Banks see a boom in capex loans
With the demand for project finance picking up since late last year, bankers believe that the long-term fund requirement should rise anywhere between 12-15% this year.
Bank credit deployed in the infrastructure segment grew 10.2% year-on-year in April 2022, with roads, telecom and electricity leading the pack. According to the Reserve Bank of India, the outstanding credit to the sector stood at Rs 12 trillion by the end of March.reserve Bank of India,
As a result, banks are now gearing up to meet the demand for infrastructure projects in FY13, which they expect will be an even better year for the segment. Most of the demand in the infra segment is coming from large clusters such as roads, ports, airports, renewable energy, data centers and gas pipelines.
The projects for which the finance agreement is being done are Mumbai International Airport, Noida Jewar International Airport, Ganga Expressway, Hybrid Annuity Model (HAM) projects where the National Highways Authority of India (NHAI) has invited bids in the last four months. There are some solar projects and small port projects in Telangana, Odisha and Maharashtra.
Rajneesh Karnataka, Executive Director, Union Bank of IndiaThe said increase in the government’s capital expenditure and its intention to achieve 60% of the capital expenditure target by September 2022, suggests a strong credit off take in FY23. The government has budgeted Rs 7.5 trillion as capital expenditure for FY23.
“We are looking at all sectors and projects and wherever the project is viable and the promoter is strong, we are taking stake. There are also some refinance transactions happening in some thermal, renewable and road projects, where cash flow starts after There is a demand for refinancing,” said Karnataka.
The pick-up in demand has encouraged large private banks to take a share of the pie. HDFC bank, is known to avoid risky bets, participating in project finance transactions. For now, at least, the lender is sticking to the classic private-bank script of financing projects, where cash flows have already started arriving, rather than the commercial operation date (COD) being a few years away. Bankers say that the quantum of demand is enough to accommodate all the interested players.