IL&FS financial arm tweaks biz model to boost revenue

With an eye on the business from the $1-trillion infrastructure financing market, IL&FS Financial Services Ltd (IFIN) has tweaked its business model to earn more from syndication and advisory services. The company plans to earn Rs 200 crore as fees from syndicating infrastructure loans this year.

Managing Director Ramesh C Bawa said the syndication market was vibrant this year, and that IFIN’s fee income from this business would rise 17 per cent to Rs 200 crore from Rs 170 crore in the last financial year. “Currently, the share of syndication fee in revenue is 30 per cent. We plan to raise this to 50 per cent,” he said, while refusing to give any time-frame for the change.

Other income-generating activities of the financier are infrastructure advisory and equity financing. The company also lends to various projects, and this activity is the primary revenue generator in interest income. Banks and investment banks act as syndicators, procuring loans from many lenders to fund large infrastructure loans in consortia.

IFIN recorded a rise of about four per cent rise in profit for the year ended March at Rs 542 crore, against Rs 521 crore a year ago. The company’s total income rose 6.76 per cent to Rs 1,104 crore, while its total asset rose to Rs 8,562 crore from Rs 6,762 crore in 2009-10.

Bawa said this year, the company saw a loan syndication opportunity of $5 billion. As much as 70 per cent of these loans would be for core infrastructure projects. Around 20 per cent of these loans would be funded from overseas. The company works as a lead arranger of loans for infrastructure projects across sectors like power, roads and ports. The financing company recently opened its third foreign office in Dubai.

State Bank of India and IDBI account for a large share of this business, and are the largest and second-largest players in the segment, respectively. However, Bawa is not deterred by this. “We syndicate only those loans which we lend. That gives other lenders the comfort to lend to the project. We don’t take more than 90 days time to arrange loans for syndication,” said Bawa.