DUBAI: Kerala Infrastructure Investment Fund Board (KIIFB), the state’s principal infrastructure financing arm, continues to tap the debt market, with its latest Rs1,500-crore unsecured bond issue receiving a final rating from a leading agency.
Another Rs3,500-crore tranche is in the pipeline, taking the total rated bond exposure of KIIFB to about Rs10,650 crore.
Acuité Ratings and Researc has reaffirmed the rating at ‘AA (CE) /Stable’, underscoring investor confidence in the fund’s structured payment mechanisms and the explicit guarantee of the Government of Kerala (GoK).
The rating action converts a provisional rating on the Rs1,500 crore issue to final status, following completion of SEBI-mandated formalities, while the Rs3,500-crore tranche remains provisional pending trustee confirmation.
KIIFB serves as the nodal agency for financing critical infrastructure projects across Kerala, channelling funds raised through market instruments to various departments and project-specific entities.
Its borrowings are fully guaranteed by the state government and backed by dedicated inflows from the motor-vehicle tax and fuel cess, as stipulated in the KIIF Act.
While KIIFB’s model is developmental rather than profit-oriented – it posted a net accounting loss of Rs1,328 crore in FY 2025 – it maintains a comfortable liquidity position with nearly Rs7,940 crore in cash and equivalents and a corpus fund of about Rs3,892 crore.
Rating agencies view these buffers, along with the debt-service-reserve mechanisms, as strong mitigants.
KIIFB continues to prefer the bond market over bank finance, a route considered more cost-effective for long-tenor infrastructure funding.
“Market borrowings allow KIIFB to match project maturities, diversify its investor base, and secure relatively lower coupon costs compared with traditional term loans,” an investment banker told businessbenchmark.news in Dubai.
The reaffirmation of the high-grade rating also comes at a time when states face tighter fiscal space. KIIFB’s activity complements Kerala’s budgetary infrastructure spending, operating within a framework that is legally ring-fenced by dedicated revenue streams.
Financial analysts, however, note that the Centre and states continue discussions over the treatment of such guaranteed borrowings within overall fiscal parameters – a debate that has policy rather than credit implications.
For now, the stable rating and continued investor interest signal confidence in KIIFB’s governance structure, monitoring by the Fund Trustee and Advisory Commission, and the government’s commitment to ensuring smooth debt servicing.
