IFCI to be merged with PNB

Putting an end to the speculations on the future of IFCI, the boards of both Punjab National Bank (PNB) and IFCI on Friday gave ‘in pri...

Putting an end to the speculations on the future of IFCI, the boards of both Punjab National Bank (PNB) and IFCI on Friday gave ‘in principle’ clearances to the merger of IFCI with PNB. Chairman and managing director of IFCI, V. P. Singh also completed his tenure in IFCI and put in his papers after the board meeting. Singh’s four months extension expired on Friday.

According to FI sources, at present the total business of IFCI is to the tune of Rs 20,000 crore out of which around 50 per cent, which are either bad or doubtful loans and assets, is expected to be transferred to the asset reconstruction company (ARC). The ARC would anyway continue as a separate entity after the proposed merger. PNB’s total business at present is to the tune of Rs 1,23,000 crore and hence the total business of the merged entity is expected to be to the tune of Rs 1,40,000 crore.

Talking to The Indian Express after the board meeting, Singh said “the board on Friday gave the in principle approval for the merger of IFCI with PNB”. Elaborating on the completion of his own term, Singh said that his two-year term had earlier expired on September 2003 subsequent to which he got a four-month extension which expired on Friday.

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Meanwhile, talking to reporters in Mumbai, chairman and managing director of PNB, S. S. Kohli said that the PNB board has also given the in principle clearance for the merger subject to due diligence. Kohli also added that PNB would appoint a chartered accountant within 10 days to conduct the due diligence and valuation process. The swap ratio and other details would be worked out only after the due diligence is complete, sources said.

According to Kohli, apart from addition to PNB’s business, the merger would also broaden PNB’s presence in various segments of financial markets, including debt finance. The move is in keeping with the earlier announcements by Finance Minister Jaswant Singh who pointed out that the merger with a PSU bank as one of the options for IFCI.

	The Merger Story

			• Total business of IFCI is around Rs 20,000 crore. • Around 50% are either bad or doubtful loans and assets. • And are expected to be transferred to ARC. • The ARC will continue as a separate entity after the merger. • PNB’s total business is Rs 1,23,000 crore • Total business of the merged entity is to be around Rs 1,40,000cr. • Swap ratio and other details to be worked out after due diligence. • Merger to be completed by April 1, 2004.

Jaswant Singh had also stated that revival plans for both IDBI and IFCI would be in place before April 1, 2004.

According to FI sources, the merger is expected to be complete by April 1, 2004. V. P. Singh pointed out that process would take some time.

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Meanwhile, the rest of the board members of IFCI which includes P. S. Shenoy, R. N. Bharadwaj, S. Ravi and Vinod Rai would continue to monitor the merger process.

A two man committee, consisting of the two executive directors of IFCI, R. M. Malla and M. V. Muthu, would in the interim period look into the daily monitoring of IFCI, sources said.

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