Ifci Raises Rs 300 Cr Via Placements At 12-13%

The Industrial Finance Corporation of India (IFCI) has quietly raised Rs 300 crore by privately placing bonds with banks at staggered interest rates in the band of 12 to 13 per cent. The financial institution has an unique system of stepped up arrangers fees.

The three-year tenure instrument has a call and put option after every one year giving an exit route to both the investor as well as the issuer.

The instrument has increasing interest rates, starting from 12 per cent per annum in the first year, 12.5 per cent in the second year and 13 per cent in the third year. Interest rate is payable annually.

In the stepped up system of arrangers fees, higher the amount placed higher will be the fee.

However, the arranger fee has not been passed on to the investors, say the lead arrangers.

The interest rate offered by IFCI, 12 per cent for one year, is the same as the rate offered by the Industrial Credit and Investment Corporation of India for the same maturity. ICICI which was offering 11.5 per cent per annum for one year had to hike the rate to 12 per cent recently.

IFCI in its confidential information memorandum has stated the objects of the issue as : "The funds are being raised for the purpose of financing its business operations." However, institutional sources say IFCI, taking a cue from other financial institutions like the Industrial Development Bank of India (IDBI) and the ICICI, is foraying into financing working capital requirements of its borrowers. "Though IFCI has formally not announced its intention of financing working capital and medium-term financing, the institution is essentially raising the three-year money to deploy for short-term lendings," the source said. IFCI has tapped the inter-bank market at a time when the banking system is awash with liquidity.

The bonds, having a face value of Rs 1 lakh and rated LAAA by Information & Credit Rating Agency of India (Icra), were subscribed mainly by banks. The Delhi-based financial institution tapped the bond market on June 15 with a Rs 200-crore issue with a greenshoe option of another Rs 100 crore on June 15.

Though the date of allotment is July 20, insiders said IFCI would retain the entire garnered Rs 300 crore.

The bonds, having staggered interest payment, christened as - Step up liquid bonds are unsecured and are in the nature of promissory notes.