Technical Assistance Consultant’s Report

Project Number: TA - 8279 July 2015

Asian Development Bank : Preparing the Bond Guarantee Fund for India – 1 Consulting Firm (44447-012)

CONFERENCE REPORT

Prepared by:

CRISIL Infrastructure and Risk Solutions Ltd , India

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

CONTENTS

I. INTRODUCTION ...... 1 A. Structure of report ...... 3

II. CONFERENCE AGENDA ...... 4

III. LIST OF PARTICIPANTS ...... 5 A. List of panelists ...... 5 B. List of speakers ...... 6 C. List of attendees ...... 9 D. Participants from the steering committee ...... 11 E. Participants from CRISIL/ADB ...... 12

IV. CONFERENCE PROCEEDINGS ...... 13 A. Key takeaways from the panel discussion ...... 14

List of tables

Table 1: Agenda for seminar on Bond Guarantee Fund for India (Mumbai) – June 30, 2015 ...... 4

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CURRENCY EQUIVALENT (As of July 2015)

United States Dollar (USD) 1.00 = Indian Rupees (INR) 63

ABBREVIATIONS

ADB - Asian Development Bank AGM - Assistant General Manager BGFI - Bond Guarantee Fund for India CEO - Chief Executive Officer CFO - Chief Financial Officer CIO - Chief Investment Officer CRIS - CRISIL Risk and Infrastructure Solutions DEA - Dept. of Economic Affairs DFS - Dept. of Financial Services IAS - Indian Administrative Service IIT - Indian Institute of Technology SEBI - Securities and Exchange Board of India IRDA - Insurance Regulatory and Development Authority PFRDA - Pension Funds Regulatory and Development Authority MoF - Ministry of Finance, Govt. of India RBI - USA - United States of America UTI - Unit Trust of India

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I. INTRODUCTION

1. The Ministry of Finance (MoF) has requested the Asian Development Bank (ADB) to examine the modalities, scope and potential for the establishment of the Bond Guarantee Fund for India (BGFI) that supports the development of the local currency bond market to meet India’s infrastructure and non-infrastructure financing requirements.

2. CRISIL Infrastructure Advisory (CRIS) has been mandated with designing such a fund. The assignment is being undertaken with a technical assistance grant from ADB and under the aegis of the MoF.

3. To oversee the progress of this assignment, the MoF has constituted a steering committee comprising the following representatives from the Department of Financial Services (DFS) – Chairperson of Department of Economic Affairs (DEA), Observer from Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).

4. The first meeting with the steering committee was held on June 2, 2014, wherein CRIS presented the objectives of the study and detailed work programme – approach and methodology, work plan and deliverables’ schedule. Thereafter, a detailed inception report was submitted by CRIS on June 23, 2014, presenting the aforementioned details.

5. The second meeting with the steering committee was held on August 11, 2014, wherein a detailed market assessment report was submitted by CRIS. This report discussed the long-term debt funding requirements of the infrastructure and non-infrastructure sectors in India along with various issues and concerns faced by the sector in accessing traditional sources of finance. It also highlighted alternative sources of financing available, such as the bond market and the relevance of credit enhancement in the current scenario of Ltd corporate bond issuances in India. Based on this analysis, the report established the need for BGFI and presented some of the key issues and discussions with stakeholders on these issues.

6. The third meeting with the steering committee was held on December 17, 2014, wherein the interim report was presented. The report discussed the detailed business plan for the entity, and established its financial viability. Subsequently, the steering committee met on April 9, 2015, to discuss the final report of the study, which presented an optimal structure for BGFI and described in detail the capitalisation structure, legal framework, corporate governance framework and the environmental and social safeguards framework for the fund.

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7. This document – the conference report – is the fifth deliverable of this study. This report aiMs. to summarise key findings of the seminar on developing the BGFI, held on June 30, 2015, in Mumbai. The Seminar was aimed at imparting awareness regarding the value preposition offered by the facility to the various stakeholders including the developers, and investors. It was also aimed at receiving feedback from the stakeholders so as to make n infrastructure financing on India

A. Structure of report 8. This report is structured as follows:

A. Chapter I – Introduction B. Chapter II – Conference agenda C. Chapter III – List of participants D. Chapter IV – Conference proceedings.

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II. CONFERENCE AGENDA

Table 1: Agenda for seminar on BGFI (Mumbai) – June 30, 2015

9:30 am to 10:00 am Registration

10:00 am to 10:10 am Welcome note – Mr. Bruno Carrasco, Asian Development Bank

10:10 am to 10:20 am Opening address – Shri Alok Tandon, Joint Secretary, Department of Financial Services

10:20 am to 10:45 am ADB’s credit enhancement of project bonds facility and lessons for the BGFI – Mr. Don Lambert, Asian Development Bank

10:45 am to 11:15 am Overview of the BGFI – Mr. Raman Uberoi, President, CRISIL

11:15 am to 11:30 am TEA/COFFEE BREAK

11:30 am to 11:50 pm Learnings from international facilities – Mr. Prasad Koparkar, President, CRISIL

11:50 pm to 12:50 pm Panel discussion along with Q & A – ‘Thoughts and recommendations – Issuers and investors’

12:50 pm to 12:55 pm Concluding remarks – Shri Ateesh Singh, Director, Department of Financial Services

12:55 pm 1:00 pm Vote of thanks – Mr. Sameer Bhatia, President, CRISIL

1:00 pm onwards Networking & Lunch

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III. LIST OF PARTICIPANTS

A. List of panelists 9. Mr. Lok Mishra, General Manager - Wholesale Banking Group & Head of Structured Finance, ICICI Bank Ltd

Mr. Lok Mishra is General Manager – ICICI Bank Ltd He heads the Corporate Banking Group (Western Zone), Capital Markets and also heads the Structured Finance Group.

In his current assignment, he is responsible for developing and implementing strategies for growing the bank’s corporate banking business. Mr. Mishra has a rich experience of over 20 years with ICICI Bank Ltd, primarily in the area of corporate finance. He handles large corporate relationships for the bank and is a well-known banker amongst top promoters, CEOs and CFOs. He also has extensive knowledge about various sectors of the Indian economy.

He has structured and concluded several large corporate funding deals. His areas of expertise are structured finance, corporate finance, M&A funding, restructuring and recovery of stressed assets, trade finance and cash management services. Mr. Mishra is an MBA in finance and a Certified Associate of the Indian Institute of Bankers.

10. Mr. Jitendra Jain, CFO, Corporate Finance, GMR. Group

Mr. Jain has being working for more than 21 years in financial markets in areas such as treasury and forex management, investor relations, M&A, asset liability & risk management, equity / debt capital markets & corporate finance.

Before joining the GMR. Group in July 2009, Mr. Jain worked in the Treasury department of one of India’s leading public sector banks in Kolkata, as a fixed income fund manager with a leading private sector asset management company in India, and in the finance department of a major company, handling treasury, corporate finance, and investor relations & strategic planning functions.

Mr. Jain is an engineering graduate with post-graduate Diploma in Management, Certified Associate of Indian Institute of Bankers (I) and Diploma in Operation Research. He is also a gold medalist in the Diploma in Business Finance course from the Institute of Certified Financial Analysts of India, Hyderabad.

Mr. Jain is a regular speaker at various financial markets, seminars, conferences and foruMs. He has been quoted extensively on various newswires.

11. Mr. Kailash Vaswani, Deputy Chief Financial Officer at ReNew Power

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Mr. Vaswani has more than 10 years of hands-on experience in corporate finance and investing. He has spearheaded a team that resulted in Goldman Sachs raising funds of $200 million for ReNew Power. As part of ReNew, he has been leading the efforts to raise cumulative debt of $540 million for various projects of the group.

As an investment professional, he has looked at investment opportunities in renewable energy, retail, real estate, metals and information technology sectors. He brings a wealth of diversified experience and is equipped to offer the best possible advisory solutions to his clients.

Prior to ReNew Power, he worked with the Corporate Finance and Investments division at Saffron Asset Advisors and Aditya Birla Group. His key strengths include transaction structuring, negotiations, strategic analysis and corporate finance advisory.

A chartered accountant by profession with leadership training from Harvard Business School in real estate, Kailash has worked on transaction closures for leading Indian and international business houses.

12. Mr. Rakesh Singh, Group Head - Investment Banking, Capital & Commodity Markets, HDFC Bank

Mr. Rakesh Singh holds a Bachelor of Science degree from St Xavier's College, Ranchi and Hansraj College, Delhi. He also holds a Post-graduate Diploma in Business Management from the Institute of Management Technology, Ghaziabad.

He has over 21 years of experience in debt and equity capital markets, structured finance, leveraged finance, debt restructuring and managing proprietary investments.

Prior to joining HDFC Bank in 2011, he has worked with ANZ Investment Bank, Standard Chartered Bank, Morgan Stanley and Rothschild. He has led successful capital raisings for several Indian corporate houses and financial institutions and currently heads the investment banking, capital and commodity markets business in the bank.

B. List of speakers 13. Shri Alok Tandon, Joint Secretary, Department of Financial Services, Ministry of Finance, Government of India

Shri Alok Tandon is a member of the Indian Administrative Service. He has a bachelor’s degree in electrical engineering from IIT (Kanpur) and has also won the President’s gold medal.

He has held various positions in the Government of Uttar Pradesh including Joint Secretary, Department of Heavy Industries and District Magistrate of three districts – Maharganj, Allahabad and Varanasi. He has also worked as the Chairman and Managing Director of UP Rajya Vidyut

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Utpadan Nigam, Lucknow. He is currently holding the post of Joint Secretary, Ministry of Finance, since October 2011.

Mr. Tandon finished his Master’s degree in Public Policy from Princeton University in 2006 and won the Chevening Gurukul Scholarship awarded by British Government in 2010.

14. Shri Ateesh Singh, Director, Department of Financial Services, Ministry of Finance, Government of India

Shri Ateesh Singh is a member of the Indian Railway Traffic Service and has over 15 years of experience in civil administration, policy formulation and implementation. He holds a bachelor’s degree in economics from Hindu College, Delhi University.

He currently serves as a director in the Ministry of Finance, Government of India, working in areas such as – policy formulation, policy execution, coordination with provincial administration, coordination with various regulators in the financial space, monitoring governmental schemes and plans.

He has been a part of the board of directors of Bank of Maharashtra since July 2012 and Irrigation and Resources Finance Corporation Ltd since April 2014.

15. Mr. Bruno Carrasco, Director of the Public Management, Financial Sector, & Trade Division, SARD of Asian Development Bank

Bruno Carrasco first joined the Asian Development Bank in 1993 as a young professional. In 2003, he served as principal financial economist in the South Asia department. He became Director, Country Coordination and Regional Cooperation, in 2008. Two years later, he was appointed Director, Public Management, Financial Sector and Trade Division. During 2000-03, he was on leave and worked as Senior Economist at the European Central Bank.

Mr. Carrasco is currently Chair of ADB’s Financial Sector Group and formerly served as Chair of the Governance CoP. Mr. Carrasco has a Ph.D. in Economics from Essex University, United Kingdom, and a Masters in Economics from the University of British Columbia. Most recently, he has co-edited the book on “Managing Capital Flows, Issues in Selected Emerging Market Economies” by Oxford University Press. His research interests include applied policy in financial economics, monetary and fiscal policies.

16. Mr. Don Lambert, Senior Finance Specialist, Financial Sector, & Trade Division, SARD of Asian Development Bank

Don Lambert is a senior finance specialist at the Asian Development Bank. His previous positions at ADB include Head of the ADB's Corporate Recovery Unit and risk management specialist focusing on financial institution credit risk.

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Prior to joining the ADB, he was with the United States Federal Reserve. Don holds a bachelor’s degree from Princeton University, a master’s degree from Harvard University and is a CFA charterholder.

17. Mr. Raman Uberoi, Business Head - CRISIL Ratings, Large Corporates

Raman Uberoi currently leads CRISIL’s large corporates ratings business. Raman joined CRISIL in 1992 and has held leadership roles since 2007 across a wide portfolio. Within the ratings segment, he has extensive experience in large, mid- and small enterprise ratings, including formulating business strategies, managing client relationships, and ensuring quality and consistency of ratings.

In his earlier role as CRISIL’s Chief Operating Officer, he was responsible for Finance, Administration, Technology, Legal, Compliance, Communication, Marketing and Investor Outreach, among others. Raman has also led the CRISIL Risk & Infrastructure Solutions business and the CRISIL Foundation, the company's Corporate Social Responsibility platform. Additionally, Raman’s exposure to emerging capital markets globally contributes to his robust knowledge base. He has been part of committees formed by SEBI and the MoF for development of the Indian capital markets.

Raman is an associate member of The Institute of Chartered Accountants of India.

18. Mr. Sameer Bhatia, President, CRISIL Infrastructure Advisory

Sameer Bhatia is the President of CRISIL Infrastructure Advisory, a division of CRISIL Risk & Infrastructure Solutions Ltd (CRIS), which is a fully owned subsidiary of CRISIL. CRISIL Infrastructure Advisory is one of the leaders in the areas of infrastructure policy, development and transaction advisory services.

Sameer has more than 20 years of rich consulting experience across business strategy, corporate & competitive strategy, project feasibility, new market entry and process & operations improvement.

He has strong domain expertise across a range of sectors including energy & resources (oil & gas, power & mining), transportation and logistics, real estate & special economic zones and industrial products manufacturing & services. Sameer has handled more than 250 consulting engagements across these sectors, as partner/engagement leader.

Apart from advising large corporates and government/PSUs in India, he has also worked with clients in the Middle East, Asia-Pacific and large multi-nationals (MNCs) across the globe. Sameer has a strong track record of leading the Advisory practice in the Middle East, based out of Dubai.

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Sameer has a post-graduate diploma (MBA) in Business Administration from Symbiosis Institute of Business Management (Pune) and a degree in electrical engineering from VJTI, Mumbai.

Prior to joining CRISIL, he was a Senior Director (Partner) in Deloitte’s consulting practice in India.

19. Mr. Prasad Koparkar, Senior Director, CRISIL Research

Prasad currently leads industry and customised research at CRISIL Research. He oversees the Industry, Customised and Equity Research business with a team-size of over 150 professionals.

Prasad joined CRISIL in 2002. Previously, he headed the Rating Criteria & Product Development and Structured Finance teaMs. in CRISIL Ratings for nearly a decade. His overall experience spans over two decades across credit rating, equity research and fund advisory businesses.

Prasad is a Chartered Accountant and a Cost Accountant from ICWA. In addition, he has also cleared exaMs. conducted by the CFA Institute (USA) and the Global Association of Risk Professional (GARP), USA.

C. List of attendees

Table 2: List of attendees Organisation Name Designation

1. UTI Capital Funds Ltd Mr. K. Mukundan CEO

2. IIFCL Mr. Naresh Goyal Deputy General Manager

3. IIFCL Mr. Neeraj Gupta Assistant Manager

4. GMR. Group Mr. Mitesh R. Jain Associate Manager - Corporate Finance

5. IL&FS Energy Mr. Avinash Bapat Group CFO

6. Tata Power Ltd Mr. Kailash Mali EA to CEO

7. Tata Power Ltd Mr. Arun Viswanathan Group Head - Treasury

8. Maharashtra Maritime Mr. Ashish Sharma CEO Board

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9. Cyril Amarchand & Ms. Niloufer Lam Partner Mangaldas

10. Cyril Amarchand & Ms. Ayushi Anand Associate Mangaldas

11. Cyril Amarchand & Mr. Soummo Biswas Senior Associate Mangaldas

12. IDBI Asset Management Mr. Abhishek Iyer Analyst, Fixed Income

13. Hero Future Energies Mr. Rajesh Puri SVP, Finance

14. CLP India Ltd Mr. Prashant Narkhede Manager, Corporate Finance

15. Essel Infraprojects Ltd Mr. Chetan Sharma President - Finance & Strategy

16. HSBC Global AMC Mr. Tushar Pradhan CIO

17. Ashoka Buildcon Ltd Mr. Sandeep Bamb GM, Finance

18. ICICI Securities Mr. Ray Head, Debt Capital Markets

19. DSP Blackrock Mr. Anil Gelani Vice President Risk Investment Managers Management & New Product Development

20. SBI Funds Management Mr. Rajesh Keswani VP, Investment Banking Ltd

21. ICICI Bank Mr. Raman Mahajan Manager

22. ICICI Bank Mr. Prateek Srivastava Manager

23. SBI Mr. D.P.Singh CIO

24. Maharashtra Maritime Mr. Ashish Sharma CEO Board

25. ReNew Power Ventures Mr. Anant Jain Senior Manager Ltd

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26. ICICI Bank Mr. Abeer C. Manager

27. ICICI Bank Mr. Rahul Lachhiramka Manager, Structured Finance Group

28. Afcons Infrastructure Ltd Mr. Arvind Sagar Executive Vice President

29. Afcons Infrastructure Ltd Mr. Parag Bhargava AGM - Strategy Planning

30. IDFC Mr. Jayen Shah Director

31. IDFC Mr. Gaurav Sharma Director

32. L&T Infra Finance Mr. Jagan A. Debt Capital Markets

33. L&T Infra Finance Mr. Abhilash Pillai Assistant General Manager – Debt Capital Markets

34. UTI Mutual Funds Mr. Siddharth Senior Associate Vice Sivaramakrishnan President 35. UTI Mutual Funds Mr. Sunil M. Patil Fund Manager

36. CRISIL Mr. Pawan Agrawal Senior Director, CRISIL Research 37. CRISIL Mr. Ajit Velonie Director, CRISIL Ratings 38. CRISIL Mr. Siddharth Arora Director, CRISIL Ratings

39. CRISIL Mr. D.K.Joshi Chief Economist, CRISIL Ltd

40. CRISIL Mr. Amit Vora Director, CRISIL Risk Solutions

41. CRISIL Mr. Rohit Chaturvedi Director, CRISIL Infrastructure Advisory

42. CRISIL Mr. Guruprasad Iyer Associate Director, CRISIL Infrastructure Advisory

D. Participants from the steering committee A. Mr. Alok Tandon, DFS

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B. Mr. Ateesh Singh, DFS C. Ms. Sumeer Kaur Kapoor, PFRDA D. Ms. Latha Vishvanath, RBI E. Mr. Srinivasa Rao, IRDA F. Mr. Sandeep Kriplani, SEBI G. Mr. Praveen Kumar, DEA

E. Participants from CRISIL/ADB ADB

A. Mr. Bruno Carrasco B. Mr. Don Lambert CRISIL

A. Mr. Raman Uberoi, President, CRISIL Ltd B. Mr. Sameer Bhatia, President, CRISIL Infrastructure Advisory C. Mr. Prasad Koparkar, Senior Director, CRISIL Research D. Mr. Karthik Krishnan, Associate Director, CRISIL Infrastructure Advisory E. Ms. Tulika Vardhan, Consultant, CRISIL Infrastructure Advisory

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IV. CONFERENCE PROCEEDINGS

1. The seminar imparted awareness regarding the value proposition offered by the proposed Bond Guarantee Fund to key stakeholders. More than 40 representatives including Mr. Alok Tandon, Joint Secretary, Department of Financial Services, Ministry of Finance, representatives from all financial market regulators (SEBI, IRDA, RBI, PFRDA) & DEA participated in the event. The attendees included senior representatives from various bond market participants in India, along with potential bond issuers of the infrastructure sector, mutual funds, insurance companies and banks.

2. Mr. Bruno Carrasco (Director, Public Management, Financial Sector and Trade Division, SARD of Asian Development Bank) delivered the opening address, highlighting the Asian Development Bank’s involvement in developing the infrastructure finance sector in India. Mr. Carrasco also thanked the Ministry of Finance for their continuous support towards the ADB’s initiatives.

3. Following the opening address, Mr. Alok Tandon, IAS (Joint Secretary, Department of Financial Services, Ministry of Finance) addressed the gathering, emphasising the criticality of infrastructure for the economy’s growth and the government’s vision of investing $1 trillion in infrastructure over the Twelfth Five-Year Plan period (2012-17). Mr. Tandon also stressed the immense funding gap that exists in the infrastructure sector and stated that the government is keen to support the development of funding mechanisMs. that can help reduce this gap.

4. During the seminar, Mr. Don Lambert, CFA (Senior Finance Specialist, Financial Sector, & Trade Division, South Asia Department of the Asian Development Bank) shared lessons from ADB’s previous experience with credit guarantee schemes in India1 while Mr. Prasad Koparkar (Senior Director, Ratings) spoke about similar guarantee facilities existing worldwide2.

BGFI presentation_ CEPB lessons learned .pdf 1 For Full Presentation -

BGFI_ Learnings from International Facilities.pdf 2 For Full Presentation -

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5. Mr. Raman Uberoi (President, CRISIL) presented the key features of the proposed fund to the stakeholders3. An insightful panel discussion, moderated by Mr. Uberoi, was held as part of the seminar to receive feedback on the facility from the stakeholders. The panelists included Mr. Rakesh Singh (Group Head - Investment Banking, Capital & Commodity Markets, HDFC Bank), Mr. Lok Mishra (General Manager - Wholesale Banking Group & Head of Structured Finance, ICICI Bank Ltd), Mr. Kailash Vaswani, (Deputy Chief Financial Officer at ReNew Power) & Mr. Jitendra Jain, (CFO, Corporate Finance, GMR. Group).

6. Mr. Ateesh Singh (Director, Department of Financial Services, Ministry of Finance) concluded the seminar and affirmed the need for the facility, as established during the panel. Mr. Singh also acknowledged the various challenges that lie ahead in establishing the entity and requested all stakeholders present to support the initiative.

7. Mr. Sameer Bhatia, (President, CRISIL Infrastructure Advisory) delivered the vote of thanks by appreciating the insights provided by the panelists and the audience that would serve as key inputs while structuring the products of the proposed Bond Guarantee Fund.

8. All participants endorsed the proposed fund and agreed that the Bond Guarantee Fund for India could potentially play a key role in funding the infrastructure demands of the country, while promoting development of the currently nascent bond market in India. The conference was instrumental to gauge market sentiment on the proposed BGFI. It also provided for the right environment for the various participants from government, regulators, investors and financial institutions to dialogue and give their feedback to strengthen the final report and fine tune the findings and recommendations in advance of the final steering committee meeting and proposed next steps including proposed establishment of BGFI and submission to DEA for ADB financing.

A. Key takeaways from the panel discussion

 The bond market in India, though nascent, is likely to grow faster in the coming years as there is a perceived improvement in the state of the economy and infrastructure projects.

o Credit rating upgrades pertaining to infrastructure issuers are imminent in the near future. Hence, an increase in bond issuances is expected.

BGFI_Introduction Features.pdf 3 For Full Presentation -

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 Credit enhancement is a welcome step towards enabling access to the bond market. However, the guarantee structure has to be simple and easy to understand. The guarantee process has to be quick, providing sufficient savings.

o Pension funds are likely to have a huge corpus of long-term funds over the years. Credit enhancement provided by the BGFI would definitely help in accessing these funds.

o Relatively complex structures such as the partial credit guarantee are not appreciated by a major chunk of bond market investors – especially pension funds. The complexity may be increased over time, when the market develops the knowledge of instruments.

 BGFI has to achieve a significant scale over a period of time to be successful and profitable

o In order to achieve the required size and scale, the infrastructure sector will be very ideal, given the large ticket size. Apart from infrastructure, BGFI may target the core sectors - steel manufacturing & mining - that are capital intensive in nature. BGFI may also target sectors such as affordable housing. Increased fund flow to these sectors would directly result in economic development, while helping BGFI to achieve the scale.

 Speedy processing of the guarantee and timing of the launch are very critical for BGFI’s success. It was accepted by all the panelists that it is the right time to launch BGFI, given the large number of projects and softening of interest rate. It was also noted that the long documentation process for securing IIFCL’s partial credit guarantee facility was a deterrent for the facility’s success.

o The panel agreed that the documentation and credit analysis processes would be improved / standardised over time, which would solve this problem. However, it was suggested that BGFI should work on the procedures for processing and documentation before the launch, so that the delay could be reduced.

 It is imperative for the guaranteeing entity to find the right balance between what is a good business model and what is the benefit to the investor/issuer. A ‘one size fits all’ approach for designing the guarantee structure is not feasible for the infrastructure sector. The features of the guarantee will have to be modified depending on the project’s parameters.

o For example, a renewable energy segment may need a different structure compared with a thermal energy segment, given the variance in capital costs, operating costs and cash flow.

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o The market could develop floating rate bonds to tackle the problem due to lock-in of interest rate at the current high levels. However, it may take some time to develop these instruments.

 Current laws /regulations that limit investors from investing in infrastructure bonds need to be amended prior to BGFI starting its operations. For example,

o IRDA regulations pose probleMs. for insurance companies investing in bonds issued by infrastructure SPVs

o The Insurance Act forbids insurance companies from investing in private limited companies.

 Guarantee products will serve as competition to banks’ existing product – bank loans. Bank loans to the infrastructure sector are abundant in the market, and are standardised with respect to terMs. and documentation. On the other hand, guarantees are currently nascent and not well-understood in the market. A comfort level similar to that of bank loans will have to be provided by guarantees in order to compete with bank loans.

o The acceptability of new products by the markets increases over time. Gradually, the market will accept BGFI’s guarantee products.

 The panel endorsed the public-private ownership model for BGFI, as explained by Mr. Don Lambert during his presentation. The panel also expressed confidence that BGFI could attract private investors (shareholders), if the entity has independent and competent management.

 Hence, if the structure of the guarantee is flexible enough to accommodate the needs of the issuer and the regulations are amended well before operations commence, most infrastructure developers will be drawn towards the products offered by the BGFI. All the panelists endorsed the importance of BGFI to revive the bond market in India.