India's Infrastructure Development and Finance Co Ltd sees a good year ahead as the government aims to boost growth by improving the country's roads and power supply, its managing director said on Saturday.
Foreign firms commonly cite poor infrastructure as the biggest challenge to doing business in India, Asia's third-largest economy, which attracted only an eighth of the $60 billion in foreign direct investment that poured into China last year.
"Last year, we did growth disbursements of Rs 60 billion and the pipeline looks good this year as well," Managing Director Rajiv Lall said in an interview.
"Our profits were up close to 27 per cent, which I think is a good performance, and we feel confident of delivering good profitability going forward."
IDFC posted a profit of Rs 3.9 billion ($87 million) on total income of Rs 10.49 billion for the year to March 2006.
India has grown at an average 8 percent clip in the past three years but the government wants to raise that to 10 percent by building better roads, ports and power supplies. Prime Minister Manmohan Singh reiterated on Friday that India needed $150 billion invested in infrastructure in the next few years.
Lall said whereas state-backed financial institutions once lent money to entire sectors, IDFC's loan portfolio was more focussed on specific projects, which decreased the default risks.
{{/usCountry}}Lall said whereas state-backed financial institutions once lent money to entire sectors, IDFC's loan portfolio was more focussed on specific projects, which decreased the default risks.
{{/usCountry}}"Financing of roads, power and ports is new (business)," he said. "There would be less risk of loss of capital in these sectors for the simple reason because there are no (risks of) international or price developments."
Some state-run lending institutions ended up with huge bad loans in the late 1990s after defaults by some sugar, textile and steel firms due to a downturn in global prices and weaker demand.
IDFC was set up in 1997 to channel funding for private sector infrastructure projects and has 37 per cent of its exposure to energy and 25 per cent each to transportation and telecoms. The rest is in commercial and industrial infrastructure.
IDFC floated a hugely successful initial public offering last year. Priced at 34 rupees, the stock doubled on its debut, though it has not moved much since then, still trading around 72 rupees -- valuing it at $1.8 billion.