IFCI to seek allies for arms
Tour financiers eager to travel homewards
Rs 40-lakh Volvo bus launched
Silk exporters in a spot

Calcutta, Oct. 20: 
IFCI Ltd, the beleaguered financial institution, will scout for a strategic partner once its health improves after the infusion of Rs 1000 crore, chairman and managing director V.P. Singh said here today. Strategic partner would be sought not only for IFCI but also for its subsidiaries, Singh added.

This was one of the key recommendations of the Dipankar Basu committee that was appointed to formulate a medium to long-term strategy for the development financial institution. “I am keen on implementing this, but not before the house is set in order,” Singh said.

Divesting stake to a strategic partner would not only help raise funds, but also source expertise and improve the institution’s credibility, Singh explained. “Once our credibility improves, we would like to go to the market and raise funds to get back into business,” he added.

At present, IFCI has barely enough funds to meet its repayment commitments and the stipulated capital adequacy ratio. It has approached the government for infusion of Rs 1000 crore—Rs 400 crore by the central government, and the balance, by its institutional shareholders. Its principal shareholders are IDBI, the state-owned insurance companies, State Bank of India, Unit Trust of India and some nationalised banks.

Singh said he was confident that the Rs 1000 crore promised by the government and the institutional shareholders would be infused within this financial year. “I am expecting the government to release its share of funds to disburse any day,” he said. But there is still some amount of uncertainty about the Rs 600 crore that the IDBI-led consortium would have to inject. UTI for instance is unlikely to cough up its share. It holds 4.47 per cent in IFCI.

Singh also said IFCI would scout for strategic partners for its subsidiaries as well, particularly for its venture capital business. “The US experience has shown that venture capital is a good business. We would like to rope in a strategic partner for IFCI Venture Capital Funds,” he added.

Asked whether IFCI had any plans of foraying into retail banking, Singh clarified that the institution would go to the extent of lending to finance companies with retail operations, but not enter the business on its own.

On IFCI’s long-term strategy, Singh said the institution would seek to reduce its exposure to project financing through debt instruments from its present level of 94 per cent to 50 per cent. “We will have to increase our exposure to equity and non-fund businesses,” he added.

“We have acquired a lot of expertise in infrastructure financing and can leverage it to offer advisory services,” he explained. He also mentioned investment and merchant banking as other thrust areas for the institution in future.


Mumbai, Oct. 20: 
Thinking of taking a break? Where would you wish to head for a holiday—Europe, US, or the UK? Given the anthrax scare sweeping across the continent and the US, chances are you’d like to play it safe and opt for safer destinations closer home.

Tourists the world over are doing exactly that—opting for low-profile retreats unlikely to figure on the terror brigade’s hit list. But the shift away from the traditional holiday hotspots has hit non-banking financial companies and banks, which had entered the lucrative holiday finance arena, real hard.

With outbound travel from the country predicted to take a blow from the crumbling World Trade Center towers, tour financiers are now changing strategy, enticing tourists with attractive interest rates.

For instance, a leading NBFC has been providing holiday finance at 11 per cent on a reducing balance method.

This means you can tour Bangkok or Pattaya on an EMI of Rs 1,60 paid for a period of 24 months. This includes air fare, hotel accommodation apart from sight-seeing.

Speaking to The Telegraph, Kamlesh Rao, associate vice-president, Kotak Mahindra Finance Ltd, one of the leading players in the arena, said while the concept has caught on lately, it has been processing over 3,000 applications annually.

While tour operators wait for signs of better times, NBFCs and banks engaged in holiday finance are using this opportunity to re-focus their strategies to concentrate on domestic travel.

“We feel that domestic travel holds good potential and plan to enter into tieups to address this segment,” added Rao. The company presently has joined hands with SOTC to finance outbound travel.

Rao said the focus will be on high networth customers and leading hotel chains in the country.

Sources said the April-May-June phase, followed by October-November-December, are considered to be the peak holiday season.

The latter half of the year usually witnesses a rush for destinations like Singapore, Mauritius and Bangkok, owing to the harsh winter in the Western hemisphere.

Industry circles say that this time, the “psychological fear” stemming from the September 11 terrorist attacks will add to reducing interest.

“Apart from destinations in the US and Europe which will certainly get affected, we also apprehend a drop in terms of bookings to other countries. Many people are likely to postpone their holiday plans and wait for conditions to improve,” said a financier.

Echoing similar views, a senior official from one of the leading city-based tour operators said though they expect a drop in outbound travel, the extent of the fall will be known only in early November, since the bulk of the bookings are done prior to Diwali.

“Usually at this time of the year, most companies splash campaigns about attractive package tours. But it is missing this time around,” he added.


Oct. 20: 
Swedish auto giant Volvo today entered the luxury coach segment in India with launch of its B7R bus. Senior Volvo executives said in Bangalore that the company hoped to sell 300 to 400 units of B7R in India annually in three years’ time. A B7R bus costs Rs 40 lakh (all exclusive, ex-bangalore), they said.

President of Volvo Bus Ccorporation Jan Engstrom said the launch is a result of intensive studies and trials in India in the last three years.

B7R is aimed at inter-city and tourist traffic, he said, adding, the company has no plans to enter the production of city buses. The market size for big buses (above 12 tonnes) is estimated to be 25,000 in India, Engstrom said.

“We expect to see buses from Volvo to be a motivation to travel and bring cities and people closer in India,” Ulf Nordqvist, MD of Volvo India Private Limited, said.


New Delhi, Oct. 20: 
The Indian Silk Promotion Export Council (ISPEC) is battling a government directive that requires it to pay back with retrospective effect DEPB benefits worth almost Rs 60 crore.

Last November, the government stopped extending benefits under the duty entitlement passbook (DEPB) scheme to exporters of silk embroidered fabrics.

But it then went a step further and asked the silk exporters to pay back all the DEPB benefits they had drawn in the two-and-a-half years that the scheme had existed.

Silk exporters claim that the draconian measure has led to a slump in exports of silk embroidered fabrics in the past 11 months.

In its notification issued on November 6 last year, the department of revenue had claimed that it was never the intention of the DEPB committee to extend export incentives in the form of duty concessions to embroidered fabrics.

The government has now started tightening the screws on the silk exporters by issuing showcause notices to them as a first step towrds recovering the past DEPB credits.

ISPEC chairman Subhash Mittal says, “Not only is DEPB credit being denied with retrospective effect but the silk exporters are also being denied other export incentives on other commodities in which they trade on the ground that they have run up DEPB arrears.”

The total DEPB arrears for the period comes to about Rs 60 crore and the duty drawbacks being withheld amount to about Rs 125 crore, he said.

In January, the government had fixed a value cap of Rs 750 per piece of silk garment exported for DEPB entitlement with a rate of 15 per cent.

Mittal says the value caps are unfair because the DEPB entitlement rate remains the same irrespective of the value addition on embroidered fabric. This severely hits profit margins of silk exporters who receive export orders primarily for their embroidered fabrics.


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