Srei, An Infrastructure Financing Company | srei

Srei, An Infrastructure Financing Company

The Reserve Bank of India (RBI) introduced Infrastructure Finance Companies (IFCs) as a new category of infrastructure funding entities, in February 2010.

Keeping in view the representation made to RBI by NBFCs-ND-SI engaged predominantly in infrastructure financing that there should be a separate category of infrastructure financing NBFCs in view of the critical role played by them in providing credit to the infrastructure sector, the RBI had introduced a fourth category of NBFCs as "Infrastructure Finance Companies"(IFCs).

Criteria for obtaining IFC Status

The RBI grants the IFC status to a Non-Banking Financial Company (NBFC). An NBFC is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution, which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

A non-deposit taking NBFC is eligible to apply to the RBI to seek IFC status upon fulfilling the following criteria:

  • A minimum of 75% of its assets is deployed in infrastructure loans;
  • Net owned funds of at least rupees 3,000 million;
  • Minimum credit rating “A” or equivalent from Credit Rating and Information Services of India Limited (CRISIL Ratings), India Ratings and Research Private Limited (India Ratings), Credit Analysis and Research Limited (CARE Ratings), Investment Information Credit Rating Agency Limited. (ICRA Ratings) or equivalent rating by any other accrediting agencies; and
  • Capital to Risk (weighted) Assets Ratio of 15% (with a minimum Tier-1 capital of 10%).


Several benefits are accorded to IFCs which include:

  • a lower risk weight on their bank borrowings (from a flat 100% to as low as 20% for AAA-rated borrowers)
  • higher permissible bank borrowing (up to 20% of the bank’s net worth compared to 15% for an NBFC that is not an IFC)
  • access to external commercial borrowings (up to 75% of owned funds under the automatic route)
  • relaxation in their single party and group exposure norms

These benefits enable a highly rated IFC to raise more funds, of longer durations and at lower costs, and in turn to lend more to infrastructure companies.

Srei as an IFC contributes to the infrastructure growth

The business model of Srei encompasses providing financial products and services for customers engaged in infrastructure development and construction, with particular focus on power, road, telecom, port, oil and gas, and special economic zone sectors in India.

Being an IFC, Srei can:

  • access long-term funding resources
  • optimize its funding structure by way of issuing long term infrastructure NCDs
  • raise external commercial borrowings
  • issue debentures to Foreign Institutional Investors

By the successful application of the above, SREI can expand its financing operations while maintaining its competitive cost of funds.

Srei NCDs : Opportunity for your organization

With the new regulation, Charitable and Religious Trusts can now invest any proportion of their investment corpus in debt instruments offered by an IFC registered with the Reserve Bank of India (CBDT notification No. 40, 2012/F.No.149/32/2012: FO(TPL) Dated September 20,2012). Srei Infrastructure Finance being an IFC, can offer efficient products such as NCDs, CPs, etc. and cater to your investment requirements.

Your organization can choose any of the investment routes:

Public Issue:

In this method the NCDs are sold to the public at large in the primary market. Bids are collected from investors and the NCDs are listed in the stock exchanges. The NCDs are offered through a window of fixed duration as an Initial Public Offer (IPO).

Private Placement:

In this process NCDs are offered to a small set of clients through few distributors, with the investor usually being directly addressed by the issuer as regulations do not permit companies to advertise or market these bonds.