Managing Director and CEO, IDFC, Defends his Strategies to B&E’s
Started in 1997 to help finance the country’s infrastructure development, Infrastructure Development Finance Company Limited (IDFC) is now India’s leading integrated infrastructure finance corporation. This year, it was also post-haste awarded the status of an NBFC. And now, the company has made its growth intentions clear by putting forward an ambitious plan to raise Rs.34 billion via infrastructure bonds during the current fiscal. CEO Rajiv B. Lall speaks to B&E’s:
B&E: You obtained the status of an NBFC in June this year. How has life changed for IDFC after that?
Rajiv B. Lall (RBL): The best part of it is that as an NBFC, we are now allowed to raise funds from both public and overseas. And thus, we are planning to raise around Rs.30 billion in the near future. This will also minimise our risk of liability management.
B&E: Your bond offering, which ended on October 22, came at a time when Sensex was at a 2-year high and the primary market was gaining ground. What was the rationale behind issuing a debt instrument at a time when equity was on a high?
RBL: Our bonds are almost risk free as the government itself is the largest shareholder in the company. At the same time, the returns offered by us are also higher. It now depends on the investors to see whether they want to invest in this or not. But before that, investors must look into a few facts like our NPAs and PAT growth rate et al. Currently, at 0.15% we have one of the lowest NPA rates among the finance companies and our bottom-line has grown at a CAGR of 28% over the past 5 years. Also, IDFC’s post tax return on assets stands at 3.5% and I am certain that we will be able to sustain such profitability in the future.
B&E: Do you think the rate of interest that you are offering to your bond investors are lucrative enough to generate a warm response?
RBL: Certainly. The rate that is offered by us is very competitive. We are offering an interest of 8% in two schemes, while the rate of interest is 7.5% in two other schemes. That too at a time when we have a AAA rating on our bonds, which many do not get in this country. This rating implies that our bonds are safe investments and with this interest rate, I think, we are definitely competitive.
B&E: Still, what is the guarantee for these bonds?
RBL: Cash flow of the company is the underlying security for our bonds. However, debt servicing not only depends on the cash flow, but also on leveraging of the balance sheet. And we are one of the most under leveraged companies. That is the reason why we are AAA rated. Also, you can have a look at our 13-year track record in terms of management, capital structure and growth trajectory. They all account for support of the bond.
Started in 1997 to help finance the country’s infrastructure development, Infrastructure Development Finance Company Limited (IDFC) is now India’s leading integrated infrastructure finance corporation. This year, it was also post-haste awarded the status of an NBFC. And now, the company has made its growth intentions clear by putting forward an ambitious plan to raise Rs.34 billion via infrastructure bonds during the current fiscal. CEO Rajiv B. Lall speaks to B&E’s:
B&E: You obtained the status of an NBFC in June this year. How has life changed for IDFC after that?
Rajiv B. Lall (RBL): The best part of it is that as an NBFC, we are now allowed to raise funds from both public and overseas. And thus, we are planning to raise around Rs.30 billion in the near future. This will also minimise our risk of liability management.
B&E: Your bond offering, which ended on October 22, came at a time when Sensex was at a 2-year high and the primary market was gaining ground. What was the rationale behind issuing a debt instrument at a time when equity was on a high?
RBL: Our bonds are almost risk free as the government itself is the largest shareholder in the company. At the same time, the returns offered by us are also higher. It now depends on the investors to see whether they want to invest in this or not. But before that, investors must look into a few facts like our NPAs and PAT growth rate et al. Currently, at 0.15% we have one of the lowest NPA rates among the finance companies and our bottom-line has grown at a CAGR of 28% over the past 5 years. Also, IDFC’s post tax return on assets stands at 3.5% and I am certain that we will be able to sustain such profitability in the future.
B&E: Do you think the rate of interest that you are offering to your bond investors are lucrative enough to generate a warm response?
RBL: Certainly. The rate that is offered by us is very competitive. We are offering an interest of 8% in two schemes, while the rate of interest is 7.5% in two other schemes. That too at a time when we have a AAA rating on our bonds, which many do not get in this country. This rating implies that our bonds are safe investments and with this interest rate, I think, we are definitely competitive.
B&E: Still, what is the guarantee for these bonds?
RBL: Cash flow of the company is the underlying security for our bonds. However, debt servicing not only depends on the cash flow, but also on leveraging of the balance sheet. And we are one of the most under leveraged companies. That is the reason why we are AAA rated. Also, you can have a look at our 13-year track record in terms of management, capital structure and growth trajectory. They all account for support of the bond.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
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