KSIIDC to restructure, plans turn around this fiscal

The Karnataka State Industrial Investment & Development Corporation (KSIIDC), the investment arm of the Karnataka government, which also provides loans to small, medium and large industries in the state, is on a restructuring mode.

K Jairaj, who took over as managing director of the corporation two months ago has charted out a recovery path and plans "to turnaround KSIIDC during the current fiscal and make a nominal profit".

Currently, KSIIDC's equity holding in various companies is about Rs 300 crore while its loan portfolio is a staggering Rs 2,000 crore. NPAs constitute over 50 per cent of the loans. KSIIDC's accumulated losses are Rs 350 crore.

With this background, KSIIDC's biggest priority is to restructure the corporation and arrest the financial haemorrhage. KSIIDC is in talks with Sicom (State Industrial and Investment Corporation of Maharashtra), which is doing a study to help KSIIDC privatise. Sicom is already privatised and is a premier financial institution responsible for catalysing industrial development and FDI in Maharashtra.

Speaking to Business Standard, K Jairaj, managing director, KSIIDC, said, "Restructuring will mean having a sharper business objective, creating strategic business units and becoming profitable. We have stopped advances from November 2002. As the recoveries were as low as Rs 3-4 crore per month, it resulted in a cash flow problem. Recovery of loans is being given the top priority."

While measures are being taken to recover loans through a one-time settlement, KSIIDC is also in an advanced stage of discussion with its lenders for a one-time settlement.

KSIIDC owes nearly Rs 600 crore to SIDBI and IDBI. It has proposed to IDBI the paying back of loans worth Rs 400 crore in three installments and has asked for an interest waiver.

As part of the one-time settlement, KSIIDC is also proposing to go for a debt swap which is expected to reduce interest rates from 12.5-13 per cent to 8-9 per cent. By restructuring the borrowing portfolio, KSIIDC hopes to reduce the cost of funds to less than 10 per cent.

Another option being pursued is getting government guarantee for Rs 100 crore to retire high cost debt and rolling over government guarantee of over Rs 200 crore.

Jairaj's measures have already begun to show results. Recoveries have gone up from Rs 8 crore in June, 2004 to Rs 13.5 crore in August, 2004. The target for this month is Rs 20 crore. KSIIDC has set itself a target of Rs 170 crore from loan recoveries alone this fiscal.

Part of its revival process also includes venturing into new lines of activity. The state government's proposal to designate KSIIDC as the nodal agency to promote and develop new projects on the public-private partnership mode should auger well in this aspect.

Some of these projects include Bangalore City Gas project, Film City at Hessarghatta, Financial District in Bangalore and Agency for Disinvestment of State PSUs.