The Telegraph
Since 1st March, 1999
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Financial giants eye slice of IFCI loan-repair firm

New Delhi, Dec. 11: IFCI is in talks with a bevy of foreign investors who are keen to pick up a stake in an asset reconstruction firm it floated recently.

Sources said IFCI held talks with the UK-based Commonwealth Development Corporation (CDC), Goldman Sachs, New Bridge and GE Caps for acquiring equity in Asset Care Enterprise, its asset reconstruction subsidiary. ACE will initiate measures to take over the non-performing assets (NPAs) of the financial institution and develop a market for securitised loans.

“CDC has the best chance of picking up an equity stake in the ACE,” the official said, adding that the long-term the relationship may extend to the functioning of the parent body.

The stuttering financial institution set up Asset Care Enterprise with an authorised capital of Rs 20 crore. “The foreign equity partner will hold around 50 per cent in ACE,” he said.

The ACE will take charge of the financial institution’s NPAs which currently amount to Rs 3,897.6 crore (22.21 per cent of its loan portfolio). The institution’s non-performing loans are mostly concentrated in the iron and steel and textile sectors where it has the maximum exposure at 21.69 per cent and 11.4 per cent respectively.

The official said the foreign investor would soon begin a due diligence process. “The valuation of the assets is a matter of concern because the capital inflow will depend on this.”

Analysts said the NPA level of IFCI is close to 48 per cent instead of the 22 per cent as claimed by the institution. IFCI’s standard assets (comprising loans and debentures) stood at 77.79 per cent of total assets whereas the doubtful assets were higher at 17.11 per cent (Rs 3002 crore). The remaining 5 per cent are sub-standard assets.

Recently, state-run banks and FIs had worked out a loan restructuring package worth Rs 6,000 crore that would replace high cost funds of around 14-16 per cent rate of interest with low cost funds of around 6 per cent.

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