Interview with CEO & MD, IFCI
IFCI CEO and managing director Atul Kumar Rai is battling multiple problems: declining net profit growth, complexity in his company's capital structure as there is no clarity on government converting its warrants into equity, and allegations of suppressing facts at the time of his appointment as the chief of the financial institution. In a talk with Vrishti Beniwal, Rai defended himself and says he is open to inquiry. Edited excerpts:
What's your outlook for IFCI, considering tha t net profit growth has moderated this year?
The net profit this quarter is lower, but revenue is higher than before. IFCI has for long had this legacy problem. Our balance sheet had been shrinking right up to 2009; we were down to about Rs 13,500 crore. It is now Rs 27,800 crore; the profits are still substantial. The increase in interest rates has not allowed our growth in top line to be translated into bottom line. So that is a genuine concern. The only way it can be overcome is by growing sustainably, consolidating and hoping that fresh assets will add to the bottom line.
Sometime back you were looking for strategic investors. Has anyone shown interest so far?
We were looking for a partner, but no one came along. We examined the issue and found that we were not good enough at that time to have a partner. There were issues about our capital structure, the kind of company we are, whether we are in the public or private sector, the degree of freedom that will be available to investors. These concerns continue to beset us.
How do plan to expand your business in that situation?
Internal accruals are one major source. We are also looking at increasing our competency through our subsidiaries which have their own ability to raise funds. We have to look at our advantages in terms of what we bring to the table and where we can grow. Having built institutions is our strength.
Are you planning to get into new business areas? You had shown interest in new bank licences.
Always. Banking licence is something we thought we should attempt. We think we will be able to raise necessary capital. We also have some recognition which can be used for a bank in terms of brand image. But at the same time, we have not seen any progress on banking licence front. We don't know whether it is going to happen and when is it going to happen.
Would it be possible given your complex capital structure?
Banks will have to be attempted on a different scale altogether. You will have to think of a holding company and you will have to look at raising capital in that company. If that is the way it goes, then it should free us from having to deal with our own set of capital related issues for the banking endeavour.
How are you addressing issues of financial and functional mismanagement in IFCI?
I will make myself open to any inquiry or investigation. It is neither effective nor possible for me to deal with all this by ascribing motives or intentions. If you have a concern and ask me, what I owe you is an opportunity to whatever things are for yourself. Many investigations have been carried out in that sense into the affairs of the company. We are a regulated entity by RBI.
Are you able to figure out why all these issues are cropping up now?
I can figure out. I'm at the end of my term. That raises certain kind of vulnerabilities. IFCI is now doing very well. Obviously there may be persons who have aspirations. What is presented to me is an allegation. I'm saying please make the allegation clear or see relevant documents and facts with respect to that allegation. I'm not hiding behind any rules.
Have you heard from the government on providing clarity on your capital structure?
I would not think the government would have the same degree of urgency as we have. As of now, there is no desperation but when there is a situation which needs to be addressed we would be able to reach that conclusion because the thought of strategic investor is now more or less given up.
How have sanctions and disbursements been this year?
We have had a dip of about 60 per cent in our fresh sanctions against last year. Our new sanctions were about Rs 10,000 crore during April-December last year. This year, it is about Rs 4,000 crore in the corresponding period. A large part of it has been deliberate, while most of it is also because of the investor climate worsening globally. These issues will continue to challenge us for a while.
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This is an increase of about 33% over the previous fiscal