IDFC Bank is creating a renewable energy niche in loans, sanctioning Rs 675 crore to a Rajasthan-based solar power project owned by French company Solairedirect.
The deal could be an early sign of a revival in lending in India, especially after growth in industry credit hit a 62-year low of 5.1 per cent year-on-year for 2016, down from 10.6 per cent last year.
Emails sent to IDFC Bank remained unanswered at the time of going to print. Gaurav Sood, managing director of Solairedirect Energy India Pvt., confirmed the matter, saying the funds were for the project at Bhadla in Rajasthan being developed under the National Solar Mission.
“Our NSM Bhadla project, which is under construction currently, is taking project finance from IDFC Bank for Rs 675 crore at a debt-equity ratio of 70:30,” he said.
IDFC Bank is charging 11% interest during the construction period and 10.5% from the start of commercial operations. The debt is for an 18-year tenor. The project is scheduled to be commissioned by April this year.
The loan has been channelised through a special purpose vehicle called Solaire Surya Urja Pvt.
IDFC Bank’s loans grew 53% year-on-year to Rs 71,354 crore (outstanding credit) during the October-December period. The bank is expanding its credit presence through fintech startups in areas such as Surat, Rajkot, Chandigarh and Bengaluru.
The pace of loan growth by banks plunged to a 54-year low as individuals and companies put consumption and economic activity on hold with the pressures of the cash crunch unleashed by the country’s currency scrapping that began on November 9.
Banks have started cutting lending rates, based on marginal cost of funds, across maturities, a move aimed at working off sluggish credit while wooing borrowers.
Capital expenditure in renewable power – solar and wind – has started kicking in, according to Rakesh Singh, group head for investment banking, capital and commodity markets at HDFC BankBSE 0.45 %. “Significant capex is happening in this space. Investment will continue to be largely in infrastructure across the country,” he told ET in an interview.
The government has targeted solar power capacity of 100 GW by 2022. Solar generation capacity was 9,012.69 MW at the end of December, according to data on the Central Electricity Authority’s website. The country plans to generate 175 GW from clean and renewable sources by then, ET reported earlier.
Solairedirect entered India in 2010. It has 97 MW in operation and 85 MW under construction, according to its website. Solairedirect owns assets in Rajasthan, Punjab, Telangana and Uttar Pradesh.