LTIF is fully owned subsidiary of L&T Finance Holdings (LTFH). LTFH is the financial services holding arm of Larsen and Toubro Limited (L&T). LTFH offers a wide range of financial products and services to various sectors through its subsidiaries. The group’s activities of LTFH are broadly categorized into infrastructure finance (carried out by LTIF), retail/SME finance, corporate finance, asset management, investment management and wealth management. LTFH’s largest shareholder is Larsen and Toubro Limited which is a major global technology, engineering, construction, manufacturing and financial services conglomerate.

IFC proposes to invest up to US$100 million (INR equivalent) through subscription to secured, fixed, rated, listed Non-Convertible Debentures (NCDs) proposed to be issued by LTIF.

• Reduction in GHG emissions: The proposed investment is expected to generate significant environmental and economic benefits through the development of solar projects. The investment is expected to reduce around ~80,069 tCO2 of GHG emissions per annum.
• Support eco-system for development of solar energy projects and job creation: Besides the direct impact of reduction of GHG emissions, the investment would have a cascading effect on vendors and services providers to solar energy projects that would be supported through the investment. This would lead to expansion of the eco-system for such projects and assist job creation.
• Demonstration Effect: IFC's support to LTIF will further strengthen the latter's commitment to the renewable energy sector, which is likely to attract other local and international financial institutions to increase their investments in LTIF and LTFH group.

• Dedicated Credit Line: The investment will provide a dedicated credit line for on-lending to developers of solar energy and, thereby, strengthen the green lending practice within LTIF. Compliance with the green bond principles shall encourage green financing as a long term strategic focus as against a short term tactical effort.
• Knowledge Sharing: Proposed investment shall be IFC's first engagement with LTIF. It will bring them into IFC's knowledge sharing network. LTIF will be able to leverage on IFC's global expertise in renewable energy lending in order to further develop its project appraisal and risk assessment capabilities.
• Risk Mitigation: IFC's subscription to LTIF's Green Bonds will help the latter with long tenor funding (7-10 years) which is critical for LTIF to expand its ability to fund renewable energy projects. Currently, only ~10% of its funding comes from sources that are 7+ years or longer. Long term funding will also help LTIF to better manage its asset liability mismatch.

The project consists of Non-Convertible Debentures (NCDs) to support L&T Finance's (LTIF) lending activities focused on development of solar energy projects in India. While LTIF supports various types of infrastructure projects it is expected that majority of the sub-projects to be supported from these NCDs will have moderate Environment & Social risks (E&S risks) that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures. There is a very limited likelihood for high risk sub-projects to be supported by these NCDs issuance. Therefore, this project was categorized as FI-2 in accordance with the IFC Sustainability Policy. LTIF will be required to ensure that all loans within the asset class (solar energy) supported by these NCDs comply with the IFC Exclusion List, applicable E&S local laws, and the relevant Performance Standards.

?The main E&S risks of this project are associated with the construction phase of solar energy sub-projects. During the appraisal IFC reviewed the existing portfolio of LTIF projects and its E&S risk management practices. LTIFhas developed and implemented a system to assess and manage E&S risks in line with relevant Indian (state and federal) regulations. Its systems include detailed procedures for verification of all required permits and their conditions, including E&S provisions in legal documentation with its borrowers, ongoing monitoring, etc. IFC has also reviewed LTIF's labor and working condition practices. In general, they are in line with the objectives of PS 2 on Labor and Working Conditions. LTIF has a well-developed grievance mechanism for its employees in place.