IFCI puts bank plan on hold, to raise Rs 1,200 cr

IFCI was not planning to apply for a banking licence as of now and was targeting to raise around Rs 1,200 crore in January-March through a mix of bond issue and market borrowings, Chief Executive Officer Atul Kumar Rai said on Monday.

“Right now, we are not considering a banking licence. Moreover, the Reserve Bank of India is also not giving out any fresh banking licences,” he said.

Having emerged out of the financial mess it found itself in the late 1990s and in the first half of this decade, the development financial institution has been looking at various growth options, including a foray into banking.

However, it has not been able to concretise its strategy on the banking front as it involves various regulatory issues and the requisite approvals from the government, which is a major stakeholder in the company.

The company, which has already raised over Rs 2,500 crore during the nine months ended December, has appetite for more.

The proposed bond issue, which is currently undergoing a rating process, is likely to hit the market in March.

Rai also hopes the net interest margin (NIM) will improve through reduction in borrowing costs.

“We are comfortable with the current NIMs of 2-2.1 per cent. Going forward, we expect higher NIM,” he said.

Attributing a 30 per cent jump in October-December net profit to Rs 136 crore to some of IFCI’s assets giving “better returns”, Rai said the company’s balance sheet too was growing.

“Our balance sheet size is healthy and stands at around Rs 16,000 crore,” he said.

The company’s loan sanctions and disbursals for the nine-month period ended December stood at Rs 4,892 crore and Rs 3,446 crore, respectively.

During 2008-09, the company had sanctioned and disbursed Rs 4,105 crore and Rs 3,351 crore of loans, respectively.

On the timeframe for appointment of consultant for charting IFCI’s future roadmap, Rai said, “The terms of reference will be decided by the government.”

According to reports, consulting firms McKinsey, Boston Consulting Group and Ernst & Young are in the race for the consultancy job.

The consulting firm will also advise the government on its optionally convertible debenture holding of Rs 523 crore. If these debentures are converted into equity, the government will have a direct equity holding in IFCI.

Currently, the government holds 13.2 per cent in IFCI through a clutch of state-owned insurance firms.