NBCC to establish NBFC in bid to slash borrowing costs: Report

State-owned construction and real estate developer, NBCC, is gearing up to launch its own non-banking finance company (NBFC) later this year, aiming to substantially reduce borrowing costs for critical infrastructure projects. Two insiders familiar with matter revealed that NBCC anticipates saving a staggering $108 million in interest expenses over next two years through this strategic move.

proposal to establish a show lender was deliberated upon by NBCC's board in March, with plans for finalising NBFC's structure slated for post-June. According to one of sources, NBCC will seek approval for initiative from new ministration, set to be elected at culmination of ongoing seven-phase national polls, which commenced on Friday.

Unlike or state-run entities that rely on government-owned infrastructure financial institutions for project financing, NBCC's venture into NBFC space marks a departure in corporate landscape. However, company will need to obtain a license from Reserve Bank of India (RBI) before proceeding furr, a step it has yet to undertake.

Currently, NBCC incurs borrowing costs ranging from 12 to 14 per cent when dealing with or NBFCs. establishment of its own NBFC is expected to bring down se costs by 1-2 percentage points, offering financial relief. ditionally, in-house NBFC is set to play a key role in securing seed funding for redevelopment and monetisation ventures involving or public sector entities, as noted by one of sources.

NBCC's recent acquisition of redevelopment projects from Steel Authority of India Ltd (SAIL) and Indian Railways reflects its strategic positioning to leverage capabilities of its forthcoming NBFC. Notably, NBCC h previously contemplated setting up an NBFC back in 2016, albeit without success.

Despite potential benefits, NBCC has refrained from offering official comments on matter, declining to respond to email queries.

(With Reuters inputs)