Govt to Transform IFCI into Infrastructure Advisory Firm

The Indian government plans to overhaul operations at IFCI Ltd, a non-bank lender, by ending its lending activities and repositioning it as an infrastructure advisory firm. According to sources familiar with the matter, the move comes in response to capital constraints and rising non-performing assets.

Though the infrastructure finance company was founded in 1949, IFCI was ordered to stop new lending in 2021-22 after bad loans devastated its capital and liquidity. The Centre – which holds a 72% stake in IFCI – has now decided to use the company as an infrastructure advisor amid the country’s increasing focus on infrastructure development.

New Role and Scope
It would not restart lending under the new dispensation but expand its advisory services. The company will offer expertise in infra and green project appraisal to state governments. The idea is to build IFCI capabilities on the lines of SBI Capital Markets, the investment banking subsidiary of the State Bank of India.

Government also proposes to inject Rs 500 crore into IFCI this year so that it would meet its repayment obligations and further capital infusions to be made as needed.

Additional Measures
The transformation plan includes:

• Real Estate Monetization: IFCI will monetize its real estate assets and rent office spaces to generate income.
• Merger with Subsidiary: IFCI’s board has approved a merger with StockHolding Corp. of India, following recommendations from the finance ministry.

IFCI earned Rs 42.7 crore in rental income and posted a profit of Rs 130 crore in FY24.

Stock Performance
On November 25, IFCI shares fell 0.8% after news of the revamp emerged. However, the stock had gained 11.3% on Monday following the merger announcement. It has delivered a 121% return year-to-date, significantly outperforming the 10% rise in the Nifty 50 index.

India’s infrastructure spending has increased significantly, with the budget allocation tripling over five years to Rs 11.11 lakh crore for 2024-25. The shift in IFCI’s focus is expected to support this national priority.

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_{^{Source: Moneycontrol}}