Ficci Chief Cautions Corporates Against Gdr Route
Talking to reporters after a Ficci executive committee meeting here yesterday, Banker said issues pertaining to raising alternate source of international funds were discussed. Indian corporates dilute their equity holdings in favour of foreign companies when they source project funds from GDR markets, which he said, was a matter of concern.
Ficci secretary-general Amit Mitra said the federation is exploring possibilities to raise debt finance that are significantly available worldwide and that does not dilute equity.
For the country's long-term interest, industry should explore a number of alternatives available in debt financing, he said.
There are as many as 18 international debt instruments available to source funds but these are not known to industry.
Ficci has plans to promote alternative debt financing methods to corporates so that even while they get cheaper finance equity, holdings will not get diluted.
Ficci has called for changes in the Companies Act to free corporates from inter-corporate loans restrictions. Cost of finance is very high and so the laws must be revised to allow corporates to lend or invest within the group in addition to sourcing funds from inter-corporate segment for investment requirements, said Banker.
Industry's incremental investment is expected go up to Rs 2,95,500 crore in 2,000-2,001 from the present Rs 1,36,600 crore. This means alternative sources have to be tapped from India and abroad to finance the massive requirements.
Both the private sector and government should approach this issue in a scientific and time-bound manner. Foreign direct investment is vital in meeting the growing needs of the economy, especially in infrastructure where an investment of $ 200 billion is expected in five years, it said.
The global summit, `Destination India' is a concerted effort by Ficci to sell India to the outside world. It proposes to establish a series of joint ventures and seek FDI in infrastructure projects under the plan.
Ficci said the central depository should be set up soon, which will substantially cut transcation costs in scrips and help increase market capitalisation.
For this, both debt and equity market have to be improved so that corporates can access cheap and easy funds through measures like zero coupon bonds, floating rate note, industrial revenue bonds, financial futures and derivatives trading.
These instruments should be introduced speedily to revive the captial market, it said.
Banker said a high-level Ficci team will meet Tamil Nadu Chief Minister M Karunanidhi to discuss joint ventures, investment in infrastructure and agriculture projects, areas in which Ficci expects to render assistance.