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Sarbajeet K. Sen

NEW DELHI, June 30

WITH the health of IFCI Ltd showing steady deterioration, the Ministry of Finance is considering the option of stepping in once again to catalyse yet another financial support package for the institution.

Officials said that the Government would make up its mind on how to cobble up the fresh support package only after a thorough look at the recent report submitted by McKinsey and Co for IFCI's revival. The report has recently been submitted to IFCI.

While ruling out any further direct infusion of funds by the Government, officials hinted that Finance Ministry could consider convincing IFCI's institutional shareholders to step in to help the beleaguered FI out of its immediate liquidity problems. They said that preliminary discussions on IFCI's future had already been held.

"Institutional shareholders cannot completely avoid their responsibilities. IFCI is after all their baby. If one's child is sick, the person has to think of ways to cure the ailment. The child cannot be simply abondoned,'' a top ranking official told Business Line.

Institutional shareholders have been wary of coming to the support of the IFC fearing that in the present financial state of the FI, further assistance committed to it would not be recovered in future, leading to NPAs.

While most of institutional shareholders had stayed out of the Rs 1,000-crore recapitaliation package worked out for IFCI by the Government last year, the FI's recent request to banks and institutions, including its shareholders, for rollover of investments had also fallen on deaf ears.

Compounding matters further, IFCI has reported a net loss of Rs 884 crore for 2001-02 against a loss of Rs 265.93 crore in the previous year.

McKinsey has, however, said that all is not yet lost for the institution. In its report the consultants have suggested that IFCI asset base be split into two, with the bad assets transferred to the asset reconstruction company (ARC) recently floated by the institution.

With the good assets remaining with it, the institution can continue functioning as a stand-alone entity which could then adopt further corrective measures to ensure that the it does not find itself in a similar plight in future.

While deliberating on the suggestions made by the consultants, the IFCI Board has also expressed the need for support of the Government and the Reserve Bank of India for the revival of the institution.

It is understood that IFCI would soon discuss the McKinsey report with the Finance Ministry officials. However, it is not known whether the consultants have suggested any Governmental support for IFCI.

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