The International Finance Corporation has made a sizeable investment in a non-banking financial company in India to bolster financing renewable energy projects.
PTC India Financial Services (PFS) has sold non-convertible debentures worth $35 million to the International Finance Corporation (IFC). PFS — which counts energy financing as a major aspect of its business — intends to use the money raised to provide debt financing to renewable energy projects.
This is not the first time that the IFC has done business with PFS, when in 2011 IFC executed a loan to PFS worth $50 million to enable the latter finance 4 renewable energy projects in India.
Raising funds from international investors like IFC is increasingly beneficial for Indian companies. International investors generally do not expect very high returns on debt investments while interest rates in India are still very high compared to most other countries. Just a few months back, debt instruments would have yielded 9-11% annual returns. By offering debt instruments to foreign investors, who generally have expectations of return at low rates, Indian financial companies and banks can maintain a higher margin on loans disbursed, or can offer project finance at lower rates.
The IFC has been a consistent investor in India’s renewable energy sector over the last 2 years, making equity investments in several companies including Continuum Wind Energy, ACME Group, Azure Power India, Surajbari Windfarm Development, NSl Power, and Bhilwara Energy.
The Indian government plans to continue to tap international development banks in order to finance the approximately 140 GW of new renewable energy capacity they plan to develop by 2022, which includes the development of 25 ultra mega solar power projects with a cumulative installed capacity of 20 GW.
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