IDFC sees slowdown in lending in FY12

IDFC sees slowdown in lending in FY12

Mumbai: Private sector financier to infrastructure firms Infrastructure Development Finance Co (IFDC) sees a slowdown in lending and expects a squeeze in its margin in FY12 as the road sector has been inactive, a top official said.

“FY12 will be slow. There is some degree of slowdown that is likely to happen in the coming fiscal given the macro situation, the interest rate environment, political situation and investment cycle is likely to see some slowdown" said Vikram Limaye, executive director at IDFC.

Road construction, which forms a large part of the infrastructure sector, has been dormant in the last 6-8 months due to delay in awarding of projects by the National Highways Authority of India, he said.

Developers were also cautious in putting money in new projects due to concerns over getting environmental clearances, land acquisitions, he added.

There are some 27 projects across sectors waiting for clearance from the environment ministry.

In addition to this, the rise in borrowing costs will squeeze margins in the fourth quarter, Limaye said adding he expects margin to stabilise in the later quarters as asset yields have begun to pick up.

During April-December, IDFC’s spread stood at 240 basis points and loan book increased 51% to 35020 crore, a growth which it has not seen in the last three years.

The loan book growth on an average had been 23% during FY08-FY10. In FY10, IDFC had said it aims to triple their balance sheet size in three to fours years.

“It’s not feasible to have such a smooth straight line growth," Limaye said, adding, he is confident of achieving the set target.

IDFC also aims to diversify its lending to the transmission, solar and hydro projects, he added.

Fund raising

The company expects to raise $150 million-$200 million from overseas as it finds the interest rates there competitive even after hedging for forex, Limaye said.

However, in four months the aggregate amount to be raised abroad may go up to $425 million, he added.

The firm had raised 1200 crore through infrastructure bonds in two tranches earlier this fiscal year and plans to launch another issue in March 2011.

“We will see how much we get, but in the aggregate if we are able to mobilise 1,500 crore rupees, it’s not such a bad outcome," Limaye said on infrastructure bonds.

Like State Bank of India, the non-bank lender also plans to raise money through retail bonds in order to diversify its sources of funds.

Limaye, however, refused to give more details.

Last week, the country’s largest lender had said that it will issue retail bonds at 9.75% with maturity of 10 years and at 9.95% with maturity of 15 years.

On Friday, shares of IDFC ended down 1.48% at 143.50 in a weak broader market.