| National Bank for Financing Infrastructure and Development | ||||
| 'CRISIL AAA/Stable' assigned to Non Convertible Debentures | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL AAA/Stable' rating to the non-convertible debentures (NCD) of National Bank for Financing Infrastructure and Development (“NaBFID” / “Institution”). Rating on the existing NCD of NaBFID has been reaffirmed at 'CRISIL AAA/Stable'.
The rating centrally factors in the expectation of strong support from the government of India (GoI), which holds 100% stake in NaBFID. CRISIL Ratings believes NaBFID is strategically important to GoI as the institution is envisaged to play an important role in the development and financing of the infrastructure sector in India. The government has laid significant emphasis on this sector with various schemes, such as National Infrastructure Pipeline with total investment of Rs 111 lakh crore in infrastructure over fiscals 2020 to 2025.
The rating also factors in the healthy capitalisation of the Institution and an experienced professional management team. GoI has infused equity of Rs 20,000 crore and provided grants of Rs 5,000 crore to the Institution.
These strengths are partially offset by the Institution’s limited track record owing to nascent stage of operations.
The NaBFID Act came into effect on April 19, 2021, and the institution initiated lending operations in the last quarter of fiscal 2023. Total loan portfolio stood at Rs 15,335 crore as on September 30, 2023. NaBFID began by financing brownfield and operational projects and is now gradually building its presence across the entire project life cycle, with a mix of greenfield and brownfield projects. |
Analytical Approach CRISIL Ratings has considered the standalone business, financial and management risk profiles of NaBFID and factored in the expectation of strong support from GoI. |
Key Rating Drivers & Detailed Description Strengths:
The institution has been incorporated under a separate Act, the NaBFID Act, which provides various enabling features such as access to government guarantees for its borrowing at lower fees, reimbursement of hedging cost from the government, 10-year tax holiday and market standards applied on the employee remuneration policy. Furthermore, the Act states that GoI will maintain minimum 26% stake in the institution at all times.
Besides the initial sizeable capital infusion of Rs 20,000 crore, additional support through government grant of Rs 5,000 crore will help in reducing effective cost of funds for NaBFID and, in turn, its lending rates. Also, NaBFID will be entitled to short-term funding in form of repo from the Reserve Bank of India (RBI) to manage short term liquidity shortfalls, if any, in the future. This is in line with the government’s objectives to create an entity that plays a key role in developing the debt market in the infrastructure space.
CRISIL Ratings believes GoI will continue to hold majority stake in the entity in the foreseeable future. Hence, GoI has a moral obligation to support NaBFID, given the institution’s role in addressing the government's infrastructure sector funding requirement.
Given the important role that NaBFID is expected to play by offering funding assistance to infrastructure projects, it will be strategically important to GoI and is therefore, expected to receive strong support from GoI going forward.
While gearing is 0.4 times at present as on September 30, 2023, it may increase gradually to about 10 times on a steady state basis over time.
The capital profile will remain healthy over the medium term supported by regular capital infusion and flexibility to raise capital.
Out of the thirteen directors on the Board, two are GoI nominee directors and six are independent directors.
Weakness:
However, because of the inherent vulnerability of the infrastructure funding business, the institution’s track record is to be seen. Though exposure to risk will be low in the initial stages, as the institution diversifies, its ability to maintain adequate asset quality on a steady-state basis and successfully scale up the business will be a key monitorable. |
Liquidity: Superior Surplus cash and liquid investment stood at Rs 21,009 crore against borrowing of Rs 9,937 crore as on September 30, 2023. Liquidity will be supported by timely infusion of funds from the government and raising of resources from financial markets. |
Outlook: Stable CRISIL Ratings believes NaBFID will remain strategically important to GoI, given the important role it is expected to play towards infrastructure financing. NABFID will also benefit from its healthy capitalisation and sovereign ownership in raising resources at competitive rates. |
Rating Sensitivity factors Downward factors:
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About the Company NaBFID was incorporated on April 19, 2021 as a Development Financial Institution (a corporate body) regulated by the Reserve Bank of India (RBI). NaBFID is regulated and supervised as an All India Financial Institution (AIFI) by the RBI under the Reserve Bank of India Act, 1934. With development and financing being the key objectives, NaBFID proposes to position itself as a preferred entity for lending to the infrastructure sector. It plans to build an asset portfolio across borrowers, industry sectors and rating categories.
It commenced lending operations in the fourth quarter of fiscal 2023. It reported profit after tax (PAT) of Rs 1046 crore and total income of Rs 1127 crore as on March 31, 2023 and a PAT of Rs 781 crore and total income of Rs 1064 crore as on September 30, 2023. |
Key Financial Indicators
*As per CRISIL Ratings calculation methodology |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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