Transcript the infrastructure opportunity

THE INFRASTRUCTURE OPPORTUNITY :
A MACRO PERSPECTIVE
Rajiv B. Lall
Managing Director & CEO
Infrastructure Development Finance Company Limited
JAPAN
MAY 2007
1
The Context : India vs China

Consumption vs Investment led growth

Bottom Up vs Top Down

Private vs Government led build out of infrastructure
2
India Infrastructure Investment (% of GDP)
8
7
6
5
4
3
2
33 Year Low
1
0
61 964 967 970 973 976 979 982 985 988 991 994 997 000 003 006 9 E 2 E
9
0
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
20
20
3
INFRASTRUCTURE SPENDING & FINANCING
(% OF GDP AT CONSTANT 2005 / 06 PRICES)
2006/07
(estimated)
2011/12
Spending
~ $ 360 billion
Total
o/w
Government
Non-government
5.0
7.5
1.7
3.3
2.0
5.5
4.7
0.3
6.5
1.0
over 5 years or >
$ 70 billion / year
Financing
Domestic Savings
Foreign Savings
Bulk of spending will have to come from non-government sources.
Will need an average of at least $ 5 billion a year in overseas funding
just for infrastructure over next 5 years.
4
Sustainable Reform & Infrastructure Development
Reform Impulse
“Tipping Point”
Competition
Declining Cost
Resistance from incumbents
Support from consumers
Irrevocable change sustainable reform
5
Telecommunication Reforms

Telecommunications





In 1994 – Telecom policy – mobile phone licenses for major metros (2 in each
city), followed by licenses for mobile and fixed line services in 15 circles (1
each) – major imbroglio due to unrealistic bidding
Resolved by a New Telecom Policy in 1999 – migration to a revenue share
regime, more players, universal access service – challenge now is rural
connectivity
Regulator (TRAI) established – initial hiccups but now functioning well
Private investment has grown the market - over 200 million subscribers; growing
at over 5 million per month
Prices – mobile from 37 cents per minute to 0.01 cents per minute
6
Mobile Growth and Effective Charge per minute
Mobile Growth and effective charge per minute
102.00
101.00
Fixed
Mobile (Rs./min)
Mobile Subscriber base (Millions)
16.00
Effective charge
(in Rs. per min.)
14.00
75.92
12.00
65.05
10.00
52.17
8.00
6.00
33.60
4.00
13.00
2.00
0.00
0.88
1.20
1.88
3.58
6.50
96.00
90.00
84.00
78.00
72.00
66.00
60.00
54.00
48.00
42.00
36.00
30.00
24.00
18.00
12.00
6.00
0.00
Mobile subscriber base
(in million)
18.00
Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Sep-05 Dec-05 May-06
Source : TRAI (2005C and 2006C)
7
Foreign Direct Investment
Sector
Limit
Airports
Up to 100%, with FDI beyond 74% requiring Government approval
Hotels & Tourism
100% FDI is permissible in the sector through the automatic route
Housing & Real Estate
Construction – 100% (If developed area exceeds 50,000 sq
metres)
Housing – 100% (If area exceeds 25 acres)
Power
Up to 100%, FDI allowed in respect of projects relating to
electricity generation, transmission and distribution, other than
atomic reactor power plants
Roads & Highways,
Ports & Harbours
100% FDI is permissible in the sector through the automatic route
in both construction and maintenance
Telecommunication
74% FDI is permissible in the sector through the automatic route
Source: Investing in India-FDI Manual, DIPP
8
Opportunities

Highways : $ 48 billion
 Total emphasis on BOT roads
 NHDP 1 to 7 (40,000 kms of new road)

Railways : $ 12 billion
 Private container trains
 Dedicated Freight Corridors
 Logistic Parks / Railway Stations

Ports : $ 12 billion
 Concession at major ports and development of minor ports

Airports : $ 9 billion
 Delhi, Mumbai, Bangalore, Hyderabad, Chennai, Kolkata & 35 nonmetro airports

Power : $ 130 billion
 Generation and transmission
 Wind, hydro
9
IDFC : Who we are







Project finance : Debt, Sub-debt, Mezzanine
Equity Finance – principal investments and asset management
 IDFC Private Equity – 2 funds aggregating USD 630 million
 Project Equity Funds USD 1 billion by March ’08
Investment Banking and Advisory Services
Focus areas : Energy, Telecom, Transport & Industrial / Commercial
Infrastructure
Total Loan Assets of close to USD 4 billion + USD 0.5 billion in equity
investments
Market cap : USD 2.2 billion
Track record of performance and consistent growth
 25% of the loans to private infrastructure projects
 Net Non Performing Assets: Nil
 FY 2002 – 2007 CAGR in Balance Sheet – 42%, Infrastructure loans: 48%,
Total Income: 31%, PAT: 22%
Unique Public Private Partnership delivering innovative financial solution to Indian
Infrastructure Sector
10