India Infrastructure Finance Company Ltd (IIFCL) has dropped plans to raise debt resources through tax-saving and tax-free bonds in the remaining months of the current fiscal.
Domestic fund raising plans through tax bonds have been shelved for now as the market conditions are very tough and also there are sufficient surplus funds with IIFCL, its Chairman and Managing Director, Mr S.K. Goel said.
“We have sufficient liquidity. That is why we are postponing our fund raising plans. We were earlier looking to mop up funds through both tax savings and tax free bonds. Our board has decided against this for the current fiscalm” Mr Goel said.
He also highlighted that the Government was really not interested in piling of cash in any of the institutions. “They are rather trying to squeeze out some liquidity from cash rich companies. Some cash may be drawn from us also.”
As IIFCL borrows funds on a long-term basis (average tenor of 10 years), Mr Goel felt that raising money at the current high interest rates may not be in the best interest of IIFCL.
“At today's rate if we tie-up funds for 10 years.... after two years, we may repent why we had taken money at this price. It may be better not to take funds now unless we very urgently require them”.
High interest rates
Both tax-free bonds (for corporates) and tax-saving bonds (for retail investors) today come at high interest rates, thanks to tightening of interest rates in the banking system, following successive 13 policy rate hikes by the Reserve Bank in the last 18 months.
Only the cash starved institutions may be compelled to go in for such high rates, Mr Goel said.
“Our aim is to provide loans to developers at concessional interest rates. It will not be in my interest to raise funds at such high rates”, he said.
Till date, IIFCL has sanctioned loans worth Rs 39,000 crore. Of this, the disbursement in the domestic market by this state-owned company is about Rs 19,000 crore.
Mr Goel said that IIFCL's London subsidiary has so far sanctioned loans worth $ 3.4 billion and disbursed about $ 800 million.
IIFCL is also yet to draw down the $1.195 billion line of credit made available to it by the World Bank.