India Ratings and Research (IndRa) estimates a possible refinancing opportunity for more than Rs 56000 crore out of the total debt of Rs 1.73 lakh crore across various infra subsectors in its portfolio till FY19. Of this, solar is expected to be in the forefront in terms of the number of deals with refinancing to the tune of 33%, followed by 27% in the highway sector. Also, there could be a shift in the type of instruments issued for the purpose of raising capital in the sector, largely to the capital market instruments, namely bonds, from the conventional term loans. IndRa believes that the renewable energy sector, especially solar energy, would reduce its borrowing costs further by at least 100bp through bond issuances or bank loans. Around 45% of the potential refinancing candidates in IndRa’s portfolio are from the renewables space.
The sector is also likely to be benefited from the government’s thrust on the development of the second phase of 20GW solar energy and evolving payment security mechanisms. However, the limited improvement in the current issues such as grid curtailments, receivable days, plant load factor volatility could hinder the refinancing prospects for renewables. IndRa estimates that around Rs 6000 crore could be refinanced by the first four infrastructure investment trusts (InvITs) which are likely to hit the primary markets in FY18. InvITs would enable infrastructure developers to deleverage their balance sheets and refinance remaining debt at lower costs.