Ifci Rolls Over Fis Bonds At Lower Rates

Financial institution IFCI Ltd has sought reinvestment of about Rs 2,200 crore from institutional investors including provident funds and co-operative banks and has offered them a coupon rate ranging between 9.5 per cent and 10.25 per cent against the average current yield of around 13 per cent.

This follows the inability of the cash-strapped institution to meet its repayment obligations, and the inability of provident funds to do much about it. About 10 to 15 per cent of the total corpus of provident funds is invested in IFCI.

The beleaguered FI has approached provident funds, banks and institutions for rollovers of the maturing bonds. Over the next 10 months, IFCI is saddled with repayment obligations of Rs 4,500 crore, and another Rs 5,000 crore in the coming fiscal.

 

In presentations to and meetings with institutional investors, IFCI has said that it would offer a 9.5 per cent return on investments up to 5 years, 10 per cent on 5-7 year papers and 10.25 per cent on bonds with a maturity of 10 and above.

Sources said that the Employees' Provident Fund Organisation (EPFO) with a corpus in excess of Rs 55,000 crore, has investment in IFCI paper to the extent of Rs 800 to 900 crore, which is expected to be rolled over. The 2,500-odd exempted provident funds in the country are also expected to roll over their debt investment in IFCI at a lower coupon.

Despite e-mailed questionnaires, the Central Provident Fund Commissioner did not comment on the issue. IFCI executives, however, confirmed that the institution had made a presentation to the EPFO investment committee last month. They said the organisation's investment of about Rs 70 crore is maturing over the next few months. Co-operatives have invested around Rs 1,500 crore in IFCI papers.

The ailing IFCI is facing a grave asset-liability mismatch. According to its balance sheet for 2000-01, it will see its cash flows becoming critical. Against maturing rupee assets of Rs 3,477.48 crore for a period between one year up and up to three years, liabilities stand to the tune of Rs 5,031.18 crore, reflecting a mismatch of Rs 1,553.7 crore. The development financial institution (DFI) suffers from high mismatches in its liquidity exceeding three years to five years as rupee assets exceed rupee liabilities by Rs 402.88 crore.

IFCI, however, expects to see positive cash inflows after four years as rupee assets stand at Rs 3,877.59 crore against rupee liabilities of Rs 1,512.71 crore. This will reflect high liquidity of Rs 2,364.88 crore.