Board-sponsored asset management company soon
THIRUVANTHAPURAM: The KIIFB-sponsored asset management company (AMC) is fast progressing and once established will be able to mobilise funds from all types of investors through various investment structures such as Infrastructure Investment Trust (InVIT), Alternative Investment Fund (AIF), Infrastructure Debt Fund (IDF), Mutual Funds, etc.
Clarifying KIIFB’s stand in the wake of the ongoing debates surrounding Kerala’s debt and the need for furthering the quantum of debt, thanks to the devastating floods that broke the back of the state’s economy, the fund Board’s chief executive officer, Dr KM Abraham (seen in the picture) categorically said that the KIIFB borrowings will neither dent the state finances nor would it multiply its debt.
”The impact [of KIIFB] on the state budget will therefore be minimal, whereas the gains from the massive infrastructure asset formation will propel the state’s revenues,” he stated in a KIIFB document released recently.
Though these announcements may not put to rest the apprehensions about KIIFB, albeit some being alleged to be politically motivated, Dr Abraham says the people can rest assured that the KIIFB borrowings could, to a good extent, be taken care of by the one per cent cess from petroleum products and cut from motor vehicle tax (MVT).
The contribution from MVT is so designed that it starts with 10 per cent in the first year and increases by 10 per cent every year in stages until it reaches 50 per cent.
“KIIFB will be raising Rs50,000 crore for infrastructure development in 5 years and that too without having to pledge any collateral assets, Dr Abraham explained.
The high volume institutional borrowings come without any collateral security, as the lender relies solely on the credibility of the borrower based on cash flows and credit rating.
“Credit rating primarily takes into account the financial stability, creditworthiness and track record based on several parameters. In connection with a proposed General Obligation Bond issue, the top-ranking rating agencies ICRA and CRISIL have accorded an initial credit rating of A+ to KIIFB in terms of a Structured Repayment Obligation,” he further added.
Besides, the Act provides for the implicit guarantee backing of government. NABARD has already accorded in-principle sanction for a long-term loan of Rs4000 crore, of which, Rs100.80 crore has already been disbursed. HUDCO as well as several banks has come forward to finance KIIFB projects.
Indian rupee-denominated ‘Masala Bonds’ are proposed to be issued in Singapore and UK shortly. “The novel Pravasi Chitty being launched by KSFE with KIIFB assistance will be the cheapest and biggest source of KIIFB funds,” Dr Abraham exuded confidence.
KIIFB hopes that 25 per cent of the projects would be able to add not-so-bad revenues to the kitty and this will help the Board in its repayment drive.
The KIIFB chief says that the projected average monthly yield from MV Tax and the petroleum cess that alone comes to Rs540 crore, plus the 25 per cent expected yield from self-supporting projects, i.e. Rs150 crore , will sufficiently support the repayment.
The amendments made to the KIIFB Act ensure that any shortfall in KIIFB funding will be made up mandatorily through budgetary support. Moreover, there is an implicit Government guarantee to all repayments to the borrowings of KIIFB under the Act itself. There are several layers of protection built into the process of borrowing and investments by KIIFB. These are more than enough to guarantee that a100 per cent accountability is built into all transactions that KIFFB carries out.