 "DFI tag will help us lend to infrastructure for the long term: Malay Mukherjee")
IFCI, which was converted back into a government company last year, wants to get the status of a development finance institution (DFI) - the way it started in 1948 - to bring down its cost of funds. Malay Mukherjee, managing director of IFCI, tells Vrishti Beniwal that the lender is planning to raise Rs 1,500 crore this year by selling noncore assets, and that it may not apply for a bank licence again. Edited excerpts:
Recently, IFCI's share price jumped following news about the sale of the company's noncore assets...
I don't know why the media picked it up that day. I have been telling this from the very beginning. I have seen the portfolio, and out of about Rs 29,000 crore of assets, noncore assets are worth Rs 6,000 crore. Of this Rs 6,000 crore, assets worth Rs 600 crore are listed, while the rest are unlisted. It is all spread thinly and is not giving us the value for the money which is there. So, in a phased manner, we would like to exit those investments. When we were a DFI, it was nice to put up money everywhere. Now we are not a DFI, we are an NBFC (non-banking finance company). So we have to utilise money in a manner where the investors get money.
For this financial year, we have planned only for three - NSE, where we want to divest around 2.5 per cent; factoring, where we plan to divest 2630 per cent, and IFIN (IL&FS Financial Services) from where we want to get out of the entire 95.5 per cent stake. The reason we want to exit IFIN completely is that we have another subsidiary, which is almost in the same business - Stock Holding Corporation. We should get about Rs 1,500 crore this financial year from these three divestments.
Why are you asking for a DFI status again?
Countries like China, Vietnam, Brazil, Malaysia and Germany have DFIs. So if these countries are doing well and DFIs are able to assist infrastructure companies not only in those countries but outside as well, why should India not do these same? When IFCI was a DFI, it started many of the prime institutions in the country like NSE, CRISIL and others. Today, when there is a need to fund infrastructure, and the present government is asking for infrastructure boost, someone should play the role to lend to infrastructure for long-term. Banks cannot lend to them on a long-term basis because they have an assetliability mismatch. NBFCs like us will not be in a position to lend because our cost is too high. We again borrow from the market and lend. So, the government has to make IFCI and companies like IIFCL DFIs, or they will have to change the priority-sector norms for the banks for lending to infrastructure. Also, they will have to tweak the rules for SLRs (statutory liquidity ratio) and CRR (cash reserve ratio), if infrastructure has to grow.
IFCI was not considered for a bank licence in the first round. Will you apply under the new norms?
If we go for it for long-term, that is, wholesale banking, the draft guidelines for that say you can take deposits above Rs 5 crore and lend at higher rates. Not many people put more than Rs 5 crore in deposits on a longterm basis. So, I don't know when the guidelines come out, how those will look, but as of now, it looks it may not suit us, as there will be huge assetliability mismatch again. So unless there are changed guidelines, we may not opt for that.
What are your plans for IFCI subsidiaries?
We want to grow those subsidiaries. IFCI Venture is launching two new venture funds very soon. Also, the government in the last Budget gave Rs 200 crore for the scheduled castes venture capital fund to IFCI, which has gone to IFCI Venture. We are also trying to see if we can be a part of the government's plan for the MSME (micro, small and medium enterprises) sector.
Recently, IFCI's share price jumped following news about the sale of the company's noncore assets...
I don't know why the media picked it up that day. I have been telling this from the very beginning. I have seen the portfolio, and out of about Rs 29,000 crore of assets, noncore assets are worth Rs 6,000 crore. Of this Rs 6,000 crore, assets worth Rs 600 crore are listed, while the rest are unlisted. It is all spread thinly and is not giving us the value for the money which is there. So, in a phased manner, we would like to exit those investments. When we were a DFI, it was nice to put up money everywhere. Now we are not a DFI, we are an NBFC (non-banking finance company). So we have to utilise money in a manner where the investors get money.
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Which investments can you divest and how much money would you get?
For this financial year, we have planned only for three - NSE, where we want to divest around 2.5 per cent; factoring, where we plan to divest 2630 per cent, and IFIN (IL&FS Financial Services) from where we want to get out of the entire 95.5 per cent stake. The reason we want to exit IFIN completely is that we have another subsidiary, which is almost in the same business - Stock Holding Corporation. We should get about Rs 1,500 crore this financial year from these three divestments.
Why are you asking for a DFI status again?
Countries like China, Vietnam, Brazil, Malaysia and Germany have DFIs. So if these countries are doing well and DFIs are able to assist infrastructure companies not only in those countries but outside as well, why should India not do these same? When IFCI was a DFI, it started many of the prime institutions in the country like NSE, CRISIL and others. Today, when there is a need to fund infrastructure, and the present government is asking for infrastructure boost, someone should play the role to lend to infrastructure for long-term. Banks cannot lend to them on a long-term basis because they have an assetliability mismatch. NBFCs like us will not be in a position to lend because our cost is too high. We again borrow from the market and lend. So, the government has to make IFCI and companies like IIFCL DFIs, or they will have to change the priority-sector norms for the banks for lending to infrastructure. Also, they will have to tweak the rules for SLRs (statutory liquidity ratio) and CRR (cash reserve ratio), if infrastructure has to grow.
IFCI was not considered for a bank licence in the first round. Will you apply under the new norms?
If we go for it for long-term, that is, wholesale banking, the draft guidelines for that say you can take deposits above Rs 5 crore and lend at higher rates. Not many people put more than Rs 5 crore in deposits on a longterm basis. So, I don't know when the guidelines come out, how those will look, but as of now, it looks it may not suit us, as there will be huge assetliability mismatch again. So unless there are changed guidelines, we may not opt for that.
What are your plans for IFCI subsidiaries?
We want to grow those subsidiaries. IFCI Venture is launching two new venture funds very soon. Also, the government in the last Budget gave Rs 200 crore for the scheduled castes venture capital fund to IFCI, which has gone to IFCI Venture. We are also trying to see if we can be a part of the government's plan for the MSME (micro, small and medium enterprises) sector.