IFCI offers VRS to cut costs

To shed 68% staff by offering relief up to Rs 15 lakh, offer open till Feb 29.

IFCI, which recently made an unsuccessful attempt to induct a strategic investor, has decided to shed more than 68 per cent of its staff to cut costs and sustain business in the medium term.

It has offered a voluntary retirement scheme (VRS) to its staff on February 4 and the offer is open till February 29. The compensation offered is subject to a maximum limit of Rs 15,00,000.

The country's oldest financial institution had turned profitable in 2006-07 after six years in the red. The turnaround was due to a boom in the economy, which transformed bad assets into valuable assets in metals and some other sectors.

It has sold many bad assets during the last two years, generating significant revenue. Out of the total Rs 1,200 crore profit in 2007-08, IFCI has made Rs 500 crore from investments.

Aware of the realities that the profits are mostly from recovery of bad loans and investments, the non-banking finance company has offered VRS to non-core staff such as clerks to cut the running cost.

"There are about 470 people in IFCI and our current business size requires not more than 150 people," IFCI Chief Executive Officer Atul Kumar Rai said. He said the VRS would give space to the company to redesign the business model.

"Our business model will undergo a change. We have no go but to shed weight because our wage bill is not sustainable beyond 2009-10. In other words, we will go back into losses again unless we reduce our wage costs. We will be better off if we have right kind of people," he said.

The management has started working on the assumption that there will be no government support and they will have to meet regulatory requirement and sustain business in the medium term on their own.

IFCI has also conveyed to the government that it does not require the Rs 2,200 crore that it was supposed to receive as a part of an earlier package to meet loan repayment obligations.

Rai said the institution had started looking at some new proposals for lending. On the induction of a partner in the company, Rai said it was open for an angel investor if there was a need to give a strategic direction with business expertise. IFCI was able to meet all regulatory requirements on its own and would not go for an investor for money alone, he added.