Crowding in private capital for India’s critical infrastructure

Crowding in private capital for India’s critical infrastructure

India is on an ambitious pathway from a middle to high-income economy following a sustained period of significant growth. This impressive trajectory needs to be underpinned by sustainable infrastructure – everything from green energy and e-mobility to agriculture and social infrastructure – to confirm India’s position as a cost-effective and seamlessly operating market in which to do business.

Financing the upgrade of India’s infrastructure at scale aligned to national vision is a sizable challenge. This challenge simply can’t be met by the capacity of the traditional banking channel; private institutional capital will have a pivotal role to play. Regulatory constraints and perceptions of unpalatable levels of risk mean that the country’s fixed-income market of over USD 3 trillion is dominated by government securities and large corporates (both together accounting for over 95 per cent) and continues to receive limited mainstream attention. These are barriers that need breaking down to grant mid-market corporates and project bonds access to institutional capital markets to fund critical infrastructure initiatives.

Credit enhancement solutions can provide risk mitigation to open up competitively priced long-term debt capital options to the smaller and mid-tier operators required to bridge the infrastructure funding gap. This is important as such companies struggle to raise sustainable and competitively priced debt from traditional funding sources like banks.

For over 20 years GuarantCo, which is part of The Private Infrastructure Development Group (PIDG), has provided guarantees that improve the creditworthiness and credit rating of borrowers and projects to mobilise private sector capital into infrastructure across Asia and Africa. Supported by its international credit ratings of A1 (Moody’s) and AA- (Fitch), GuarantCo offers guarantee cover of USD 15-50 million[1] (equivalent in local currency) with a maximum tenor of 20 years. Its innovative credit solutions are aligned to the highest global standards of Health Safety Environmental and Social governance and the UN’s Sustainable Development Goals to add to the attractiveness of transactions from the perspective of satisfying ESG allocations.

GuarantCo has mobilised funding from banks in India for e-mobility ecosystem, sustainable agri solutions, food security and climate financing. In 2025, GuarantCo has evolved its focus to developing local debt capital markets.

Like most of the other markets in Asia and Africa where GuarantCo has made significant tangible impact, our approach was proven in in India in September 2025 with the issuance of the country’s first externally credit enhanced Green Bond by mid-size corporate, KPI Green Energy, to expand its solar and wind operations in Gujarat. Backed by a partial guarantee from GuarantCo enabling an A to AA+ (CE) rating from CRISIL and ICRA, the bonds attracted long-term domestic investors including infrastructure funds, credit funds, mutual funds and insurance companies.

This was followed in quick succession a few weeks later, with a second credit enhanced Green Bond issuance by Muthoot Capital, one of India’s leading publicly listed non-bank financial institutions. The proceeds of this bond will be on-lent to consumers, primarily from rural locations, for the purchase of electric two-wheelers, thereby fostering the growth of the Electric Vehicle ecosystem beyond India’s metro cities.

GuarantCo’s guarantee enabled a three-notch upgrade to Muthoot’s debut green bond to AA+ (CE) by CRISIL, India’s leading rating agency. This transaction will not only help Muthoot diversify its funding sources away from commercial banks to include institutional investors, including potentially to domestic provident funds, but also enables the company to tap into longer-tenor liquidity.

We see these landmark transactions as an industry-defining moment that sets a new standard for green finance in India. The replicable deals open the door for corporates to tap into long-term debt capital through pioneering credit enhancement structures. They also signal a powerful shift in investor sentiment, with domestic markets showing a growing appetite for purpose-driven, responsible investments.

In November 2025, PIDG, in partnership with National Stock Exchange (NSE) India and NSE IX hosted an Expert Industry Forum in Mumbai. The event brought together leading domestic institutional investors, as well as respected voices from industry and the policymaking ecosystem, to seize the moment and explore how India’s debt capital markets could be scaled for sustainable infrastructure finance. Using the KPI Green Energy and Muthoot Capital transactions as case studies, the goal was to inspire and engage the market around the use of credit enhancement solutions, while addressing perceived legal and regulatory barriers to action.

What we hope comes out of this event is not just an appreciation of what has been achieved so far, but a sense of urgency and possibility about what more can be done.

We are a committed long-term partner in building this market and ensuring that India’s credit enhancement journey continues to accelerate so that the benefits are felt widely across the economy and society.

[1] (For selected transactions, GuarantCo can offer a higher than USD 50 million guarantee.