To raise Rs 5,000 cr more; market conditions, demand to determine timing.
Infrastructure Development Finance Corporation (IDFC) will almost double its borrowings than originally envisaged in the second half of this financial year (ending March 2009) to stay liquid in the current environment marked by uncertainty over availability of adequate resources.
“We want to be more liquid. While the original plan was to raise Rs 2,000-3,000 crore, we will probably raise another Rs 5,000 crore,” IDFC Executive Director Vikram Limaye said. Market conditions and customers’ demand would determine the timing of the fund-raising, he said adding, “We will not just raise capital and sit on it since it will impact spreads and earnings. It is a dynamic situation.”
| BOLSTERING RESOURCES IDFC's borrowings as on September 30 | ||||
| Product | 2007 | 2008 | ||
| Rs crore | % of total | Rs crore | % of total | |
| Long term | 14,244.0 | 83.1 | 20,236.0 | 88.4 |
| Bonds/debentures | 7,563.0 | 44.1 | 11,284.0 | 49.3 |
| Rupee loans | 4,837.0 | 28.2 | 5,988.0 | 26.2 |
| Forex loans | 1,194.0 | 7.0 | 2,314.0 | 10.1 |
| Sub debt | 650.0 | 3.8 | 650.0 | 2.8 |
| Short term | 2,900.0 | 16.9 | 2,654.0 | 11.6 |
| Total | 17,144.0 | 100.0 | 22,891.0 | 100.0 |
The borrowings at the end of September 2008 stood at Rs 22,890 crore as against Rs 17,144 crore a year ago. The net borrowings in 2008-09 are estimated at Rs 8,000-9,000 crore, of which at least two-thirds the amount would have been raised in April-September. The company advanced its fund-raising plans to the first half in response to the tight resource conditions.
Limaye said, “Not all funds raised from the market will used to lend for new business. Some part of it (borrowings) will be used to repay debt, which is coming up for redemption.”
Elaborating on the challenges in raising resources, Limaye said, “Overall financing in the current environment has become more difficult and the cost of financing has also gone up (in October).” While IDFC had anticipated tight market conditions way back in July, what has happened now is worse in terms of liquidity tightening and availability of capital, he added.
Raising funds, though at a higher cost, will not be a daunting task for IDFC. “We borrow from banks and insurance companies. We have no issues,” Limaye said, adding the company has a rating of AAA+, zero non-performing assets and the capital adequacy is 22 per cent.
As a matter of prudence, it has slowed down on taking fresh commitments in the third quarter due to the lack of clarity on liquidity. It is focussing on asset quality. IDFC is not lending to commercial real estate and IT parks since these are facing severe stress.
The balance sheet size grew by 28 per cent from Rs 22,578 crore as on September 30, 2007, to Rs 28,970 crore as on September 30, 2008. The loan book saw a 25 per cent rise from Rs 17,160 crore to Rs 21,393 crore.
