Investors can raise a substantial portion of the project cost in India through debt and equity instruments.
Applications for long term loans can be made to State Financial Corporations when the project is small - generally less than Rs.50 million - or to national level financial institutions, such as IDBI and IFCI, when the project is large. Institutions expect concrete project and market reports, with reasonably firm costs and implementation plans. Other long term financing options include leasing, hire purchase, deferred payment guarantee, etc.
Capital markets are increasingly the preferred route for raising finances in India, through equity shares, debentures and hybrids. Investors can freely access the capital market and in most cases freely price the issue. Investors with both small as well as large fund requirements can mobilise funds from the market. Private placement with institutional investors is also possible. Indian companies also have the option of raising funds from international capital markets.
Short term finances for working capital requirements are available from commercial banks and through instruments such as fixed deposits, inter-corporate deposits and commercial paper.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.