IDFC has plan B to go retail if bank permit bid founders

Tags: IDFC, Companies
Even as it awaits a banking licence, infrastructure financing major IDFC has kept a plan B ready to get into some non-infrastructure financing businesses such as retail and housing finance and corporate lending through a separate entity, mainly to diversify risks.

IDFC has a status of infrastructure finance company (IFC) and it cannot lend to other sectors under the existing nomenclature. If it fails to get the banking licence, the company will quickly complete the formalities to set up a new company for non-infrastructure financing activities.

Group CFO Sunil Kakar told Financial Chronicle that IDFC had more than 75 per cent of its loan deployed in the infrastructure business, that too mostly in lumpy projects.

“If something goes wrong, the risks and loss would be heavy. We would like to distribute our risks by diversifying our asset base into retail lending, housing finance and corporate lending. We have some entities that can be reactivated into a company,” Kakar said.

He said IDFC was seeing flattish growth as the economy was in a bad shape, with GDP growing at 5 per cent for two consecutive years for the first time in two decades.

“Things do not look good even for the third year,” Kakar said, adding that even with a stable government at the centre, it would take at least 12 months for things to look better.

There are no green field projects happening in the infrastructure space, especially in the power, roads, ports or mining sector.

“Our loan growth has turned flattish compared with a CAGR of 26 per cent three years back. This year, we expect our growth to be around 2 per cent. Even with the general elections being a trigger and a favourable government at the centre, we cannot be sure if capital expenditure in infrastructure will pick up anytime soon,” said Kakar.

He said there was a huge trust deficit between the stakeholders — the government and private companies — and even within the government between politicians and bureaucrats. “If you have to think of witch hunt every time you take a decision, things will not improve. We have the right mix of resources and intelligent people along with youthful energy. But it must not be forgotten that we are at the cusp of development and we may fall if the decisions are not right. The young generation is not used to this kind of pain, hence we have to be careful,” he said.

vikassrivastav@mydigitalfc.com

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