Ailing PICUP turns to UP govt for help

The Uttar Pradesh government is considering a proposal to invest Rs 200 crore, over the next five years, to revive the ailing Pradeshiya Industrial and Investment Corporation of Uttar Pradesh (PICUP).

According to sources, PICUP has made a proposal to the state government to invest Rs 40 crore annually as equity in the corporation for the next five years. "This will help the corporation get low-cost funds with which it can restart its activities," the sources said.

Reeling under a loss of Rs 427 crore and with 100 per cent of its assets turning non-performing, PICUP stopped lending for projects in 2002. It has since been looking for funds to get started again.

However, the sources added, bureaucrats in the state government have raised the question that there is no guarantee that the fresh lending done by the corporation too will not turn into non-performing assets.

The other option to revive PICUP was to give a majority stake to a strategic partner with strong skills in debt recovery. The factor that might interest a partner in PICUP is the real estate owned by the corporation. The assets are worth almost Rs 125 crore, though their valuation is substantially lower on the corporation's books.

Recently, the Small Industries Development Bank of India had proposed to refinance up to 60 per cent of loans given by PICUP to small and medium enterprises. However, the PICUP brass is not too keen on the refinance facility as it comes with a 7 per cent rate of interest. "With PICUP's lending rate of 9 per cent, it leaves a spread of just two per cent which is very thin, the sources said, adding, "For profitable lending, it is essential that PICUP be provided funds at a very low cost."

PICUP has done some recovery of distressed assets in the last few years and hopes to recover another Rs 50 crore in the current financial year. The corporation is also looking at fee-based activities like consultancy to augment its financial resources.