Banks, Private Equity Firms Explore Last-Mile Financing Arrangement for Stalled Infrastructure Projects

Several top Indian banks, including ICICI Bank, Axis Bank, and State Bank of India (SBI), are in discussions with private equity firms such as Macquarie, Piramal, KKR, and I2 Capital to create a last-mile financing arrangement for infrastructure projects that have stalled due to a lack of funds. This innovative plan would allow private equity firms to invest in stalled projects, with the banks agreeing to give them priority in cash flows, potentially offering quick returns at some risk. Experts believe this would be the first time such a funding plan is being implemented.

Key Takeaways:

• The last-mile financing arrangement would involve private equity firms investing in stalled infrastructure projects, with the banks agreeing to give them priority in cash flows.
• The projects being considered for this arrangement have completed 80-90% of the work and require only a small amount of funding to generate cash flows.
• The investment amount is expected to be in the range of ₹400 crore.
• The private banks are more aggressively exploring this option, while public sector banks are cautious due to the risks involved.
• The banks would need to draw up separate pacts with the project company, overriding the existing ones.
• The private equity firms would either invest in equity or fund the project through their NBFC arms.

Statistics:

• The investment amount for the last-mile financing arrangement is expected to be ₹400 crore.
• The projects being considered have completed 80-90% of the work.
• The private banks are more aggressively exploring the last-mile financing option.
• The public sector banks are cautious due to the risks involved.

Sources:

• People aware of the matter, as cited in the article.
• ET (Economic Times) - mentioned as the source of queries sent to the banks and private equity firms.
• Expert opinion not attributed to a specific individual or source.