Managing Director and CEO, IDFC, Defends his Strategies to B&E’s
B&E: What is your capital adequacy ratio at the moment and what is the outlook for the period ahead?
RBL: According to the RBI guidelines 75% of our assets must be invested or lent for infrastructure projects. We must always maintain a capital adequacy ratio of 15% at any point of time. But we are doing a good job and are operating with a CAR that is much more than 15%. Our capital adequacy stands at around 25%.
B&E: Your current balance sheet size is only Rs.350 billion? How do you expect it to grow over the next five years?
RBL: No one can predict the future. So it is hard to comment. But, our balance sheet has grown over 30% in the past 5 years and I am sure that the growth will be faster in the years to come. Moreover, with increasing private participation, the country’s infrastructure sector too is set to fly high bringing in lot more opportunities for us. We have a very robust prospect to grow our balance sheet size in the next few years.
B&E: There are a lot of environmental concerns related to infrastructure sector. How do you see these affecting the sector and IDFC?
RBL: It will certainly have an impact on the whole infrastructure sector. But if you see this from IDFC’s point of view, bulk of our investment is in power projects and it is certainly different from constructing a road. A power project enjoys a greater degree of freedom as compared to a highway project. Environmental issues will undoubtedly affect the infrastructure sector, but I think, over the next 5 years, the sector still has enough opportunities for the company to grow rapidly. As far as our investments are concerned, we have taken all the necessary approvals and we will continue to do that on a continuous basis.
B&E: There are complaints coming from the banking sphere that Infrastructure Finance Companies are enjoying an unfair advantage over the banks because now they can raise funds through tax free bonds and External Commercial Borrowings. What’s your take on this?
RBL: I do not think it is true because there is an upper limit on the amount that we can raise through these sources. However, I think competition is healthy for the industry. It is really important for us to tap domestic savings and overseas funds to finance our infrastructure growth as the country still needs a great amount of funds to meet its infrastructure development dreams.
B&E: What is your capital adequacy ratio at the moment and what is the outlook for the period ahead?
RBL: According to the RBI guidelines 75% of our assets must be invested or lent for infrastructure projects. We must always maintain a capital adequacy ratio of 15% at any point of time. But we are doing a good job and are operating with a CAR that is much more than 15%. Our capital adequacy stands at around 25%.
B&E: Your current balance sheet size is only Rs.350 billion? How do you expect it to grow over the next five years?
RBL: No one can predict the future. So it is hard to comment. But, our balance sheet has grown over 30% in the past 5 years and I am sure that the growth will be faster in the years to come. Moreover, with increasing private participation, the country’s infrastructure sector too is set to fly high bringing in lot more opportunities for us. We have a very robust prospect to grow our balance sheet size in the next few years.
B&E: There are a lot of environmental concerns related to infrastructure sector. How do you see these affecting the sector and IDFC?
RBL: It will certainly have an impact on the whole infrastructure sector. But if you see this from IDFC’s point of view, bulk of our investment is in power projects and it is certainly different from constructing a road. A power project enjoys a greater degree of freedom as compared to a highway project. Environmental issues will undoubtedly affect the infrastructure sector, but I think, over the next 5 years, the sector still has enough opportunities for the company to grow rapidly. As far as our investments are concerned, we have taken all the necessary approvals and we will continue to do that on a continuous basis.
B&E: There are complaints coming from the banking sphere that Infrastructure Finance Companies are enjoying an unfair advantage over the banks because now they can raise funds through tax free bonds and External Commercial Borrowings. What’s your take on this?
RBL: I do not think it is true because there is an upper limit on the amount that we can raise through these sources. However, I think competition is healthy for the industry. It is really important for us to tap domestic savings and overseas funds to finance our infrastructure growth as the country still needs a great amount of funds to meet its infrastructure development dreams.
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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