The term-lending institution is also repositioning itself by focussing on short term lending and restricting exposures to a an induvidual company to 15 per cent of its net worth--against the RBI stipulation of 25 per cent-- by fiscal 2002. It will confine its exposure to a business group to 30 per cent of its net worth against the RBI norm of 50 per cent. The institution has lent to both the Essar and the Ispat groups exceeding the 30 per cent limit.

IFCI chairman and managing director PV Narasimham said on Thursday: "We will try and grow at less than 10 per cent annually. The focus will be on short-term products like working capital requirements and bill discounting." He said he was looking at restructuring large NPAs and was pressing for a change in management in a few of these companies. "We may alsotake over companies and sell them to buyers to recover our assets," Narasimham said.

IFCI has stopped lending to cement and steel companies and was concentrating only on infrastructure projects. "We are going in for more focussed monitoring of projects during implementation and thereafter on an ongoing basis," he said.

Among term lending institutions, IFCI has the largest non-performing assets at 21.5 per cent. The sticky assets portfolio consists of 1,110 companies -- out of its 2000 borrowers -- and aggregated to Rs 4,234 crore while gross NPAs were pegged at a staggering Rs 5,000 crore against a net worth of Rs 1,730 crore.

IFCI will make a Rs 357 crore rights issue in the current financial year at par to meet its capital adequacy requirements. Its CAR was pegged at 8.37 per cent in March 1999. It has also retired Rs 450 crore of high cost funds and replaced them with cheaper funds. "We do not intend to go the Government for funds. Our existing shreholders should be subscribe to the rights issue,"Narasimham said.

He is against the idea of going in for a one-time write-off as it does not help. "A large part of the assets are recoverable," he said.

The FI has restructred seven cases of large NPAs and will restructure 11 large cases of NPAs during the current financial year. The principal amount incolved in these cases is Rs 712 crore and the interest aggregated to Rs 49.5 crore. It has set up a corporate restructuring division to strengthen the restructuring activities of companies.

Narasimham said he was lobbying with the Government for a one-time settlement of Government guaranteed loans. "These loans amount to Rs 2,500 crore out of which state government guranteed loans amount to Rs 650 crore. There needs a one-time settlement in prespect these government guranteed cases," he said.

INSIGHT
In the right direction

Like other players in the financial sector, IFCI also has finally recognised the fact that its single biggest burden are NPAs. It has also realised that providingfor these NPAs out of earnings is a difficult and unsustainable method, especially since profits are not growing. Therefore, a better way to do it is through aggressive recoveries. The decision to increasingly move away from traditional term lending is also a step in the right direction, and the FI should speed up its clean up act and model its future business on the lines of ICICI's universal banking model.

-- Aaron Chaze