One of popular state run entity of India National Buildings Construction Corporation Limited (NBCC) decides to set up its own non-banking finance company (NBFC) later this year, in order to manage their borrowing cost for key infrastructure projects. According to the report, the construction and real estate developer correctly calculated that the move which will help it to save $108 million in interest costs over the next two years.
The share of NBCC swelled up as much as 1.8%, and they intend to break a five-session losing streak, after the Reuters report. They were last up about 1% at Rs.125.95 each at 0834 GMT.
The Indian government possesses infrastructure financial institutions but no other state-run company has created a unit like this to help with finance projects. The managerial board of NBCC has discussed the proposal of establishing a shadow lender during March, but the final structure NBFC will be decided after June.
The NBCC will seek approval for the shadow bank from the new administration that will be elected in June, at the end of the seven-phase national polls that started on Friday. Additionally, the company will need a license from the Reserve Bank of India (RBI), which it has not yet applied for.
Lately, NBCC pays 12% to 14% to other NBFCs in borrowing costs and that could be lowered by 1-2 percentage points if it sets up the NBFC.
According to the sources, the internal non-banking financial company will aid in securing seed capital for the redevelopment and monetization projects of other public sector entities. Recently, NBCC got redevelopment projects from Steel Authority of India Ltd and the Indian railways. The state-run firm had tried setting up an NBFC in 2016 as well, but had failed.
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