Announcement of IFC to Establish New Indian Equipment Leasing Company February 3, 1986

q International Finance Corporation shigt 0433 USA FOR RELEASE: Monday, February 3, 1986 CONTACT: Don Roessner Press Release No. 86/25 (202) 676-0394 IFC HELPS TO ESTABLISH NEW INDIAN EQUIPMENT LEASING COMPANY India Equipment Leasing Limited, Madras (IEL) is being established with the assistance of the International Finance Corporation (IFC) as part of an effort to further deepen the institutional base of the financial sector. IEL will provide equipment lease financing and related services to a wide range of sectors in the Indian economy, including industry, mining, agriculture, construction, transport and commerce. It will concentrate its activities in the states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. Sundaram Finance Ltd. (SFL), one of the pioneers in the hire-purchase field and an early entrant in lease financing in India, is the major sponsor of the project and will invest Rsl6.5 million ($1.38 million) in the project's equity. IFC will invest Rs4.5 million ($375,000) and the State Bank of India (SBI) is expected to take up Rs9.0 million ($750,000) of IEL's equity after it has gone into operation. SBI is the largest commercial bank in India and IFC is the world's largest multilateral agency that provides financial assistance in the form of loans and equity to private sector enterprises in developing countries. IEL expects to extend lease financing of about Rs225 million ($18.75 million) largely to small and medium-sized companies to acquire both locally produced and imported equipment during its first three years of operation. IFC will extend a $2.5 million long-term loan to IEL, while SBI and SFL are expected to provide local currency loans of RslO million ($800,000) and Rs5 million ($400,000), respectively. The remaining funds required will come from additional term loans, public deposits and internal cash generation. -2- The project is part of a broad IFC program to extend the leasing industry in India to assist fast-growing, medium-scale enterprises by establishing four regional joint-venture companies through pooling the financial and managerial resources of private finance companies, public sector commercial banks and a multilateral agency, with the full support and encouragement of the Government of India. IFC has worked closely with the Government and the Reserve Bank of India to help change existing regulations which will allow leasing companies to raise public deposits up to ten times their net worth and to import equipment to be leased to "actual users." The further development of the leasing industry will help broaden the domestic capital market through a supplementary source of equipment finance, will support the local capital goods industry, will make imported equipment available on a lease basis and will help alleviate pressure on companies' working capital. This IFC project is the latest in a number of investments in the leasing sector made in its member countries in Asia, Africa and Latin America.