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Wednesday, Apr 17, 2002

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IFCI seeks Government guarantee on bond issue

Sarbajeet K. Sen

NEW DELHI, April 16

WITH tough market conditions making it hard to raise resources, IFCI Ltd has approached the Ministry of Finance with a request for a Government guarantee on bonds to be issued by it in future.

IFCI has pointed out to the Government that the present credit rating of the institution is posing to be a stumbling block as investors are seeking to park their funds in instruments issued by higher rated institutions.

"Our rating has come down in recent times. Though we are still in the investment grade we are finding it difficult to raise resources. Besides making it easy to raise money from the market in general, some sort of a comfort from the Government for the institution as a whole would help banks and FIs to freely invest in our instruments,'' the top IFCI executive said.

In its last downgrade of IFCI, the rating agency, ICRA, had brought down the short and medium term ratings of the institution by two notches from A1+ to A2+ and MAA(-) to MA respectively and the long-term rating down by three notches from LAA(-) to LA(-).

IFCI officials said that large investors are not finding the present rating attractive enough. "In the present market conditions, investors feel that they should invest in instruments with at least a AA+ rating,'' the executive said.

The request for the guarantee is pending with the Government at a time when the institution has recently had to delay repayment of part of its borrowing that matured in early March. IFCI had instead requested the investors to reinvest the amounts in the institution at the current market rates.

It is understood that a number of the institutions to whom the request for roll over was made have expressed their willingness to reinvest in IFCI. "Quite a few banks have already conveyed their decision to reinvest,'' the executive said. However, he was unwilling to name the banks that have given a positive response since the entire process has not yet been completed.

Meanwhile, officials at the Ministry of Finance are a worried lot over the pace of improvement of the health of the institution. IFCI has been under immense pressure from official circles to show quick results in view of the large Government contribution in the bailout package that was put in place last year.

Out of the Rs 1,000-crore recapitalisation package for IFCI, the Government had put in Rs 400 crore while the remaining was split between IDBI, LIC and SBI.

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