The Hindu Business Line : LIC in fray for taking over IFCI

The Life Insurance Corporation of India (LIC) is emerging as the dark horse that could give serious challenge to IDBI Ltd in acquiring the oldest development financial institution in the country.

LIC has been figuring prominently in official talks as the possible candidate for acquiring IFCI, should other alternatives, being worked out, do not pan out as planned.

"A takeover of IFCI by LIC could be one of the options," a top Finance Ministry official said. He said that IFCI's expertise in project appraisal could come in handy for LIC for its exposure to the infrastructure sector.

The only other option that the Ministry of Finance appears to actively considering is the long-standing proposal for a merger of IFCI with IDBI.

The Government had also at one time considered a possible merger of IFCI with Punjab National Bank. The proposal did not make much headway after PNB sought a huge financial assistance of about Rs 3,000 crore from the Government as a compensation for acquiring the ailing institution.

In fact, IDBI Ltd, too, had been expressing its unwillingness to take over IFCI since it feared the adverse impact of the huge burden of bad debts that the latter had accumulated. IDBI had also pointed out that it was already in the midst of a major restructuring exercise after the merger of IDBI Bank with it.

Officials feel that there has been some softening in IDBI's stand after IFCI started showing improvement in its financials.

"At one point IDBI was not interested. But it is now looking closely at IFCI's performance after the institution has been on a pretty good recovery path. IFCI is likely to show considerable improvement in its results for the first half of the current fiscal. The NPA recoveries during April-September have been good as had been the case for the previous fiscal," the official said.

Officials said that they had also examined the option of keeping IFCI as a standalone entity. "Keeping IFCI as a stand-alone entity was not found to be a viable alternative especially when the trend was to have larger entities through mergers," the official said.

The Government has been working on a plan for IFCI for nearly two years now. However, strong pulls and pressures from political and trade union circles have come in the way of taking a firm decision all this while.

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