FIs want debt-ridden firms to sell assets
Bullion prices surge on hectic buying abroad

New Delhi, June 3 
The financial institutions are considering asking debt-ridden business houses to sell off certain identified companies in order to improve their financial situation. This is mainly being done to reduce the high level of non-performing assets (NPAs) amounting to almost Rs 6000 crore that the FIs are now carrying on their books.

�The FIs have initiated talks with the promoters and we will try to enforce sale of these units next year,� IFCI managing director P.V. Narasimham said at a press conference where he unveiled the institution�s annual results.

These groups are involved in diverse businesses like basic chemicals, textiles, magnetic tapes and other sectors. �There are about 8-10 groups which are involved and some promoters have accepted our proposal,� said Narasimham.

An asset reconstruction company will have to be set up to transfer these assets and mandates would be given to financial consultants to find suitors. The FIs say the step is necessary to curb the growth of NPAs. IFCI alone has bad loans running into Rs 1500 crore from some group companies.

The Industrial Development Bank of India (IDBI), ICICI and IFCI usually lend in the ratio of 2:1:1, and so stakes of all three institutions are very high. The country�s oldest FI has classified its NPAs into three areas: those that are passing through a low phase because of which promoters are unable to repay immediately, but the institution continues to have confidence in such companies.

�We may consider re-setting their interest rates or giving them new payment schedules. We may be initially hit, but we will be able to recompense later,� said Narasimham. NPAs of about Rs 1,500 crore would fall in this category.

The second are those where the promoters are not willing to either pay up or sell their assets. �These companies seek the protection of BIFR or debt recovery tribunals. We will have to either convince them to pay up or sell off,� he added. The last are those businesses which are not viable because of which IFCI would have to write off loans taking losses of 30-40 per cent. IFCI has set up a committee to work out a long-term strategy, including alliances with others and merger with IDBI. It would look at new business propositions and the possibility of becoming a bank. This report is expected to be out in the next four months. It would however have to be approved by its shareholders, including IDBI which holds the largest stake.

For the first time, IFCI has decided not to pay any dividend to its shareholders. Its NPA has come down marginally from 21.44 per cent in 1998-99 to 20.78 per cent in 1999-2000. Net NPAs is estimated at about Rs 4,300 crore. It has seen a marginal increase in income from operations which touched Rs 2898.1 crore in 1999-2000.

Interest/cost of borrowings also rose marginally to Rs 2535.7 crore in 1999-2000 while expenditure came down from Rs 114.5 crore in 1998-99 to Rs 105.1 crore in 1999-2000. Net profit rose to Rs 59.37 crore as against Rs 23.5 crore last year. The company has made provisions for bad and doubtful debts and investments of Rs 251.17 crore appropriated from general reserve on account of reversal interest income of Rs 144.85 crore.

IFCI�s sanctions amounted to Rs 2376 crore as against the disbursements of Rs 3262 crore, which included guarantees of Rs 525 crore. In the last quarter of 1999-2000, its operating income stood at Rs 718.69 crore and it registered a loss of Rs 7.12 crore.    

Mumbai, June 3 
Gold prices surged on the local bullion markets today mirroring an explosion in gold and silver prices on the world markets.

On Saturday, standard gold jumped by Rs 75 to Rs 4440 per 10 gms from Rs 4365. 22-carat gold was nominally quoted sharply higher at Rs 4110 from the previous level of Rs 4040 and 10 -tola gold bar (.999 purity) skyrocketed by Rs 900 to Rs 52,000 from Rs 51,100.

�The local demand for the metal is good and international rates for gold and silver have gone through the roof. Our prices depend on the trends at the international market scenario,� said M.L. Damani of Bombay Bullion Association.

Another reason attributed for the rise in local values was the weakening of the rupee against the US dollar.

Gold prices exploded on the international markets on Friday, gaining nearly $10 per ounce at one point as massive short-covering drove prices higher. Friday�s rally also reversed the trend in silver prices from a new 12-month low of $4.89 per ounce in the international rates.

Silver, which had turned negative for months, entered new territory as buyers swarmed in after technical resistance levels were broken.

In another development that could have an impact on the price of gold, the Swiss National Bank announced plans to dispose 120 tonnes of bullion by the end of September.

However, the bank�s announcement had no effect on the volatility of prices. A leading factor that influenced bullion prices was the weakness in the US dollar.

�Steep rise in world prices, generated heavy stockists� buying in the domestic market in anticipation of a further sharp rise in the global prices,� dealers added.

In the local markets, ready silver (.999 fineness), after a sharply higher start at Rs 7995, ended at Rs 7955, showing a remarkable rally of Rs 115 over yesterday�s close of Rs 7840. Raw silver (.916 fineness) shot up by Rs 105 to Rs 7820 from Rs 7715 and tenderable silver rallied to Rs 7960 from the last close of Rs 7845.    


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