The cash-strapped IFCI Ltd today said it has approached the Centre and institutional investors with a request to reduce the interest rate on bonds worth Rs 12,500 crore to 9 per cent.
"We have asked the government to assist us in restructuring our liabilities worth over Rs 12,500 crore through reduction in coupon rates and increasing the repayment period of its bonds," V P Singh, chairman, said after the company's annual general meeting.
The Delhi-headquartered institution has sought reduction in the coupon rate from its bondholders as it has to pay 16-17.5 per cent interest on its bonds subscribed by banks and other institutional investors amounting to Rs 7,000 crore, provident funds (Rs 5,500 crore) and retail investors (Rs 1,300 crore).
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IFCI also sought extension of the repayment period of these bonds to 7-10 years, Singh said adding that retail investors will not be approached for any restructuring.
IFCI has also approached reserve bank for treating Rs 550 crore long-term loans taken from the German development bank KfW at par with equity (tier-I capital).
With an average yield on assets at 13 per cent, the reduction in cost of funds would enable the institution to post profits, Singh said. Consultancy firm McKinsey had suggested IFCI to bring down the cost of funds to 9 per cent through restructuring of its liabilities.
McKinsey had recommended a capital infusion of anywhere between Rs 2,600 crore to Rs 8,800 crore depending upon the amount of bonds that can be restructured.
Of all the interest rate on bonds is reduced to 9 per cent and KfW line of credit is treated as tier-I capital then only Rs 2,600 crore will be required to be pumped into the institution, the consultancy firm said. On the other hand if there is no restructuring of debt, then the requirement will go up to Rs 8,800 crore.