• PAGE ONE
• INDEX
• HOME

Decision on IFCI pref issue after revamp panel report

Sarbajeet K. Sen

NEW DELHI, July 16

THE Ministry of Finance has decided to keep in abeyance the proposal for subscribing to a Rs. 400-crore preference share issue of IFCI Ltd till the D. Basu Committee, appointed to look into the restructuring of the institution, submits its report to the Government.

The Ministry is of the view that it would be better to consider the entire spectrum of issues connected with the restructuring of the country's oldest FIs at one go, instead of adopting a piece-meal approach.

``We would like to wait for the report of the D. Basu Committee before taking a decision on IFCI's request for subscribing to its preference shares. The organisational and financial restructuring of the institution would form part of an overall package,' ' top officials of the Banking Division of the Ministry of Finance said.

The six-member Basu Committee, which was constituted by IFCI on April 28, is expected to submit its report to the Government towards the end of this month or during early August.

The mandate of the committee includes looking into the possibilities of converting the institution into a bank, besides looking into its asset-liability profile, studying the prudential regulations applicable to the FI and suggesting ways to comply with the norms. The committee would also suggest changes in IFCI's business strategy in the medium and long-term to improve its viability.

IFCI had requested the Government to put in Rs. 400 crores in a preference share issue earlier this year. The proposal was made in view of the need to shore up the capital adequacy ratio of the institution on account of the poor response to its Rs. 353-c rore rights issue which closed in February.

At the end of March 31, 2000, IFCI's capital adequacy ratio worked out to 8.8 per cent, against the norm of a minimum nine per cent set by the Reserve Bank of India (RBI). The institution has also reported less than the projected level of net profit at R s. 59.37 crores, against a target of Rs. 148.8 crores for 1999-2000.

A decision on the Rs. 400-crore subscription is also being keenly awaited by the Industrial Development Bank of India (IDBI) which had put in Rs. 101 crores in IFCI's at-par rights issue, on assurance from the Government that it would take a positive vie w on the institution's request.

IFCI has, for the first time in its over 50-year existence, skipped paying dividend on its equity capital. There has also been concern on the sliding prices of the IFCI stock on the bourses. The IFCI scrip closed at Rs. 6.85 on Friday on the Bombay Stock Exchange (BSE).