Section 14a Likely To Cast Cloud On Idfc Fund Raising Plans

Infrastructure Development and Finance Company Ltd (IDFC) is likely to take hit in its bottomline because of the newly introduced Section 14 (A) in the Finance Bill, 2001.

The new section has abolished the tax waiver on infrastructure investment, implying that core companies will have to offer a higher rate to investors for raising funds.

Anirudha R Barwe, chief financial officer, IDFC, said, "As long as one company is funding from its own resources, it can do away with the tax. Our disbursements in the last financial year was around Rs 1,100 crore, while our equity base and retained profit were Rs 1,000 crore and 350 crore and so we need not have to borrow funds. As far as the retrospective impact of the tax is concerned we are not affected."

Barwe, however, said the company has a disbursement target of Rs 1,000 crore during the current financial year.

With not much owned-fund left with the company, IDFC is likely to take a hit if it pursues the plan since it will have to raise funds at a higher rate.

India Inc as a whole will take a hit thousands of crores owing to the new amendment. The Essar group alone may take a Rs 200 crore hit on this account.

The Industrial Development Bank of India has already issued a note to the group asking for the money.

Infrastructure companies have already felt the impact as investors are shying away. The bond issues of Housing and Urban Development Corporation for raising Rs 1,500 crore and that of the National Housing Bank for raising Rs 500 crore have received little response from corporate investors.

With such experience, the future of IDFC, if they want to go with their Rs 1,000 crore, disbursement plan looks grim as well.