IDFC India: Infrastructure Investment Intermediaries

Abstract

Indian financial intermediary matching international capital to local infrastructure decides how to balance range of services, risk adjusted return, margin pressure, and nation building. IDFC was chartered with partial ownership from the Indian government to help evaluate policy and be a model for how private finance could be attracted to public infrastructure. As the nation and company grow, the firm also grows and embarks on a strategy of rapid expansion, offering a wide new range of financial products, and participating in many aspects of the supply chain. Teaching questions include revisiting the original mission, contemplating the reduced margins and increased risks that come with entering a number of domains which already have established incumbents, and the trade-offs between maximizing shareholder return (for example through investments in full tariff power projects in rich cities) and maximizing the benefit to the nation (for example through subsidized tariff water projects in poor states).

Learning Objective: Explore how funds are sourced and allocated to infrastructure projects. Explore government sponsored enterprises and public private partnerships. Discuss the tradeoffs in accomplishing a mission, serving a clientele, growing a portfolio, or concentrating on risk-adjusted return. Extend to other situations and other countries.