The Hindu Business Line : Despite resignations by top brass — Govt may go ahead with plan to put IDFC under SBI fold

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Despite resignations by top brass — Govt may go ahead with plan to put IDFC under SBI fold

Our Bureau

Mumbai , March 20

THE resignations of the top brass of Infrastructure Development Finance Company (IDFC) is unlikely to dilute the Government's intention of handing over the company to the State Bank of India.

According to sources close to the Finance Ministry, the Government is keen on putting IDFC under the SBI umbrella. This may help the Government to have a bigger say in the operations of the Rs 50,000-crore infrastructure fund that was proposed by the Finance Minister, Mr Jaswant Singh, in the interim Budget.

"And the Government can have greater control over IDFC by making it a group company of SBI," the sources pointed out.

The sources said the Government's plan for the merger was to begin with transfer of RBI's 15 per cent stake in IDFC to SBI, which at present owns 6 per cent equity in the company. While the Government has 20 per cent, it planned to have a tighter grip on the company by transferring the smaller shareholdings, like UTI's 3 per cent, to have control of about 43 per cent of IDFC's stake, according to the sources.

A source close to one of the officials who resigned pointed out that the Government was trying to mislead the stakeholders by indicating that it had no plans to merge IDFC with SBI and that any such decision would be taken only after consulting the stakeholders. "Our information was that SBI officials were preparing to move in any day," the source, on condition of anonymity, said.

The Government's move appears to have triggered off a major crisis at IDFC. Close on the heels of the resignation of its Managing Director, Mr Nasser Munjee, and six other top management representatives, IDFC sources say that several other officials in the second rung of the organisation may also put in their papers, if the Government does not alter its stand in the coming weeks. IDFC has on its rolls about 130 employees.

The six senior executives who quit along with Mr Munjee include Mr A.K.T. Chari, chief operating officer, Mr Urjit Patel, chief policy advisor, Mr L.K. Narayan, chief risk officer, and Mr Luis Miranda, CEO of IDFC Asset Management Company.

Mr Deepak Parekh, Chairman of IDFC, while confirming that he has received the resignations, said that they have not yet been accepted.

When contacted, Mr Munjee said any move to bring IDFC under SBI would affect the operations of the company and dilute its autonomy. "Over the years, we had taken painstaking efforts to develop risk management skills. IDFC had pioneered annuity financing of roads, introduced take-out structures and undertook creative mezzanine financing. We have a clean record and a bright balance sheet. We fail to understand what is the purpose behind this move," Mr Munjee said.

During 2002-03, IDFC's approvals and disbursements/commitments were in the neighbourhood of Rs 2,304.01 crore for 24 projects and Rs 949.3 crore for 29 projects respectively. As on March 31, 2003, IDFC approved financial assistance for 104 projects, aggregating Rs 12,459.7 crore.

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Despite resignations by top brass — Govt may go ahead with plan to put IDFC under SBI fold