The Finance minister Yashwant Sinha’s seems to be caught up in a whirlpool of worries over various financial institutions and the man is yet to tide over the barrage of criticism

in Parliament over the recent UTI fiasco, would in all probability get tangled by another fresh and brand new headache >> IFCI. In the wake of the recent repayment crisis, finance ministry has sought details of IFCI repayment plans and the top brass of IFCI were busy on 25/7/2001 working out the details to be submitted before the ministry.

The financial institution biggie is up against repayments and redemption pressure to the tune of over Rs 1,300 crore in the current fiscal. Repayment problems have cropped up due to shortage of liquidity and while the borrowings of the institutions are of shorter period, the FI has lent out for a longer period and hence is facing an asset-liability mismatch.

Further, to add to the institution’s trouble credit rating agencies are likely to downgrade IFCI. ICRA and CARE have sought further details on the repayment plans of the institution.

According to FI sources, the institution has also decided to request the other institutions to allow them to delay the repayments apart from asking them to convert the IFCI loans into debentures.

The total amount of loans, which can be converted into debentures, is to the tune of Rs 2,000 crore, the repayment crisis has been aggravated by the call option which IFCI decided to exercise on a private placement of bonds to the tune of Rs 420 crore.

The call option was exercised in an effort to reduce the interest rate burden, which was to the tune of 16 per cent to 17 per cent and this has added up to the routine redemption and repayment which are to the tune of Rs 710 crore. Mr P V Narasimham, chairman and managing director of IFCI explained that there has been an asset liability mismatch for the institution for the last few years and the asset liability mismatch is mainly due to the fact that we had borrowed for a period of five years while our lending has been for a period of 10 years.

Narasimham also confirmed that IFCI is in negotiation with other FIs for conversion of loan into debenture, but according to him, this is a part of market operation and the move is not in distress and if negotiations go through fine, otherwise IFCI would have to go for securitization.

Reacting on the possibilities of credit rating agencies downgrading IFCI, Narasimham said it is up to the rating agencies to decide, but the rating agencies should look into the entire scenario before deciding on the downgrading.

The FI also needs to meet the payment obligations of Rs 16 crore due on the family bond series, which it floated in 1996, IFCI had raised Rs 1,237 crore through the family bond series. The FI had also mobilized an external commercial borrowing to the tune of Rs 590 million over a period of three years which is due for redemption this year, sources added.

COULD IFCI be the next unlikely victim is the big question and one can only hope that is not.