Idfc Proposes Rs 650 Crore Debt Revamp

Infrastructure Development Finance Company (IDFC) has put forward a proposal to the Reserve Bank of India (RBI) and the Union government to completely delink dividend declared and interest payable on the Rs 650 crore subordinated debt it had received from both.

The proposal is to pay interest at market rate irrespective of the rate of dividend declared, and to extend the period of subordinated debt to 50 years from the present 15 years, Nasser Munjee, managing director and chief executive officer (CEO), IDFC, said.

At present, IDFC is liable to pay interest rate on the debt based on the rate of dividend declared.

 

The institution, during the last fiscal ended March 31, 2001, incurred an additional interest charge of Rs 45.5 crore (at seven per cent) on the debt, when it declared a maiden dividend of seven per cent.

Nasser said the proposal had received positive response from the central bank and it had forwarded the proposal to the government.

The extension of the period would improve the international credit rating of the institution, he said.

IDFC's total capitalisation is Rs 1,650 crore, which includes Rs 1,000 crore of the paid-up capital and Rs 650 crore of subordinated debt from the Centre and the RBI.

IDFC has posted a net profit of Rs 140.44 crore on a turnover Rs 314.06 crore in the year ended March 31, 2001, as against a net profit of Rs 149.23 crore on a turnover of Rs 288.06 crore registered in the previous year. The dip is attributed to the Rs 45.5 crore interest paid on the subordinated debt.

Nasser said: "As there are no big-ticket infrastructure projects, we have diversified our portfolio to include three new areas of operation -- agri-business infrastructure, decentralised infrastructure financing and annuity financing for the road sector. The disbursement from these three sectors is likely to increase substantially to compensate for fall in other areas."

He said IDFC had initiated dialogue with five state governments for building storage facilities that would cater to the post-harvest needs of farmers to exploit the business opportunities in financing the rural infrastructure.

To a query, he suggested to link the housing boom with the road construction activities to kick-start the economy and added that proper rural infrastructure financing could increase the rural demand substantially.