Rs 100-Crore Preferential Shares In The Pipeline

The Industrial Finance Corporation of India (IFCI) will issue preferential shares worth Rs 100 crore in the current year at a fixed dividend rate of 10 to 11 per cent. It also plans to go for unsecured subordinated debt float for raising between $100 million to $150 million.

Announcing these plans, IFCI chairman K D Agarwal said the idea was to ensure that the capital adequacy level of the institution does not go below the current 10.1 per cent.

IFCI posted a 6.67 per cent increase in net profit and a 32.65 per cent growth in income from operations for the 1996-97 fiscal. The IFCI board which met here yesterday also declared a dividend of 30 per cent free of tax for 1996-97 as against 25 per cent for the previous year.

 

Agarwal said there was a strong possibility of financial institutions lowering their prime lending rate by one per cent following the Reserve Bank's decision to reduce the bank rate by one per cent.

The institution will shortly announce a scheme for providing funds for working capital requirements in consortium with a few select banks. It will soon extend the limit under the corporate loan scheme for foreign currency loans from Rs 20 crore to Rs 25 crore as has been done in the case of rupee loans, he added. IFCI also plans to raise $300 million in the form of external commercial borrowings in the current year. It has already obtained government permission to raise $100 million, he said. Agarwal expects to be able to raise the loans at 60 to 70 basis points above Libor.

The institution's disbursements in 1996-97 was Rs 5,157 crore, an increase of 13 per cent over the earlier year. The average growth in disbursements of all institutions put together was 9.5 per cent, he pointed out.

For the current year, IFCI has set a target for sanctions of Rs 10,000 crore and disbursements of Rs 7,000 crore, implying a growth of 39 per cent and 36 per cent over last year. "These targets have been set in view of the numerous opportunities especially in infrastructure projects," Agarwal said.

A major portion of the sanctions made last year went for infrastructure projects (21.2 per cent), of which power projects accounted for 19.6 per cent, iron and steel 12 per cent, textiles 9.6 per cent, synthetic resins and plastics 6.9 per cent and capital goods 6.7 per cent.

IFCI's net profit improved from Rs 354.90 crore in 1995-96 to Rs 378.56 crore while income from operations touched Rs 2,568 crore against Rs 1,936 crore. The rate of growth of net profit was lower than the previous years due to a variety of reasons including costly borrowings, Agarwal said.

"Costly borrowings of earlier years was reflected in the 1996-97 balance sheet and this affected our profits,'' he said.

adding the lower rate of growth was also due to a lower prime lending rate (PLR).

''There was a deliberate policy by IFCI to keep the PLR nearly a percentage point lower than other institutions like IDBI and ICICI, who were giving at 17 per cent as against 16 per cent by IFCI,'' Agarwal said.

IFCI's sanctions last year aggregated Rs 7,212 crore on 394 projects. This was nearly 30 per cent lower than the sanctions of 1995-96.

He said there has been a sharp improvement in IFCI's market share amongst the three leading all-India financial institutions. While the share of sanctions had grown from 15.2 per cent to 20.5 per cent between 1995-96 to 1996-97 the share of disbursements had climbed from 14.8 to 20.2 per cent.

Agarwal added that while the earnings per share was Rs 10.73, return on networth was 24.27 per cent and book value of the equity share was Rs 41.46. He said the institution had taken steps to restructure the debt-equity ratios to make more companies eligible for funding in view of the depressed capital markets. Eighty per cent of the recommendations on competitive repositioning of IFCI made by Arthur Andersen & Associates had been implemented and the remaining part would also be done by March, he added.