The Hindu Business Line : Long-term investment advisory mandates

WITH several large domestic advisory mandates already in its kitty, IFCI Ltd has now opened up talks with overseas funds to advise them in directing their investments into the country.

The institution hopes to help divert the flow of the funds to the foreign direct investment (FDI) route, instead of the foreign institutional investment (FII) channel.

Among the funds that the financial institution has been negotiating with for the purpose are the Abu Dhabi Investment Trust and the Saudi Investment Authority.

"We are trying to make these large funds take a more long-term investment call by making them invest in Indian companies through the FDI route. Till now, they have been operating as FII," Chairman, IFCI, Mr V.P. Singh said.

He said that IFCI's thrust for more non-fund based activities had already started to bear fruit during the current fiscal with a large number domestic advisory mandates coming its way.

Among these are projects by the Ministry of Finance, the Ministry of Disinvestment and the Government of Jharkhand.

Mandates have also come from Steel Authority of India Ltd (SAIL), Dredging Corporation of India, Uttaranchal Jal Vidyut Nigam Ltd, the Inland Waterways Authority of India projects and GAIL India Ltd.

"Most of these large advisory mandates are set for completion within the current fiscal. We expect to get some more such assignments in the days to come," Mr Singh said.

He said that the thrust of the institution for the time being would be to increase its non-fund based business while fresh lending activity would remain negligible. "We are going slow on fresh lending. It would remain like that for some time.

The focus is now on non-fund based activities. Earlier we were carrying the lending risk on our balance sheet from origination to maturity. Now we are moving to a system where we do not hold on to the assets for longer period.

We would like to act as an intermediary by transferring the assets after origination," Mr Singh said.

One of the main reasons for IFCI's present financial problems has been heavy reliance over the years on term lending which at one point constituted over 90 per cent of the institution's portfolio mix.

The heavy reliance on term loans made the institution vulnerable to large addition of non-performing assets with every downturn in the economy, with businesses assisted by it also coming under stress as a result.

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