Banks, Fis Ease Ifcis Liquidity Crunch

The liquidity crisis of the cash-strapped Industrial Finance Corporation of India (IFCI) seems to be easing with banks and institutional investors extending loans of around Rs 400 crore and providing rollovers on investments to the tune of Rs 400 crore. IFCI is in talks with institutions and international lenders to raise another Rs 1,400 crore to meet its debt obligations.

While around Rs 500 crore will be required in August to meet FRN payment obligations, a $100 million medium-term debt is proposed to be raised in November to exercise a put option on external commercial borrowings. In addition, IFCI is in talks to raise Rs 400 crore from the banks to improve liquidity.

IFCI executives told Business Standard that in case further assistance was extended by the banks, the institution would be able to meet the redemption pressure and would not seek rollovers on reinvestments in many cases. However, they maintained that IFCI would meet all its obligations and would not seek any reinvestments from retail investors.

Of the Rs 400 crore raised in this financial year, the Bank of Baroda extended a Rs 200 crore loan to IFCI. The Canara Bank and the Oriental Bank of Commerce extended medium-term debts, with five-year tenor, of Rs 75 crore and Rs 100 crore, respectively.

Following the Reserve Bank of India's plea to the banks to help the Delhi-headquartered institution ease its liquidity crunch, institutional investors had been coming forward, sources said. Several, like the Punjab National Bank (PNB), are, however, unwilling to extend any fresh assistance to IFCI, saying it has already exhausted the stipulated exposure limit. IFCI executives, however, said talks were still on with PNB.

They added that the institution was going all out in its efforts to raise the Rs 500-odd crore to meet the $100 million FNR payment obligation because any delay would affect the country's creditworthiness globally. They, however, added that there was no proposal to approach the government for a loan, although a government guarantee had been sought.

During the current financial year, IFCI has to meet repayment obligations of Rs 4,500 crore, with another Rs 5,000 crore in redemptions scheduled for 2003-04.