IFCI will rope in an investment banker as a strategic partner by the end of the year and forge alliances with banks to access cheaper short-term funds in a repositioning move.
IFCI chairman and managing director V P Singh, however, did not disclose details of the plans. He said the Delhi-based institution will increase its focus on non-fund business, reduce dependence on term financing and ramp up the activities of its venture capital subsidiary.
The non fund activities would include advisory services in major infrastructure areas, syndication of loans, leasing and bill discounting, Singh said. He also said that the institution, while restricting its exposure to a single project at Rs 100 crore, would arrange syndication of loans. "We would focus on mid-size corporates," Singh said.
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The new IFCI chief, who took over from P V Narasimham last Monday, also said that the institution would focus on sectors like information technology, entertainment, pharmaceuticals and retail businesses. Exposure to steel, which accounts for a very high proportion of the FI's non-performing assets, would be restricted, he said.
"Even in the textiles sector we would be selective and lend only to those promoters who have a sound track record," Singh added. In the infrastructure sector, he ruled out any new exposure to the power sector and said that in case of telecom, road and ports IFCI would harness its experience to provide advisory services in addition to mere lending.
On reducing NPAs and better monitoring of loans extended by IFCI, Singh said that the institution would form a panel of independent directors who would be inducted in various companies and press for converting debts into equity or convertible debentures. The other ways in which IFCI would assist companies are through rescheduling of loans and reduction of interest rates.
He, however, did not provide any clear picture on conversion into a universal bank. "We are still thinking whether universal banking is the ultimate aim or we should continue as a FI," he said, adding that the expert committee under former State Bank of India chairman D Basu had suggested IFCI's conversion into a term financing institution.
But Singh was emphatic in saying that talks with prospective strategic partners, which would in all probability be an investment banking outfit, would be initiated as soon as the government and stakeholders provide the promised Rs 1,000 crore in the form of non-convertible debentures with a coupon rate of 9.9 per cent.
He said that negotiations would also be started with commercial banks, both public sector and private ones, to get access to short-term funds.