The share price of IFCI, a term lending institution, today continued its upward trend for the second consecutive day on reports that a bailout package for the ailing financial institution may be in the offing.
The stock jumped 6.25 per cent and ended at Rs 5.95 after hitting an intraday high of Rs 6.70 on the BSE. Over 5.16 lakh shares were traded.
According to reports, the Centre is considering take over of IFCI's critical liabilities by other banks and financial institutions. This would be balanced out by the transfer of equivalent amounts of IFCI's assets to each supporting institution.
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The critical liabilities include: foreign repayment, dues on SLR bonds (which carry government guarantee), investment in IFCI bonds by retail investors, and investment of provident fund (PF) monies.
IFCI would be required to undertake a detailed exercise to determine the amounts that are falling due on account of each of these heads.
According to unconfirmed reports, the government may decide to sell IFCI's assets as the financial institution does not have enough good assets that could be transferred to match its huge liabilities, which are estimated to add up to several thousand crores of rupees in the coming years.
Meanwhile, IFCI is shopping for funds abroad. IFCI has borrowed a $100 m foreign currency loan at 50 basis points over the Libor against a guarantee provided by the Centre. The amount is badly needed to repay (this month) its floating rate bonds raised in 1998 at 85 points above the Libor.
To enable the institution to tide over the severe asset-liability mismatch, the Centre agreed to provide a guarantee for Rs 800 crore borrowing, which could include the $100 m foreign currency loan.
Analysts say IFCI plans to transfer its bad debts to an asset reconstruction company (ARC), which will bring down its NPAs. They added that the outlook for the financial institution looks positive because of the positive attempts to restructure and the efforts to clean up its balance sheet.