Ifci, Idbi Get Exit Lift

The Industrial Development Bank of India (IDBI) and IFCI today witnessed a spurt in their stock prices following talks that the Centre intends to exit these institutions once they witness a turnaround in their financials.

The IDBI stock touched an intra-day high of Rs 20.50 before settling at Rs 19.55, up 4.65 per cent, while IFCI rose to Rs 5.20 and closed at Rs 5.10, up 3.03 per cent.

IDBI saw a combined traded volume of 6.64 lakh shares on the BSE and NSE, while 6.26 lakh IFCI shares changed hands.

Buying interest has been generated on both the counters following unconfirmed reports that the Centre plans to exit these financial institutions after they effect a turnaround in performances.

According to banking analysts, till date no draft has been prepared on this front but reports suggest that a new strategy could see the government infusing funds into these institutions to help them stage a revival.

IFCI, in particular, has been boosted by prospects of a bail-out package forthcoming from the Centre.

IDBI, on the other hand, has garnered interest on rumours that a proposal for its privatisation was to be put forward in the current session of the Parliament.

However, no normal work was possible in the Parliament's monsoon session over furore about the issue of favouritism in allotment of petrol pumps.

IDBI may also be upbeat over a possible revival in various commodity sectors such as steel, paper and textiles where the development bank has a great deal of exposure, dealers opined.

IDBI is also in the process of converting itself into an universal bank. It is in negotiations with a bank with assets of around Rs 55,000 crore, which, when merged with IDBI's own assets of over Rs 66,000 crore, could catapult it into the No. 2 position in the Indian financial sector.

As per an earlier report, talks between IDBI and the private bank are at an advanced stage and the merger could be completed by June 2003.

Meanwhile, reports that IFCI is seeking a $100 million foreign currency loan at 50 basis points (bps) over the London inter-bank offered rate (Libor) against a guarantee provided by the Central government, may also be fueling the IFCI scrip.

The borrowings are crucial for IFCI in its bid to repay floating rate bonds raised in 1998 at 85 points above Libor due this month. To enable the institution tide over its severe asset-liability mismatch, the Central government agreed to provide a guarantee of Rs 800 crore, which could include the $100 million foreign currency loan.

Analysts said both IDBI and IFCI plan to transfer their bad debts to an asset reconstruction company (ARC), which would bring down the non-performing assets of these institutions.

Due to the entire bid at restructuring and the efforts to clean up their balance sheets, analysts said the outlook for these financial institutions is positive.

For the first quarter ended June 30, 2002, IDBI registered a 79 per cent fall in net profit at Rs 38 crore compared with Rs 182 crore in the corresponding period last year. Total income decreased 23.5 per cent to Rs 1,684 crore from Rs 2,201 crore in 2001.

IFCI reported a net loss of Rs 221.56 crore compared with Rs 27.80 crore last year. Income from operations dropped 30.2 per cent to Rs 443.50 crore (Rs 635.55 crore).