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space funding: State-run IIFCL seeks infrastructure tag for space sector

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State-run infrastructure financing firm IIFCL has proposed to the government that the space sector should be classified as part of the infrastructure sector.

IIFCL, which plans to come out with a public offer next fiscal year has disbursed around ₹18,000 crore in loans in FY24, is also providing transaction advisory services to India’s premier space agency, the Indian Space Research Organisation (ISRO).

“We have requested the government to include space as a part of the harmonious list of infrastructure sectors,” said its chairman, PR Jaishankar, adding that IIFCL, through its subsidiary IIFCL Projects Limited (IPL), is already formulating a partnership framework for scaling up Launch Vehicle Mark 3 production on a public-private partnership (PPP) basis for ISRO and its commercial space missions arm, NewSpace India Ltd. (NSIL).

Earlier this month, the government reviewed the extant foreign direct investment (FDI) policy in the space sector and allowed up to 74% FDI under the automatic route in satellite manufacturing and operation, satellite data products, and ground and user segments. Jaishankar said that infrastructure financing firms, too, have an important role to play in the development of space technologies, and IIFCL is also providing transaction advisory services for the transfer of 10 in-orbit communication satellites from the Department of Space, ISRO, to NSIL.

On the firm’s public offer plans, Jaishankar said that IIFCL is at a stage where it unlocks the value for the benefit of the government and that it plans to tap the market in FY25.

Jaishankar observed that private investment in the infrastructure sector will see a jump when capacity utilisation is at its peak, or rather, when it goes over a threshold limit. “I think the actual investments will start only after a certain threshold of about 75 to 80%,” he said, noting that the created assets have become an asset class by themselves, and now Infrastructure Investment Trusts (INvITs) have taken them over, and a lot of private investments are coming into the INvITs. Till March 4, IIFCL’s cumulative sanction and disbursement of loans and bonds to InvITs stood at ₹13,100 crore and ₹6,351 crore, respectively. “This will go a long way, and the churning of assets will become a very big activity, with assets begetting assets,” he said. On the issue of rising cost of funds, after the Reserve Bank of India’s November 2023 circular, where the regulator increased the risk weights for loans to NBFCs by 25 basis points, Jaishankar said there is a case for relaxation for infrastructure financing firms as they are solely engaged in providing loans to the infrastructure sector.

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