India Ratings and Research estimates potential to refinance more than Rs. 56,000 crore debt of the Rs. 1,73,000 crore total debt across various infra sub-sectors. In a report on Infrastructure Project and Finance, the Fitch Group company mentions that of this, solar sector is expected to be in the forefront in terms of a number of deals, with refinance of about 33 per cent followed by highways at 27 per cent. It also mentions the possibility of shift in the type of instruments issued for the purpose of raising capital in the sector. These could be largely capital market instruments– such as bonds from the conventional term loans. The debt service coverage ratio of projects would improve if the refinance of debt at 100-150 basis points.
With four Investment Trusts, which are likely to hit primary markets in FY 2018, the rating firm estimates that Rs. 6,000 crore could be refinanced. The refinance move is particularly seen to benefit the toll roads and solar projects as most of them are in a ramp up mode. In spite of the 125 basis points reduction in the repo rate during FY 2016-2017, the average reduction passed on has been the lowest for annuity road projects. This possibly reflects that the refinancing benefit has already been passed on to the entities. The renewable energy sector, particularly, solar power, has potential to reduce its borrowing costs further by at least 100 basis points through bond issuances or bank loans. The sector is also likely to be benefited from the Government thrust on the development of second phase of 20 giga watt solar energy and evolving payment security mechanisms. Yet in this backdrop, grid constraints and plant load volatility could hinder the refinance prospects for the renewable energy, the agency states.