The Industrial Finance Corporation (IFC) is set to inject Rs 12 crore into the Calcutta-based Alliance Credit and Investment Ltd (ACIL), augmenting substantially the finance company's long-term resource position.
The rating agency Duff & Phelps Credit Rating India said that ACIL's profits suffered during 1997-98 following heavy provisioning against non-performing assets (NPAs) during the year.
ACIL, which has the maximum exposure in corporate plant and the machinery sector, has suffered in recovering funds during 1997-98 owing to the liquidity crunch faced by the corporate sector. It had made heavy provisions of Rs 49.2 lakhs, which eroded the company's profits for the year ended March 1998, said Duff & Phelps Credit Rating.
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The company's total NPAs are 14.5 per cent of total loaned assets and only 17 per cent of the tangible networth.
Alliance Capital has been floated by Abhijit Sen, with foreign equity participation by Commonwealth Development Corporation and Duncan Lawrie.
The agency said the company's deployment in 1997-98 was lower than the previous year due to cash problems.
But the current year is expected to be better in terms of disbursals on account of the IFC loan .
The negotiations for disbursal of the first tranche of foreign funds from IFC has reached an advance stage and ACIL is hopeful of deploying the same in the first half of the current financial year.
The rating agency said since ACIL's inception it has largely been equity-funded and the company is now in the process of leveraging on its large capital base through increased debt.
Until now, the company has had a low gearing. As on March 31, 1998, the gearing was as low as 0.32. ACIL seeks to augment its long-term debt resources through overseas funding from IFC and enhanced credit lines from its bankers.
The rating agency said that the company has a favourable maturity profile with Rs 21.8 crore assets ripening over next year covering liability of Rs 12.5 crore maturing over the same period.