IFCI expects Rs 1,000-cr bailout capital to flow in by October

Our Economic Bureau

New Delhi, Aug 31: Delhi-based financial institution IFCI Ltd expects the entire Rs 1,000-crore capital, promised to it recently, to come in by the end of October.

While the Rs 400-crore government contribution may come through by September-end, the major stakeholders are likely to induct their share within a month of that, IFCI chairman and managing director PV Narasimham told newspersons here on Friday.

Reacting sharply to widespread criticism of IFCI’s performance, the chairman clarified that all charges had been dealt with beforehand and “transparently” in its balance sheet for the year 2000-01. He said IFCI had openly admitted that it was facing an asset-liability mismatch, and had also asserted that investments made over the last few years would begin yielding dividends in the near future, especially in the steel and power sectors.

He said that it was in this background that IFCI had been assured of additional capital.

He clarified that all current loans were secured by first charge on fixed assets and many others were additionally secured by personal/corporate guarantees and pledge of promoters’ shares.

As for flouting of exposure norms, Mr Narasimham was categorical that the regulator had not set out guidelines and that the IFCI board of directors has stipulated an internal industry exposure general norm of 15 per cent for industry and a 20 per cent norm for iron and steel.
He said its exposures were within limits, with steel sector being 19.56 per cent, all of which were by way of consortium financing. He expressed the confidence that once the steel industry tides over the present hump and projects took off, this exposure too would come down with repayments.

In the power sector, exposure could decline from 14 per cent at present as repayments begin in two or three years. Industry exposure over five years was also expected to come down to 10 per cent of outstanding assistance, he added.

He also explained that any piercing of the prudential norms in some group companies and individual borrowers had occurred on account of a fall in the capital funds of IFCI which, in turn, was caused by a draw-down of reserves to meet the provisioning requirements for rising non-performing assets (NPAs).

As part of risk management, IFCI has decided to limit its exposure to a single company to a maximum of Rs 100 crore. As additional capital is made available to IFCI, exposure limits would come down to manageable limits.