IFCI may rope in strategic investor for factoring arm

To integrate operations of capital market subsidiaries

IFCI Limited, the government-owned finance company, plans to rope in a strategic investor for its factoring subsidiary, IFCI Factors Limited, to give the latter a new lease of life.

Top executive of IFCI said the non-banking finance company would look at giving 26-27 per cent stake in the subsidiary to the prospective investor. These were initial thoughts and there was no specific deadline set for a decision, he said.

The performance of the factoring subsidiary was adversely impacted by the long spell of economic slowdown, he added.

In fact, in January 2014, rating agency CARE had downgraded its rating for IFL’s long-term bank facilities and debentures from “A-” to “BBB+”. Its loan exposures are mainly in the SME sector, which is relatively more vulnerable to slippages in a weak economic environment.

CARE said the gross non-performing assets jumped to 4.16 per cent at the end of March, 2013 from 2.01 per cent at March-end, 2012.  The NPA ratio had deteriorated in FY13, mainly on account of the fresh slippages to the extent of Rs 43 crore from four accounts. Further, during FY13, the company had restructured two accounts aggregating Rs. 28.7 crore and written-off four accounts aggregating Rs 21 crore.

At one point, IFCI Factors was contemplating public offering to issue shares to public. In July 2011, it had also filed draft prospectus with Securities and Exchange Board of India (Sebi), the capital market regulator, for an initial share sale, which could garner between Rs 750-1,000 crore. Enam Securities was manager for the offer then. However, plans did not move ahead.

Meanwhile, IFCI is now working to integrate operations of its two capital market subsidiaries – IFCI Financial Services Limited (IFIN) and Stock Holding Corporation of India (SHICL) – to bring synergy in the operations.

Chennai-based IFIN has strong network in the southern region and SHICL’s well spread in the western region.  There is room for synergy and IFCI might rationalise its operations, IFCI executive said.

IFIN runs broking business on the BSE and NSE, merchant banking plus a membership of currency segment of the MCX-SX. It also operates as a corporate agent for life and non-life insurance.

In March, 2014, IFCI had acquired additional 18.98 per cent stake in SHCIL from IDBI Bank Limited for an undisclosed amount.  Following acquisition, IFCI is the majority owner with 52.86 per cent in SHIL. SHCIL began by offering custodial and post-trading services, adding depository services and other services to its portfolio over a period of time.