of the day, it is the cost that matters and the duration of lending. Mostly, we will look for long-term issuance...being in the infrastructure sector, most of the time, we look for 10 years or more."

 

Even for overseas borrowing, IIFCL will prefer longer-duration bonds, including those over 10 years. It has already conducted research to gauge the pulse of different markets and is considering a few options, including raising funds in the yen market. "We can look at the Japanese market, we can even look at the GIFT City market," Rishi said. "And there are some DFIs (development finance institutions) which have raised funds on the US exchange. So, we will see which is beneficial from a cost perspective," he said.

 

IIFCL Projects Ltd., IIFCL's wholly-owned subsidiary, opened an office in GIFT City in December 2023 to attract international investors to the infrastructure sector. Rishi said that after studying various markets, the company believes the size of any overseas borrowing programme should be between $300 million and $500 million. "Less than that will not be of much interest to the markets," he said.

 

According to debt market participants, an AAA-rated company such as IIFCL will be able to borrow in dollar terms at a cost that is at least 150–200 basis points lower than the domestic borrowing rate. The current 10-year borrowing rate for an AAA-rated public sector undertaking is 7.80–7.85% in the local market. This means IIFCL may be able to borrow in dollars at a cost of less than 6%. For borrowing in yen, the cost will be even lower, according to debt market participants.

 

Rishi's comments come at a time when bankers and economists have urged the Reserve Bank of India and the government to take measures to attract capital inflows into the country. These measures include a concession of 150–200 basis points in dollar-hedging costs for banks and non-banking finance companies that tap the offshore market for funds. Rishi, however, said that the company will not seek any such concession from either the regulator or the Centre. 

"We are not going for this type of waiver because these are costs which we need to incur in the course of our regular business," he said. "We have adequate operating profits to take care of such costs," he said. The company's operating profit rose 19% in FY26 to INR 21.97 billion, and it maintained a capital-to-risk weighted assets ratio of 20.53% as of Mar. 31, well above the regulatory requirement of 15%. 

 

Its net profit, however, declined 13% to INR 13.79 billion in FY26 due to mark-to-market losses on its offshore borrowing portfolio. To prevent that again, the company will substantially increase the portion of its hedged borrowing to 90% from the current 75%. "To avoid that, in view of volatility in the market, we are going for more hedging," Rishi said. 

 

The company's initial public offering, which has already received Cabinet approval, will help boost its capital, he said. "We would need some capital...at least around INR 30 billion–INR 35 billion of growth capital will be required in the next 18 months or so," the managing director said. Part of this might come from the IPO, while the remainder could be raised through tier-I and tier-II bonds, he said. 

 

Rishi did not comment on the timeline expected for the public offering or the quantum of stake the government may cut. "I can't comment at this stage because market conditions are also to be considered. The divestment department is working on the modalities," he said.

 

Informist had reported in April that the government might look to sell 10-15% stake in the infrastructure lender. In the second half of 2025, the Union Cabinet approved the company's proposal for an initial public offering. The finance ministry will make a final call on the IPO structure in the next few months, officials had said. The government will evaluate various options before deciding on the proportion of the offer-for-sale component and fresh issuance of shares, they said.  End

 

Edited by Avishek Dutta

 

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