ABSTRACT
Indian financial regulations prohibit foreign currency borrowings with maturities shorter than five years. At the same time, the pool of longer-tenor US dollar loans available to Indian companies for infrastructure projects is much more restricted. Hence, innovative structuring was required to balance these constraints. The combination of foreign currency and rupee debt helps the sponsors to lower the financing costs for the project, and enhances their returns from their investment. The structure innovatively addresses the cost over-run risk, refinance risk, foreign exchange risk and interest rate risk. IDFC has recently achieved the financial closure of two innovative highway projects. The first scheme is the Bangalore-Mysore Infrastructure Corridor (BMIC). Conceptualized in the mid-1990s, this integrated PPP infrastructure project comprises a 54km access-controlled, grade-separated ring road around the periphery of Indias IT hub, an 111km expressway between Bangalore and the neighbouring city of Mysore and well-planned townships along the expressway and at the interchanges.
