The move is expected to benefit companies such as L&T Infrastructure Finance Co. Ltd and Srei Infrastructure Finance Ltd.

So far, only a few firms such as IFCI Ltd, Life Insurance Corporation of India, UTI Mutual Fund, Infrastructure Development Finance Co. Ltd and India Infrastructure Finance Co. Ltd have been labelled as PFIs under the Companies Act. The Act allows the government to incorporate more firms through notifications.

“The idea is to have a wider, but streamlined definition of PFIs. The criteria so far were somewhat diffused,” said an official at MCA, who did not want to be identified.

In a circular on Friday, the ministry said a company can be included as a PFI if its main business was industrial and infrastructural financing. It said the company should have existed for three years and its income from industrial or infrastructural financing should be more than half its total income.

The company’s net worth should be at least Rs.1,000 crore and it should be registered with the Reserve Bank of India or as a housing finance company with the National Housing Bank, MCA said.

Besides, the company should have been established under a special Act or the Companies Act.
PFI status opens the door to cheaper funds as it allows companies labelled as such to tap regulated funds, say, money from pension funds, said an executive director at a public sector bank, who too did not want to be identified.
Pension funds face restrictions in lending to private companies, but they have the freedom to invest in bonds floated by PFIs, he added.

MCA’s move will weed out non-serious players and discourage companies with a low capital base from applying for the status, said Arun Gupta, director, Corporate Professionals India Ltd, which advises companies on investments and re-structuring.

“If we get an opportunity to become a PFI, we will, of course, be interested,” said Sumeet Maheshwari, chief executive of L&T Infrastructure Finance.
Becoming a PFI makes fund-raising easier, he said.

“A PFI also gets the benefit of SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest) Act and debt tribunal benefits. Presently, the benefits are available to only banks and PFIs,” Maheshwari said, adding he is yet to examine MCA’s circular.

The SARFAESI Act and access to debt tribunals help in securing assets pledged faster and easier when a loan turns bad.

In the infrastructure space, a project becoming unviable suddenly is a possibility that worries lenders.
Going by the criteria laid down in the circular, analysts say Srei Infrastructure Finance qualifies to be a PFI.
Sunil Kanoria, vice-chairman of Srei Infrastructure Finance, said he did not want to comment on the circular before studying it in detail.