Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IFCI bailed out by the government - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 23, 2000

    IFCI bailed out by the government

    Industrial Finance Corporation of India (IFCI) has been bailed out by the government by pumping in funds into the institution through a Rs 1.9 bn grant and a Rs 4 bn subscription to a 20 year preference share issue.

    IFCI, India's third largest financial institution is a specialised project finance institution promoted by the Government of India in 1948. While initially it was providing long term finance to corporates, it is currently providing even short and medium term loans. It also runs a financial services division which offers merchant banking, loan syndication and advisory services.

    IDBI which holds a 28.8% stake in IFCI subscribed to the rights issue of IFCI at Rs 10 per share. However as the rights issue mopped up only 80% of the total targeted amount (Rs 3.5 bn), the remaining was met by the preference issue which was subscribed by the government to help IFCI increase its capital adequacy ratio to 9%.

    IFCI has been bogged down by changes in management, high NPA's especially in the steel and textile sectors and low transparency levels. Inspite of these issues the government continues to pump in funds into IFCI. Despite the market reforms undertaken by the government it continues to also follow its socialist policies of supporting loss making and inefficient institutions and banks by using taxpayers money.

    IFCI's NPAs stood at 21.5% as of March'99. Its highest NPAs are in the steel and textile segments. As the economy is improving these sectors could improve in the future, however an area of a concern for IFCI would be its lax lending policies and its not so serious attitude in recovering loans.

    IFCI needs to be restructured to get it going to meet the increasing competition. Its asset quality needs to be improved as well as future lending policies need to be reviewed. On the restructuring front IDBI wants to undertake an independent study for restructuring the country's oldest institution IFCI. The restructuring would include all aspects of the revival of IFCI.

    In a related news article the chairman of IDBI did not rule out the possibility of a merger between IFCI and IDBI. However IFCI does not seem very keen on this, despite the fact that IDBI has pumped in funds into the rights issue inspite of its high NPA's and low capital adequacy ratio. This being mainly because of the different market segments they target, IDBI focuses on large corporates and IFCI on small and medium scale companies. However there is no concrete basis for this merger yet.

    Market View:
    IFCI has been on the 'SELL' list of many analysts due to its high NPA's and the fact that there are better quality institutions in this sector.



    Equitymaster requests your view! Post a comment on "IFCI bailed out by the government". Click here!


    More Views on News

    HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

    Aug 10, 2017

    HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

    Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

    Jun 22, 2017

    Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

    Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

    Jun 14, 2017

    Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

    IDFC: Ends FY17 on a Healthy Note (Quarterly Results Update - Detailed)

    May 30, 2017

    IDFC regains its tempo in FY17 post the demerger of the banking business.

    HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

    May 9, 2017

    HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 03:37 PM



    Compare Company With Charts