Mumbai, Feb 21: The Industrial Development Bank of India (IDBI) is contemplating nominating a full-time director on the board of IFCI. Unlike the existing nominee director, SK Chakraborty, who is currently the executive director at IDBI and takes part in IFCI's affairs only at its board meetings, the yet-to-be nominated director will be a wholetime director at IFCI.This development comes in the wake of IDBI, along with some other institutions and banks, subscribing to their portion of the Rs 350-crore IFCI's rights issue which closed on Saturday. The total amount garnered by IFCI from the subscription will, however, be known only next week. Institutional sources have put the total collection figure at around 65-75 per cent of the issue.
"Our first priority now is to improve the financial health of the development financial institution, IFCI, where we are the single largest share holder," a senior IDBI official told The Financial Express.
However, the board of directors of IDBI is yet to decide on their choice of the nominee director for IFCI. The biggest constraint now is the contentious issue that IFCI will not be able to keep its strategies under wraps from its biggest competitor, IDBI, once IDBI positions a permanent member on IFCI's board.
This move is believed to be a precursor to the bail-out package being worked out by IDBI for IFCI. "The bailout package is expected to be around Rs 100-200 crore, spread over a period of time," IDBI officials informed. Meanwhile, the central government is believed to have reiterated a Rs 400-crore assistance to IFCI.
This in effect means that IFCI will have a bail-out package of roughly Rs 670 crore (including roughly 270 crore by way of subscription to the rights issue) at it hands by March 31, 2000.
The modalities of the bail-out package are currently being worked out and will hinge on the revival plan which IFCI is expected to place before IDBI. However, the chairman of IDBI and of IFCI were unavailable for comments.IDBI had been under pressure from the finance ministry for quite some time now to bail out IFCI.
However, the biggest dilemma facing IDBI now is that the government may ask IDBI to merge IFCI with itself a few years down the line.
"This will be a severe setback to IDBI's plans," IDBI officials said. The threat is all the more plausible now, since the shareholding of IDBI in IFCI is expected to cross 35 per cent (up from around 28 per cent prior to the rights issue) on account of a less than 100 per cent subscription of IFCI's rights issue.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.