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IFCI-IDBI merger ruled out

IFCI Limited Chairman P V Narasimham does not foresee a merger with Industrial Development Bank of India, despite IDBI subscribing to its portion of IFCI's Rs 3.52 billion rights issue.

''Ownership is not important. Even if IDBI owns 100 per cent of IFCI, we still can be different'', he said.

IFCI would maintain its separate identity by focussing on small and medium scale enterprises and IDBI on large corporates, he said, adding after all IDBI is eight times larger than IFCI.

However, no agreement on segregating the focus areas has been formalised between the two financial institutions. ''We have not entered into talks with IDBI on this issue,'' he said.

The IDBI which is the single largest shareholder with 28.74 per cent is expected to increase its stake further in case the IFCI's rights issue is not fully subscribed, raising the possibility of their merger in the future.

The IDBI agreed to subscribe to its portion of the issue entailing an outgo of Rs 1.01 billion on February 18, a day before the deadline to the issue.

A visibly relieved Narasimham refused to divulge whether the rights issue has been fully subscribed. ''Wait for a few more days for details'', he quipped.

The one-for-one rights issue at par was floated to help it meet the capital adequacy norms of nine per cent by March 31, 2000.

IFCI's capital base has been eroded as it had to make provisions of Rs 8-10 billion for bad debts and had paid dividends from its reserves.

Asked if IFCI will offer voluntary retirement scheme to cut costs, he said, the wage costs for the institution are only 0.3 percent of the operating expenses. ''It is significant to reduce interest costs which account for a major chunk of our operating expenses''.

Interest costs are high as call money rates are hovering above 12 per cent. ''There will be no lending rate cuts till we reduce our deposit rates,'' he added.

IFCI will take two years to turnaround as it is taking a host of initiatives to settle NPAs fast and retain good clients by offering incentives. ''We will interconnect all our branches to have daily ledger accounts'', he said on the use of information technology.

UNI

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