Industrial Finance Corporation of India (IFCI) – Detailed Overview
1. Establishment and Evolution:
Founding:
Year: 1948
Purpose: Established to provide long-term financial assistance to the industrial sector, supporting post-independence industrialization in India.
Role: IFCI aimed to facilitate the growth of industries by offering financial support that was not readily available from other sources.
Conversion to Public Company:
Date: 1 July 1993
Current Name: Industrial Finance Corporation of India Ltd. (IFCI Ltd.)
Reason for Conversion: The conversion from a statutory corporation to a public company was intended to align IFCI with market-driven practices and enhance its operational flexibility.
Ownership and Capital:
Stakeholders: Major stakeholders include the Industrial Development Bank of India (IDBI), scheduled banks, insurance companies, and cooperative banks.
Authorized Capital: Initially set at ₹250 crores, with the government having the authority to increase it as needed.
2. Functions of IFCI:
Loan Provision:
Purpose: Provides medium and long-term loans and advances to industrial and manufacturing concerns.
Evaluation Criteria: Loans are granted based on an assessment of the project’s importance to the national economy, the total project cost, the quality of the product, and the management of the company.
Impact: Ensures that projects with significant economic benefits receive the necessary financial support.
Debenture Subscription:
Role: Subscribes to debentures issued by industrial companies, thereby supporting their capital-raising efforts.
Purpose: Helps companies acquire long-term funds for various industrial activities.
Loan Guarantees:
Function: Provides guarantees for loans taken by industrial companies from other financial institutions.
Benefit: Enhances the creditworthiness of industrial firms, facilitating easier access to financing.
Underwriting of Securities:
Role: Underwrites shares and debentures issued by companies.
Purpose: Assists companies in raising capital from the market by ensuring that new issues are fully subscribed.
Deferred Payment Guarantees:
Function: Guarantees deferred payments for loans obtained from foreign banks in foreign currency.
Benefit: Assists companies in managing their foreign currency liabilities.
Merchant Banking & Allied Services:
Specialized Department: Manages capital restructuring, mergers, amalgamations, and loan syndication.
Purpose: Provides expert advisory services to improve the financial and operational structure of businesses.
Subsidiaries:
Promoted Companies:
IFCI Financial Services Ltd.: Provides various financial services.
Function: Supports the broader goals of IFCI by managing these specialized subsidiaries.
3. IFCI as a Business Facilitator:
Economic Contributions:
Industrial Growth: Contributed significantly to the development, expansion, and modernization of various industrial sectors.
Sectoral Support:
Agricultural-Based Industries: Supported industries such as paper, sugar, and rubber.
Service Industries: Benefited sectors like restaurants, hospitals, and hotels.
Basic Industries: Assisted in the growth of steel, cement, and chemicals.
Capital Goods Industries: Helped in the development of electronics, fibers, and telecom services.
Key Insights:
Historical Impact: IFCI played a pioneering role in financing industrial development in India, providing essential capital for growth and modernization.
Adaptation and Growth: The transition from a statutory corporation to a public company reflects IFCI’s adaptability to changing market conditions and its ongoing commitment to supporting industrial progress in India.
