Guarantee backed project finance bonds

Project finance in India has traditionally been supplied by domestic and foreign banks and financial institutions through long term loans. These have been typically secured by the assets of the project itself, a pledge on the shares of the project company and at times limited guarantees from the promoters of the project company.

Bonds for the strong

Debt capital markets provide alternate means of long-term project finance for companies. Under existing regulations, companies are allowed to issue bonds which may be listed and traded in capital markets. However, thus far, only blue chip companies and conglomerates, on the back of strong balance sheets, have been able to successfully access debt capital markets in India.

Special purpose vehicles (SPVs), which often house infrastructure projects, are not able to access debt capital markets to fund projects on account of their inherently inadequate credit rating.

Saurabh Bhasin is a counsel at Trilegal in Delhi where Sahiba Chait is a senior associate. The firm has offices in Delhi, Mumbai, Bangalore and Hyderabad and has over 140 lawyers, some of whom have experience with law firms in the US, the UK and Japan.