Fis To Infuse Funds Into Ifci Only After Pwc Report

Financial institutions will pump in money into the beleaguered IFCI Ltd only after they get a detailed report on the fund flow requirements of the institution from PricewaterhouseCoopers (PwC).

Also, it is likely that the quantum of funds to be pumped in by the institutions may not be in accordance with their respective stakes in IFCI.

Though the institutions are not putting up any riders for injecting money, they want to know how IFCI plans to use the funds.

"We do not want IFCI to come back again after a year asking for additional funds. We would like to know how the funds will be put into use," said sources.

PwC will also have to find out what are the options available for financing the institution. "A mix of options is available for financing. Also, the guarantees can be substituted, and short-dated securities can be substituted with long dated securities," said sources.

The government had cleared a Rs 1,000 crore bailout package by agreeing to infuse Rs 400 crore into the institution, with the balance Rs 600 crore to be brought in by its stakeholders, including IDBI, SBI, LIC and GIC.

Sources said that funds will be lent at commercial interest rate. The rate will depend on the tax bracket the type of the instrument will come under.

The cost of funds of most of the institutions is around 9 per cent. Hence, the funds are expected to be loaned at over 10 per cent.

The institutions have also asked IFCI to stop lending to the steel and sugar industries. "IFCI has been asked not to go for project finance. There is a asset-liability mismatch and it has been asked to go in for short-term financing. If the AAA corporates are not forthcoming, IFCI should focus on companies a rung below. Though the spread may be lower it will stanch the festering of NPAs," said sources.

The institutions have also asked IFCI to vigorously follow up the cases filed with the Debt Recovery Tribunal and Board for Industrial Finance and Reconstruction. It has also asked the institution to go in for one-time settlements to recover bad assets.

IDBI holds the maximum stake 31.71 per cent in IFCI followed by LIC (8.39 per cent,) LIC subsidiaries (5.06 per cent), GIC (3.77 per cent), GIC subsidiaries (5.31 per cent), UTI (4.47 per cent) and SBI and its associates (2.10 per cent).

"The boards of each institution will decide on the quantum of money to be pumped in. For instance, IDBI subscribed to the IFCI rights issue but the SBI did not touch it. It will be left to the individual institutions on much money they would like to put in," said sources.

Going by the holdings IDBI will have to pump in around Rs 337 crore, LIC around Rs 90 crore, LIC subsidiaries Rs 53.88, GIC Rs 40.14 crore, GIC subsidiaries Rs 56.54 crore and SBI and subsidiaries Rs 22.36 crore.