SBI Macquarie infra fund acquires road project in India

SBI Macquarie infra fund acquires road project in India

Infrastructure bottlenecks

We are hearing a lot about slowdown in infrastructure investment and in GDP growth in last couple of years. I have tried to analyse sector wise key concerns in infrastructure

Power sector- In the last few years there have been not a single Power purchase agreement (PPA) signed by any discom and due to lower demand the merchant tariffs have decreased a lot. This has impacted the topline of the power producers. Moreover due to increase in coal price of imported coal EBIDTA margin of companies has decreased. The problem is more for power plants which are located far away from mines and ports and this increases the transportation cost ( presently coal transportation cost is about Rs 1~1.5 per tonne per km). 

Hydro power projects- hydro power projects are dependent on rainfall. moreover many hydro projects are facing delay in implementation due to geology risks. 

key steps required to increase investment in infrastructure:

1. Granting external commercial borrowing for takeout financing and refinancing of rupee loan

2. Restricting the provising requirement due to delay ( esp hydro projects) to 2% from the existing 5%

3. Ensuring Gas supply to gas based power plants

4. Effective and prompt dispute resolution mechanism for road sector projects

5. Allowing Banks to floats infrabonds with tax incentives

Registered vs equitable mortgage

Mortgage is a transfer of specific interest in the property owned by a person in favour of the creditor

Registered mortgage- Mortgage as per the Transfer of property act section 58(b) is registered mortgage, where the mortgagor registers the mortgage with a Sub Registrar.

In case of Simple/Registered Mortgage

•  Mortgage Deed is registered
• Stamp duty on deed and registration fees are required to paid
•  Possession of the property is not given to the mortgagee (bank)
• Mortgagee has right of foreclosure i. e. get the property sold for recovery of dues

Equitable mortgage - Mortgage as per section 58(f)is a equitable mortgage which is collateral security type of mortgage where only title deeds of the property are deposited with the mortgagor.

Delivery of documents of title to immovable property to creditor or his agent

·         Such delivery at notified town

·         Delivery of documents with intention to create mortgage to secure existing or future debt

·         Needs no registration but needs stamp duty