India - Thirteenth and Fourteenth Industrial Credit and Investment Corporation Projects

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8850 PROJECT PERFORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THIRTEENTH AND FOURTEENTH INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) AND AN OVERVIEW OF SECTORAL AND INSTITUTIONAL DEVELOPMENTS IN THE 1980S JUNE 26, 1990 Operations Evaluation Department This document has a restricled dIstributlon and may be ised by only Ia the promance of their offiial duties. Its contents may not otherwise bekdidosed World Bank authion CURRENCY EQUIVALENTS Name of Currency Indian Rupee (Rs) Year Annual Average 1981 Appraisal year of Loan 2051-IN US$1.00 - Rs 8.66 1982 US$1.00 = Rs 9.46 1983 US$1.00 = Rs 10.10 1984 US$1.00 - Rs 11.36 1985 US$1.00 = Rs 12.37 1986 US$1.00 - Rs 12.61 1987 US$1.00 =NRs 12.96 FISCAL YEAR January 1 - December 31 up to 1988 April 1 - March 31 from 1988 onwards THE WORLD BANK Washington. D.C. 20433 aCWe of ftecktofwal Opsunm IvAutko June 26, 1990 EORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECTs Project Performance Audit Report on India Thirteenth and Fourteenth Industrial Credit and Investment Projects (Loans 1843-IN and 2051-IN) and An Overview of Sectoral and Institutional Developments in the 1980s Attached, for information, is a copy of a report entitled 'Project Performance Audit Report on India Thirteenth and Fourteenth Industrial Credit and Investment Projects (Loans 1843-IN and 2051-IN) and An Overview of Sectoral and Institutional Developments in the 1980s* prepared by the Operations Evaluation Department. Attachment This document has a restricted distribution sad may be used by mociplknts only In tio perferance of their oMcial duties. Its contents may not otherwise be disclosed without World Bank satherlestion. FOR OFFC L US ONLY GLOSSARY OF ABBREVIATIONS BIFR - Board for Industrial and Financial Reconstruction IHE - Balancing, modernization and expansion CISR - Client Information Storage and Retrieval System CPI - Consmer Price Index CRI81L - Credit Rating Information Services of India Ltd. DYC - Development Finance Company DFI - Development Finance Institution ECP - Euro Commercial Paper EDII - Entrepreneurship Development Institute of India ERAS * Exchange Rate Administration Scheme ER - Economic Rate of Return FERA - Foreign Exchange Regulation Act GDP - Gross Domestic Product GIC - General Insurance Corporation of India 001 - Government of India HDFC - lousing Development Finance Corporation IDA - International Development Association ICICI - The Industrial Credit and Investment Corporation of India Ltd. ICOR - Incremental Capital futput Ratio IDBI - Industrial Development Bank of India IFCI - Industrial Finance Corporation of India IIFT - Indian Institute of Foremen Training IlM - Inter-Institutional Meetings ip - Index of Industrial Production IRx - Industrial Reconstruction Bank of India ITCO - Industrial and Technical Consultancy Organization KW - Kreditanstalt fur Weiderefban LIC - Life Insurance Corporation of India LTFP - Long Term Fiscal Policy NBD - Merchant Ranking Division MES - Minimum Economic Size MODVAT - Modified Value Added Tax NRTP - Monopoly and Restrictive Trade Practices NIF - Note Issuance Facility OD - Operations Evaluation Department .0GL - Open General License PACER - Program for Acceleration of Commercial Energy Research PACT - Program for the Advancement of Commercial Technology PCR - Project Completion Report PPAM - Project Performance Audit Memorandum PPAR - Project Performance Audit Report RBI - Reserve Bank of India SAR - Staff Appraisal Report SCICI - Shipping Credit and Investment Company of India Ltd. SDFC - Shipping Development Fund Committee SEBI - Securities Exchange Board of India SE - Senior Executive Meetings SFC - State Finance Corporation SIDC - State Industrial Development Corporation SLR - Statutory Liquidation Ratio STEP - Science and Technology Entrepreneurs Park TDICI - Technology Development and Information Company of India TFP - Total Factor Productivity USAID - United States Agency for International Development UTI - Unit Trust of India This documeat ess amsicted tbution and may be used by mbfnts oy In tho pefanamce of their official duties. Its contents may not otherwise be disclosed without World Bank sutherlti0. PROJECT PERFORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THIRTEENTH AND FOURTEENTS INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) AND AN OVERVIEW OF SECTORAL AND INSTITUTIONAL DEVELOPMENTS IN THE 1980S TABLE OF CONTENTS Page No. Preface ....................................................... i Basic Data Sheets ............................................. 111 Evaluation Summary ............................................. vii PROJECT PERFORMANCE AUDIT REPORT I. INTRODUCTION s................................ 1 II. BACUGROUND ............. .................*..........0 2 A. The Industrial Sector ............................ 2 B. Recent Developments .............................. 6 C. The Impact of Recent Policy Changes and Future Issues .............................. .......... 7 III. THE FINANCIAL SECTOR AND INDUSTRIAL FINANCE .......... 8 A. Industrial Finance ..................... ........ 9 B. The Policy Framework for Term Finance ............ 11 C. Issues Involving DFIs .................................. 12 IV. HISTORICAL REVIEW OF OPERATIONS ...................... 13 A. 1955-1964 ................................ 14 B. 1965-1974 .............................. 14 C. 1975-1979 ............................. ...... 15 V. IMPLEMENTATION PERFORMANCE OF THE THIRTEENTH AND FOURTEENTH LOANS ......... ........................... 16 A. Utilization of Loan Proceeds ..................... 16 B. Time and Cost Overruns ................. .. .... 18 C. Financial Performance of Sub-projects ............ 18 D. Economic Characteristics and Performance of Sub-Projects ................................... 19 TABLE OF CONTENTS (Contd) Page No. VI* INSTITUTIONAL DEVELOPMENTS ........................... 20 A. Shareholding and Role of the Board ............... 20 B. Organization Structure .................. ......... 20 C. Staffing ......................................... 22 D. Training ......................................... 22 B. Policy/Strategy .................................. 23 P. Operational Procedures ........................... 24 G. Procurement Procedures ............................ 25 H. Supervision ...................................... 25 I. Collection Strategy .............................. 25 J. anagement Information Systems.................... 26 VII. REVIEW OF ICICI'S ACHIEVEMENTS IN THE 1980S .......... 27 A. Financial Assistance Activities ................. 27 Merchant Banking ................................. 29 Characteristics of Assisted Projects ............. 30 Sub-Sectoral and Regional Distribution ........... 30 Consortium Financing ............................. 31 B. Other Development Activities ..................... 32 C. Resource Mobilization and Liability Management ... 32 Foreign Currency Borrowings ...................... 33 D. Portfolio Quality ................................ 34 Onlending Terms .................................. 35 3. Financial Performance and Prospects .............. 36 Projected Financial Performance .................. 36 F. Perspective on ICICI's Future Role in the Financial System................................ 37 VIII. BANK RULATIONSHIP WITH ICICI ....................... 38 Impact of Bank Leading Through ICICI ............. 38 Conclusions ...................................... 40 APPENDICES I - The Capital Market ................................... 43 II - Major Development Activities Initiated in the 1980s ... 47 III - ICICI's Euro Commercial Paper and SWAP Program ........ 51 IV - Comments Received from the Borrower ................... 55 TABLE OF CONTENTS (Cont*d) Page No. ANNEX TABLES 1 - Economic Performance of Sub-Projects Financed Under IBRD Lines of Credit ................................... 61 2 - Smunary of Operations - Total ........................... 63 3 - Summary of Operations - Details of Underwriting and Direct Subscription ................................... 64 4 - Sumary of Operations - Details of Guarantee Operations . 65 5 - Merchant Banking, 1980-1989 ..................o........ 66 6 - Purpose-Vise Distribution of Assistance ................. 67 7 - Assistance to New Entrepreneurs ......................... 68 8 - Analysis of Assistance Related to Size of Project ....... 69 9 - Industry-Wise Distribution of Financial Assistance ...... 70 10 - Geographical Distribution of Financial Assistance ....... 71 11 - Consortium Financing ...... 00.****0.*................. 73 12 - Spreads ..........................** . ..... ........... 74 13 - Line-Wise Distribution of Foreign Currency Sanctions and Disbursements ................................... 75 14 - Collection Performance before Rescheduling .............. 76 15 - Collection Performance before Reschedulings Principal .. 77 16 - Trend in Arrears ...................................... 78 17 - Loans and Other Credit Operations as on 3131189 ......... 79 18 - Analysis of Arrears-Age Analysis ........................ 80 19 - Industry-Wise Classification of Arrears ................. 81 20 - Actual and Projected balance Sheets ..................... 82 21 - Actual and Project Income Statements .................... 83 22 - Spreads .................................*..*. . .**** 84 23 - Statement of Operational Ratios (1984 to 1993194) ....... 85 PROJECT COMPLETION REPORT I. BACKGROUND ........................................ 89 II. THE PROJECT ........................................ 89 III. TE ENVIRONMENT ............... .......*.......... 90 IV. INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) .................... ...................... 92 V. PROJECT IMPLDMENTATION ............................... 97 VI. CONCLUSIONS AND R NMATIONS ...................... 104 TABLE OF CONTENTS (Cont'd) Pase No. ANNEXIS 1 - ICICI - Financial Data .................. ....... ..... 107 2 - ICICI - Industry-Vide Distribution of Project Assistance .. 116 3 - ICICI - Economic Rates of Return .......................... 117 ATTACHMENT I - ICICI's Project Completion Report ............ ......... 119 PROJECT PERFORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THERTEENT AND FOURTEENTH INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051.IN) AND AN OVERVIEW OF SECTORAL AND INSTITUTIONAL DEVELOPMENTS IN TE 19808 PREFACE 1. This Project Performance Audit Report (PPAR) reviews the thirteenth and fourteenth loans to the Industrial Credit and Investment Corporation of India Ltd. (ICICI). The thirteenth loan was approved on May 13, 1980, declared effective on June 27, 1980 and disbursed until September 1985. An undisbursed amount of US$4.3 million was cancelled and the loan was closed on schedule on December 31, 1985. The fourteenth loan was approved on October 16, 1981, declared effective on December 3, 1981 and disbursed until May 5, 1987. An undisbursed amount of US$2.11 million was cancelled and the loan was closed on schedule on March 31, 1988. 2. The PPAR, prepared by the Operations Evaluation Department (OED), is based on the Project Completion Reports for the Thirteenth Industrial Credit and Investment Projectli and the attached PCR for the Fourteenth Industrial Credit and Investment Project, prepared by the Industry and Finance Division of Asia Country Department IV, the Staff Appraisal and President's Reports for the thirteenth loan and the President's Report for the fourteenth loan, the sumnaries of the Executive Director's meetings at which both loans were considered, project files and discussions with relevant Bank staff. An OED mission visited ICICI in November 1989 to review the Bank's assistance. 3. The Bank's Project Completion Reports (PCRs) are partly based on the PCR9 prepared by the borrower and provide a satisfactory account of the utilization of the loans. The 1980s represent a period of accelerating policy changes in India, particularly after 1985 when significant steps were taken to gradually liberalize the economy. The Bank's lending strat- egy to private industry also changed at this time. ICICI has .responded positively to the changing environment and its performance during the 1980s is noteworthy. Development Finance Institutions (DFl1) in many developing countries have fared poorly during the last decade, so much so that the Bank's approach to supporting industry through DFCs has been questioned. 1/ Project Completion Report, India - Thirteenth Industrial Credit and Investment Project (Loan 1843-IN), Report No. 7858, dated June 13, 1989. The PPM has attempted to identify the factors accounting for XCIC's favorable perfomance based on an in-depth review of ICICls operational activities and institutional developments during this period. Consequently this PPM is more comprehensive than the typical PPM for a Development Finance Company (UPC) loan. 4. Following standard OND procedures, copies of the draft PPM were sent to the Government and the Borrower. The coments received are reproduced as Appendiz IV to the PPA and have been reflected in the text as appropriate. PROJECT PERFORMANCE AUDIT REPORT INDIA THHIRTEBNT INDUSTRIAL CREDIT AND INVESTMENT PROJECT (LOAN 1843-IN) EY PROJECT DATA Item Amount Loan Amount (US$ Million) 100.0 Disbursed (US$ Million) 95.7 Cancelled (US$ Million) 4.3 Repaid to IBID (US$ Million) - to 05131188 61.7 Outstanding (US$ Million) 34.0 Economic Rate of Return varied Financial Performance varied Institutional Performance satisfactory W1 EN FYe FY04 FM FYS Appisalel etmte 1.4 6.0 86.5 88.9 100.0 (USN tilIon) Actual 22.0 74.0 65.0 e8.6 95.8 95.7 Actual as of Estimate > 1005 > 1005 > 100 ) 100S 9 e Date ot Fual Disbursement 0/as OTHER PROJECT DATA First Mention in Files 10/26/79 Negotiations 0419-11180 Board Approval 05113180 Loan Agreement Date 05/16/80 Effectiveness Date 06/27/80 Original Closing Date 12/31/85 Actual Closing Date 12/31/85 Borrower ICICI Executing Agency ICICI Fiscal Year of Borrower 12/31 Follow-on Project Name ICICI 14 Loan Number 2051-IN Amount ($ Million) 150.0 Loan Agreement Date 10/08/81 MISSION DATA Report Staff Item Date Staffweeks Members Appralsal <Ln 1843) 12/79 4 2 Supervision (Ln 1843 01/81 4 2 Supervision/Appraisal (Lns. 1843/2051) 04181 4 2 Supervision (Las. 1843/2051) 06/82 2 2 Supervision 04183 2 2 Supervision 09/84 2 2 STAFP D8'U7 (ifaneeks) R»O FV8O Y YI Y2 E YØYU FYSS FMS! PYf? FMSS TOTAL Prøppealsal - 6.8 - - - - - - - - Approeal .4 20.7 - - - - - - - - 21.1 Ngbat'» - 1.8 - - - - - - - - 1.9 SupmvIsio • .8 19.8 6.8 8.0 6.8 2.0 .7 .1 - 88.6 To~.! .4 29.7 20.6 6.8 8.0 6.8 2.0 .7 .1 - 88.1 - v - PROJECT PERFORMANCE AUDIT REPORT INDIA FOURTEENT INDUSTRIAL CREDIT AND INVESTMENT PROJECT (LOAN 2051-IN) KEY PROJECT DATA Item Amount Loan Amount (US$ Million) 150.0 Disbursed (US$ Million) 147.89 Cancelled (US$ Million) 2.11 Repaid to IBRD (US$ Million) 147.89 Outstanding (US$ Million) 00.0 Economic Rate of Return varied Financial Performance varied Institutional Performance satisfactory CUMULATIVE DISBURSEMENTS FY2 FYN FY94 Fe5 FY6 FY67 Appraisal estimate 2.1 12.0 68.8 124.5 142.1 150.0 (USS MI lion) Atual 2.45 87.18 89.66 116.44 140.20 147.69 Actol as X of Esteat > 1005 > 100x > 10o 95.1% 9.75 98.5 Date of Final Diabrsement 05/05/87 OTHER PROJECT DATA First Mention in Files 03/23181 Negotiations 08128181 Board Approval 10/06/81 Loan Agreement Date 10/08/81 Effectiveness Date 12/03/81 Original Closing Date 03/31/88 Actual Closing Date 03/31/88 Borrower ICICI Executing Agency ICICI - vi - MISSION DATA Date No. of No. of Date of 0MolYr) Weeks Persons lhaeeks Report Appraisal 04/81 2 2 4 09/08/81 Supervision I 04/83 1 2 2 05130183 Supervision II 09184 2 1 2 10/18/84 Supervision III 06/87 2 1 2 07106/87* Supervision IV 10187 2 1 2 03/07188** Completion 04/89 4 1 4 04/28189 * Combined with Preappraisal Mission for Industrial Finance and Technical Assistance Project (Loan 2928-11). ** Combined with Appraisal Mission for Industrial Finance and Technical Assistance Project (Loan 2928-IN). STAF IIrUT Appraisal 4 * * * * * - 4 Negotiati * 8 - * * * 5 Supervisn e Total 4 8 2 -2 1? - vii - PROJECT PERFORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THIRTEENTH AND FOURTEENTH INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) AND AN OVERVIEW OF SECTORAL AND INSTITUTIONAL DEVELOPMENTS IN THE 1980S EVALUATION SUMMARY Introduction 1. ICICI was established In 1955 as a private financial institution with government support in the form of an interest free long-term loan. The Bank played a catalytic role in its establishment. In 1969, ICICI became a government-owned institution (521 government ownership) after the major Indian commercial banks, which were shareholders, were nationalized. The first Bank loan of US$10 million was approved in 1954. Since then the Bank has approved 21 additional loans totalling in all US$1.72 billion. The thirteenth (1980) and fourteenth (1981) loans were the last general purpose loans to ICICI. Since then there has been a major change in the Bank's lending strategy for industry. Bank leading has become more targetted with multiple financial intermediaries including commercial banks involved in on-lending the loan proceeds. In the past five years, the Bank has made loans for export development, cement industry modernization, institutional development, electronics industry and technology development. Loan Objectives 2. The main objectives of both loans were to finance efficient industrial projects in the private sector. Subsidiary objectives were to assist ICICI to diversify its sources of foreign exchange by borrowing from comercial sources and to undertake industrial sector studies that would complement its mainstream activities. Implementation Experience 3. Due to strong demand for foreign currency funds, both loans were committed and disbursed faster than projected. The thirteenth loan assisted 121 projects while the fourteenth assisted 275 projects. The average loan sizes were US$791,000 and US$538,000 respectively. Judged against national priorities (export promotion, backward area development, etc.) more than half of the assistance under both loans went to industries designated as high priority. However, time and cost overruns were substantial with the degree of overrun highest for new projects (para. 5.06). - viii - 4. The financial performance of the projects financed under both loans presents a mixed picture. Based on a sample of projects financed, only 45? and 472 of projects financed under the thirteenth and fourteenth loans respectively were earning a return of 122 or more as projected at appraisal in their normal year of operations. Repayment performance was also mixeds 362 and 23Z of subloans from each loan were rescheduled respectively. Major reasons for the relatively poor financial performance were (i) inadequate demand and low prices arising from greater competition; (ii) management and technical problems; (iii) higher import costs; and (iv) shortage of power and raw materials. The liberalization of capacity restrictions as well as selective import liberalization had an adverse impact on some firms. Finally, the borrowers' assumption of the foreign exchange risk, coupled with high fixed interest rates, also contributed adversely to profitability (paras. 5.07-5.09). 5. The projects financed had fairly high investment costs per job created because many were balancing, expansion or modernization projects with less direct employment-creating potential. Actual (reestimtted) economic rate of returns calculated for a sample of 27 projects financed under both loans show that 20 had ex-post ERRs ranging from 14.7Z to 86?. Nine of these ex-post ERRs exceeded or equalled the ex-ante ERRs. Thd remaining seven had ex-post ERRs below 10?, with four exhibiting negative ERRs. The major reasons for the lower ex-post ERRs are lower world prices for output compared to prices projected at appraisal, caused by unanticipated changes in market conditions (cement machinery, tool bits, auto components), technical and production problems leading to lower than projected capacity utilization levels (circuit board, metal parts), and failure to compete in the domestic market resulting in low production and capacity utilization (containers, cables) (para. 5.10). 6. ICICI successfully diversified its foreign currency sources by raising funds from the euromarkets to match the Bank loan during 1981-83. The Bank's share of ICICI's foreign currency loan approvals declined from 652 in 1980 to about 10 in 1985 but it has since increased to 49Z in 1988-89; but Bank loans disbursed and outstanding comprised 8.8? of ICICI's foreign currency borrowing's outstanding as of March 1989 compared to 772 as of the end of 1980 (para. 7.25). 7. ICICI also carried out its studies program as committed, which were presented and discussed in a series of workshop attended by representatives from industry and Government. These studies were extremely useful inputs in the preparation of subsequent Bank projects, particularly the Industrial Export Project (Engineering Industries) and the Cement Modernization Projects. Findints-and Lessons 8. With regard to the implementation of the two loans under con- sideration, the following conclusions emerges - ix - (1) Projects designed and implemented in a highly protected and regulated environment are likely to be less attractive in a liberalized economy; financial performance is usually affected because of lower prices resulting from lower effective protection and lower capacity utilization from greater domestic competition. Thus projects which can withstand competition should be chosen for financing by DFIs. (U1) Analysis of demand and price trends, both in domestic and export markets needs to be given much greater emphasis in appraising projects operating in a less regulated economy. This requirea greater use of risk and sensitivity analysis to assess various risk factors affecting market share, prices, and profit margins (para. 5.08). (iii) In a period of volatile interest and exchange rates, lending at high fixed interest rates with the subborrower assuming the exchange risk (and where there are no mechanisms for the sub- borrower to hedge against the exchange risk) is a recipe for problem loans as the implicit exchange risk becomes an explicit credit risk. Financial appraisal needs to explicitly take this risk into account (para. 5.07). (iv) In an administered interest rate regime, development finance institutions need to be given more flexibility to set interest rates (perhaps within a band) to offset the higher risks of lending to non-prime borrowers as well as to cover the higher cost of mobilizing resources from financial markets as otherwise financial performance would be eroded. This flexibility may also allow some measure of price competition between institutions (para. 7.32). (v) Exchange risk cover schemes of the BRAS type need careful monitoring as the exchange risk premium is usually set on the basis of anticipated devaluation whereas to recover the full cost, the premium needs to be based on the actual devaluation which can be computed ex-post only. This difference should be adjusted in the next installment period to the extent feasible to avoid a build-up of the cost differential. (vi) The consortium approach to financing of large projects, adopted by the three DFIs in India, has both positive and negative character- istice. Besides sharing of risk, loan administration procedures have been simplified, resulting in reduced administrative costs. Borrowers also find it easier to deal with a single institution. On the other hand, the consortium approach, which virtually requires automatic participation in the financing of large projects by the three all-India DPI., appears to constrain the independence and ability of an individual institution to structure its portfolio according to its own lending priorities and risk- return goals (by industry, type of entrepreneur, size, region, * X - export orientation, etc.). The approach can also lead to a diffusion of responsibilities for lending decisions since the appraisal is undertaken by the lead institution. The non-lead institutions ability to adequately supervise and strengthen loan recovery of problem loans in its portfolio is restricted since these matters are the responsibility of the lead institution. The consortium lending approach may also indirectly subject ICICI's lending decisions to governmental influence through the government's greater involvement in the operations of the other two DFIs. Moreover, the consortium approach inhibits competition among lenders. Consideration should be given to its replacement by a voluntary system of loan syndication in which commercial banks and other institutions can participate. This may require the relaxation of rules affecting project financing by commercial banks. This will provide ICICI with the opportunity to differentiate itself from the other term finance institutions for which purpose it may need to take a fresh look at its goals, policies, and strategies in light of its comparative advantages (para. 7.13). (vii) Some of the unprofitable firma in ICICI's portfolio represent potential economic losses even if ICICI is covered by a guarantee from the Government; these should be monitored and pre-emptive remedial measures adopted as appropriate. Sustainability 9. As one of the most dynamic and innovative financial institution in India, with an important influence on policy formulation in both the indus- trial and financial sectors, ICICI is clearly a sustainable institution. It has evolved from a traditional development finance institution dependent on official sourcLs of foreign currency to an institution that is able to mobilize resources from the international capital markets on its own credit rating. The major part of its foreign currency resources currently is raised from commercial sources in the international capital markets at fine spreads using sophisticated financial engineering tools (Appendix III). It has also successfully tapped the local financial market to mobilize rupee resources for term lending as well as a variety of innovative products that have enabled ICICI to maintain a high level of profitability. Its merchant bank, leasing business, and venture capital fund are the largest and most innovative activities of their type in India. Its industrial sector work, initiated from the late 1970s, has contributed to analyzing the major factors affecting the efficiency and competitiveness of Indian industry. Working in close partnership with the Bank, it has helped to shape the design of the Bank's new lending strategy adopted since 1985, which focuses on expansion of manufactured exports. During the 1980s, ICICI has turned into a major force in the technological upgrading of Indian industry in order to meet the quality and cost competitiveness requirements of export markets. Its contributions to the development of the industrial sector go beyond the mere provision of financial assistance to its clients. It has been a catalyst in establishing institutional mechanisms to deal with - si - issues ich it believes are critical bottlenecks to sound industrial development. e.g. training of managers and technicians, entrepreneurship development, etc. (Appendix II). These developmental contributions have been matched by equally good financial performance. 10. Nevertheless, the economic liberalization measures introduced in recent years as well as other changes raise some concerns with regard to ICICI's future financial performance. Financial reforms have raised rupee mobilization costs resulting in pressure on operating spreads which is likely to intensify in the future. ICICI's future borrowers are likely to comprise a greater proportion of smaller, riskier borrowers since larger and less risky borrowers are increasingly relying on the capital market for their financing needs instead of borrowing from institutional sources (Appendix 1). The economic liberalization measures and entry of new firm have also enhanced domestic comietition in some industries, leading to excess capacity and financial proalems for weaker firms which has resulted in higher credit risk. This is reflected in a substantial increase in the risk factor (provisions and write-offs) between 1981-82 and 1987-89 and the continuing low collection ratio (para. 7.18-7.19). Also about 9Z of total outstanding portfolio was affected by arrears as of March 31, 1989. ICICI has already adopted measures to address these new challenges, including introducing new lending instruments with higher profit margins and lower risk, expansion of its merchant banking activities and adopting a new collection strategy. Some problems are structural and will require time to resolve. 11. With regard to factors promoting sustainability of a DFC, ICICI's record demonstrates that both external and internal factors are important. The macroeconomic policies pursued by the Government have created a stable economic environment with relatively low inflation, and realistic exchange and interest rates without undue volatility. Thus the economic environment was not a strongly negative factor to borrowing firms' financial performance as was the case in many developing countries. ICICI was therefore able to carry out its borrowing and lending activities without being exposed to extreme risks. However, the internal factors are equally significant. Over the years, ICICI has developed into a highly efficient institution with strong and motivated management and high caliber staff. Its procedures are sound and systematically followed. Finally, management autonomy has not been overtly affected by Government ownership. It has been able to strike an appropriate balance between its development objectives and commercial profitability requirements. It has thus been able to anticipate changes in its environment and respond with new innovations on both the borrowing and lending sides to maintain high and consistent profitability and financial soundness. PROJECT PERFORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THIRTEENTH AND FOURTEENTH INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) AND AN OVERVIEW OF SECTORAL AND INSTITUTIONAL DEVELOPMENTS IN THE 1980S I. INTRODUCTION 1.01 ICICI is one of the three major publicly-owned development finance institutions in India, operating nationwide and providing medium and long- term financing for industrial projects, primarily in the private sector. The Bank Group's association with ICICI predates ICICI's legal establish- ment on January 5, 1955 and the first Bank loan to ICICI was approved in December 1954. Since then, the Bank has approved 21 more loans totalling in all about US$1.72 billion. The thirteenth loan (1843-IN) for US$100 million and the fourteenth loan (2051-IN) for US$150 million were signed in May 1980 and October 1981, respectively, and were the last two general pur- pose lines of credit extended to ICICI. These loans were disbursed between 1981 to 1987, a period of substantial change in the major parameters of Indian economy, brought about initially by the second oil price hike and subsequently by the introduction of economic liberalization measures. The subprojects financed by the two loans were shaped by the highly regulated and protected Import substitution policy environment of the turn of the decade but were implemented during a period of gradual deregulation of industrial licensing, relaxation of import and financial controls and pro- motion of exports through reduction of anti-export biases. Quite a few of these subprojects which were conceived in a more controlled policy environ- ment have not fared as well in the more competitive environment. It is in this context that ICICI's performance has to be evaluated. Although the new environment has created new pressures on ICICI, it has responded by evolv- ing new strategies and priorities to maintain its competitiveness, profit- ability and financial soundness. 1.02 The Bank has also changed its lending strategy to industry since the fourteenth loan, by focusing its lending around key objectives and specific subsectors. Expanding exports by improving the international competitiveness of Indian industry has become the leitmotif of the Bank's strategy. Export assistance projects, sector development projects and technology development projects have been developed in support of this objective. More intermediaries including commercial banks have been inducted to enhance competition in the use of Bank funds and to improve the capabilities of these institutions in financing efficient subprojects. 2 2- ICICI has played a crucial role in working jointly with the Bank in under- taking economic and sector studies, formulating the project concepts and developing the implementation plans for these projects. It has thus become an active and equal partner of the Bank in formulating strategies and new initiatives for developing a dynamic industrial sector. ICICI has also successfully diversified the sources of both its foreign currency and rupee borrowings, thus reducing its dependency on official funding sources. This PPA also reviews ICICI's recent performance and the measures adopted by it to deal with the issues arising from the changing economic environment. 1.03 This PPM is the third PPAM prepared for ICICI. The first (Report No. 949), dated December 17, 1975 reviewed the sixth, seventh and eighth loans (414, 515, and 683-1N). The second (Report No. 3428), dated April 24, 1981 reviewed the ninth and tenth loans (789 and 902-IN). A PCR (Report No. 6052), dated January 31, 1986 reviewed the eleventh and twelfth loans (1097 and 1475-IN). Finally, a PCR (Report No. 7858, dated June 13, 1989 reviewed the performance of the thirteenth loan (1843-IN). The second PPM suggested a 'target approach* be adopted by ICICI to achieve specific development objectives. ICICI has adopted a more focussed approach in its lending as enunciated in its most recent lending strategy statement with emphasis on increasing exports and competitiveness. It has also attempted to deal with the problems identified in recent PCRs of deteriorating col- lections, declining spreads and unwillingness of borrowers to assume the exchange risk on loans in a period of volatile exchange and interest rates in a pragmatic and effective manner. II. BACKGROND A. The Industrial Sector 2.01 Since independence, industry, in particular manufacturing, has been viewed with special importance by India's planners as the sector that would integrate India into the modern world, raise incomes, and reduce pov- erty and external dependence. The industrial development strategy adopted in early 1950s was based on four major themes, whose main elements continue todays (i) the promotion of heavy industry through the public sector reflecting the belief that the state should play the major role in economic developmentl (ii) a belief in self-reliance which translated into compre- hensive efforts at import-substitution, indigenous technology development and restrictions on access to foreign technology to promote indigenous innovation; (iii) promotion of the small scale and handicraft sector to maintain traditional industries and provide employment in rural areas; and (iv) promotion of balanced regional development through both public invest- ment and subsidies. Pessimism regarding exports was also an underlying element of this strategy. A comprehensive and complex web of regulationell was introduced to implement this strategy, which emphasized strict controls It For a detailed review, see India: An Industrializing Economy in Transition, Report No. 6633-IN, 1987, Chapter 3. over imports and decisions on allocation of investment and financial resources to industries whose output was intended to replace the most crit- ical imports. Concurrently, licensing was used to control capacity expan- sion in order to avoid excessive investment in protected fields and to disperse industry to backward regions. Subsequently, regulations on curb- ing the monopoly power of large firms (Monopoly and Restrictive Trade Practices Act (MRTP), on foreign ownership of firms (Foreign Exchange Rate Act (FERA) and on foreign investment and foreign collaborations were intro- duced in the late 1960s and early 1970s. At the same time incentives were given to public enterprises, the small scale sector, and firms located in backward regions through the fiscal system to promote their development. The Government also used price controls extensively (covering some 65 com- modity groups in 1987) to encourage consumption of items such as fertil- izer, limit price increases of items in short supply, and provide goods at preferential prices to special groups. Finally, a large number of regula- tions affecting labor-relations, particularly industrial disputes, were enacted to ensure employment stability and a relatively high wage level for workers in the organized sector. 2.02 The industrial sector that has evolved under the influence of the highly regulated and protected environment presents a mixed picture. Progress towards creating a diversified and regionally decentralized indus- trial base has been substantial. Domestic production now accounts for 90Z of internal consumption of manufactures and almost 100% of consumer goods. A large range of sophisticated capital goods, intermediate goods, and con- sumer goods are produced by Indian industry. Indian firms have developed expertise in adopting, adapting, and improving on various advanced tech- nologies. A large pool of skilled industrial labor and technical expertise has been built up over the years. Nevertheless, the sector's growth per- formance, employment generation and export contribution has been much below expectations. Between 1960-1980, employment grew in manufacturing at an average annual rate of only 32, only slightly above the population growth rate. From 1966-80, manufacturing output growth rates were well below the average for developing countries. The share of manufacturing in GDP at factor cost increased from 142 in the mid-1960s to only about 172 in the mid-1980s. The sector's export performance has been also uneven with manufacturing exports comprising only 52 of manufacturing output in 1985. 2.03 Although Indian manufacturing underwent major structural shifts and achieved a high degree of import substitution, this was accompanied by increasing capital intensity and declining efficiency. Incremental capital-output ratios (ICORs) in manufacturing increased from 2.8 in the 1950s, to 4.4 in the 1960s and 6.2 in the 1970s. Large differences in ICORs exist between subsectors, with the highest ICORs in industries where import-substitution had taken place in the absence of natural comparative advantage, and where underutilization of capacity, technological obsoles- cence and diminishing returns are evident. The rising ICORs are indicative of relative inefficiency of factor use. Analysis of total factor produc- tivity (TFP) change in manufacturing between 1965-80 shows a growth of -4- around lZ per annum.2/ This long run performance compares unfavorably with the experience of developed and developing countries where TFP growth typically ranged between 22 p.a. and 5? p.a. 2.04 Many of the structural and efficiency problems of Iadian industry can be traced to the internal regulatory and trade policy framework. This framework inhibited internal competition, competition from imports and ex- port rivalry, which are recognized as the major factors contributing to the sector's low efficiency. The licensing system, in particular, discouraged internal competition by controlling new entry and dampened the overall growth of new investment. It prevented firms from taking advantage of dy- namic technological progress and product specialization as well as econo- mies of scale. It also contributed to fragmentation of capacity, often leading to the establishment of a large number of uneconomic size plants. The licensing process itself contributed to wide swings in supply and demand balances as market demand was not well anticipated by the licensing authorities and licenses were often taken out by producers as defensive moves. The MRTP and technology licensing policies paradoxically often inhibited competition by restricting entry, changes in product mix and the expansion of large, successful firms. Internal competition was also hin- dered by the reservation of certain industries and products for small firms and the public sector. Small-scale reservation (and preferences in taxes and labor legislation) not only deterred competition from large scale firms; it also limited expansion of efficient small scale firms and, in some cases prevented them from installing modern high efficiency machinery. In the case of public sector enterprises, lack of competition, and the preferences given to public enterprises in government procurement, led their managers to perceive the market as captive and to act accordingly. This was reinforced by the use of a cost-plus approach to setting adminis- tered prices and an occasional tendency to divide up the market and re- strict discounting by public sector firms. As a result, the public sector manager generally faced only limited incentives to innovate, improve product quality, and cut costs. Lack of competition also encouraged private sector managers to adopt similar attitudes. 2.05 Lack of competition from imports was another important factor adversely affecting India's industrial performance. In the drive toward self-sufficiency and to save foreign exchange, protection was granted almost on demand through numerous overlapping instruments. Little consid- eration was given to the relative costs of domestic production versus imports, especially in light of the pessimism regarding India's ability to earn foreign exchange through larger exports. The resulting structure of protection seems to have contributed to the slow, capital intensive, pat- tern of industrial growth described above. Studies of effective protection across manufacturing suggest that high protection was used to allow highly capital-intensive subsectors to develop (India: An Industrializing Economy in Transition (cf)); for example, industries with high effective protection 21 Goldar B.N., Productivity Growth in Indian Industry, Allied Publishers, India, 1986. (over 70Z) in 1986 used more than five times as much fixed capital per employee as those with low protection and their average capital-output ratio was 602 higher. This suggests that employment and output growth would have been higher if some of the investments in the highly protected sector had instead been made in industries with low protection. 2.06 The Import controls and the domestic regulatory system reinforced each other in ways that have contributed to a number of the manufacturing sector's problems. One example is the fragmentation of production in plants below minimum economic size (MES). Partly to disperse production, partly to placate license applicants, partly to increase the number of firms in the industry, licenses were often given out for plants below NS (e.g. nylon filament yarn, plants producing chemicals for synthetic fibers, light commercial vehicles, and mini-steel plants). Although this may have increased competition somewhat, compared to a situation of fewer M1S plants, the possibility of oligopolistic behavior remained because of limited entry. Moreover, it also entailed high cost production, which was only possible because import competition was limited by protection. The high import barriers, created by widespread quantitative restrictions and the very high tariffs, effectively delinked many Indian industries from the technological developments in the rest of the world. The heavy indirect taxes on all stages of production had a cascading effect that, while reduc- ing the degree of overall effective protection, increased its variability and raised domestic prices, making it difficult to expand markets and achieve economies of scale. The rigidities created by the regulatory system not only constrained firms' ability to enter new markets and expand, but also limited their ability to restructure andlor close down. In many sectors, continued production by financially sick firms via subsidies, undermined the viability of the remaining more efficient units. As a result of these policies, firms in many industrial subsectors are below international standards in terms of technology, scale and efficiency, and offer products at high prices and of variable quality. 2.07 The poor performance of manufactured exports largely reflected the lack of competitiveness of many products, the bias against exports from the protection regime, and the lack of international marketing networks. Li- censing and import controls made production for the domestic market much more profitable than exports on average, thereby drawing resources out of potential export industries. They also raised the cost of inputs to exporters. Finally, lack of competition inhibited the upgrading in tech- nology and product quality that was necessary to compete effectively in the world markets. In an effort to offset the higher costs and other disadvan- tages of exporting from a highly protected and controlled economy, the Government used various incentives to assist exporters of manufactures. However, judging from export performance between 1978 and 1985, these interventions were largely ineffective. Sometimes, however, they permitted firms to cover variable costs and hence stimulated exports from existing plants, though not export-oriented investment. -6- B. Recent Developments 2.08 Since the mid-1970s, there has been a growing awareness among Government policy askers of the adverse impact of the regulatory and trade policy framework on the growth and efficiency of the industrial sector. This has led to a number of gradual changes in the regulatory framework and the export incentive system starting in the late 1970s. The Seventh Plan (1984185-1989/90), annual budgets, the Long-Term Fiscal Policy (LTFP) and recent official policy statements set out a series of policy reform objec- tives designed to address some of the major problems indicated above. Since 1985. Government of India (GOI) has initiated a series of policy actions which taken together have resulted in fairly significat improve- ments in the industrial policy environment. The reforms in industrial policies have been complemented by some liberalization of the financial sector especially in the capital markets (Appendix 1). 2.09 The policy reforms implemented since FM85 can be grouped under three broad areas. The first is the liberalization of the domestic regula- tory system through (a) delicensing investments first up to about US$4 million and more recently up to US$11 million in developed areas, and up to US$37 million in backward areas, as well as significantly reducing the number of industry groups that require a license; (b) giving firms much more flexibility to adjust both output mix and capacity; (c) allowing freer imports of capital goods and technology by moving capital goods into open general license (DOGL) and easing restrictions on technology imports; (d) reducing the number of products reserved for production by small scale industries; and (e) easing the monopoly regulations by increasing the threshold level and expanding the product areas in which firms classified as monopolistic (MTP companies) can invest. The changes in the regulatory framework have been complemented by a policy of licensing more capacity (relative to estimated domestic demand) compared to earlier practice, to induce greater domestic competition and exportable surpluses. The minimum import content of 15% for projects which require a license has been in- creased to 302. Phased manufacturing programs have been modified to reduce the targeted domestic content level from 902 to 702. Minimum economic scales have been established in many product groups to reduce inefficient import substitution. Licensing of foreign technology collaborations has also eased to allow Indian industry to catch up with the rest of the world. The number of foreign collaboration approvals, which averaged around 350 p.a. between 1975 to 1982, jumped to about 1,000 p.a. after 1985. 2.10 The second area of reform comprises measures to improve the tax system including: (a) reduction and simplification of income and corporate taxes; (b) implementation of a modified value added tax (KODVAT) that eliminates the cascading effect of indirect taxes for most products and facilitates indirect tax deduction for exports; and (c) rationalization of tax incentives for small scale industries. 2.11 The third area of reforms is in trade policies and administration where the most fundamental and consistent changes have been made. The most important change has been the adoption of a flexible and realistic exchange -7- rate policy conducive to export growth. The real effective exchange rate has depreciated more than 301 since the end of 1985. At the same time the Government has Introduced and streamlined the duty exemption and drawback schemes for imports used in export production. On the import policy side, changes have been less extensive than in exports. Tarifts remain high - 1222 on average in 1986187. Generally, non-tariff barriers to imports have eased but mostly to modernize capital or to reduce supply constraints. In capital goods, the new lmport-Export Policy raised the number of products on OGL from 750 to 1170. However, most capital goods on OGL are not directly competitive with Indian capital goods, with the exception of machine tools. The main thrust of the policy changes has been to increase supplies of non-competitive imports and, hence, import competition as a force for efficiency, remain limited. The main recent improvement on the import side has been the greater reliance on the exchange rate and tariffs to limit imports. C. The Impact of Recent Policy Changes and Future Issues 2.12 The manufacturing sector's performance has improved in the 1980s, especially in the last three years, indicating a payoff to the policy changes. Value added in manufacturing has grown at about 8.52 p.a. over the last three years. Gross output, measured by the Index of Industrial Production (H1P) has risen at a similar rate. Disaggregation reveals that growth was concentrated in a few sectors, such as electronic equipment and computers, transport vehicles, and cement, that have benefitted most from the reforms. Real investment in manufacturing has not grown particularly fast, but this may reflect a tilt toward less-capital-intensive sectors, better use of existing capacity, and some Idebottlenecking* Investments, all of which are desirable changes from previous patterns. Finally, the growth of manufactured exports has been fairly high in recent years. Manufactured exports grew about 13% in real terms in PY87 and 25? in FY88. The proportion of manufacturing exports in total exports has increased steadily in recent years to 741 in M88, reflecting the fast growth of this segment. 2.13 The liberalization program, however, has not been costless. In many industries (cement, two-wheelers, tools, etc.) the entry of a large number of new firms has substantially increased competition reducing profit margins across the board. Because of the slow growth in domestic demand, capacity utilization rates have been well below break-even indicating the need for rationalization and restructuring. That some firms will encounter financial difficulties, especially after deregulation and increased ease of entry, is a natural part of the competitive discipline that forces growth and adaptation in a market economy. But these problems are complicated in the Indian context by limitations on adjustment. The industrial regulatory system and labor legislation at the national and state level inhibit adjustment by large firms by making it difficult to shift into new product lines, move to a less expensive location, or shed labor or cut wages to reduce labor costs that were manageable in a less competitive era. Labor- ers in large firms also strongly resist restructuring because wages in alternative employment are so much less. At the same time, lengthy judi- cial processes mean that actually closing firms takes many years. Until recently, financial institutions and state governments had been constrained to maintain "sick' industrial enterprises functioning through different schemes, thus burdening their portfolios (para. 3.04). 2.14 To deal more effectively with obstacles to closure, restructuring and rehabilitation of firms, the Board for Industrial and Financial Reconstruction (BIFR), was established in 1985 with quasi-judicial powers to order and speed closures, mergers, and other changes, including the power to override some other industrial legislation. A company with half of its net worth eroded is required to report to the BIFR, which subse- quently appoints an operating agency to coordinate all involved parties and rapidly recosend a rehabilitation or closure scheme. This should ratio- nalize and quicken the decision-making process on the rehabilitation or closure of sick units. However, existing policies tend to focus on the after effects of sickness. There is a greater need to adopt policies to increase flexibility and allow adjustment for firms running into financial difficulties early on. In addition to reducing barriers to shifting product mix and location, legal and regulatory flexibility is needed to assist labor adjustment in declining industries, as well as measures to reduce transition costs through retraining. III. THE FINANCIAL SECTOR AND INDUSTRIAL FINANCE 3.01 India's financial sector has functioned over the past forty years under a regime of very tight controls. Nevertheless, considerable success has been achieved in raising the savings rate as well as in the financial mobilization of savings. India's national savings rate has been in the 22Z-24% range in the 1980s, a relatively high savings rate for a developing country with a low per capita income. Net household financial savings account for about 502 of household savings, indicating the financial sys- tem's success in mobilizing resources. The broad money stock3/ now amounts to about 45Z of GDP compared to the 242 to 27% range prevailing in the early 1970s, again indicating a high degree of financial deepening. The level of real deposit interest rates, maintenance of inflation at single digits, spread of bank offices in rural areas, shifts in income distri- bution, favorable taxation of financial instruments and other factors have contributed to the high savings rate and financial development. 3.02 With regard to resource allocation, the Reserve Bank of India (RBI), the Central bank, has maintained strict control over credit alloca- tion until recently when some relaxation took place. Currently, about 65Z of commercial bank funds are subject to government-directed credit alloca- tions. Required investment in Government debt forms the largest portion of 31 Defined as currency held by the public plus demand and savings deposits in commercial banks. Includes government, business and household holdings and thus are not strictly comparable with the savings flow of households. - 9 - government-directed credits. These required investments comprise (i) a cash reserve requirement with the RBI (currently 152 of deposits), and (ii) a statutory liquidity ratio (SLR) requiring a certain proportion of depos- its to be invested in Government bonds and other eligible instruments (cur- rently 38Z of deposits). Forty percent of a commercial bank's portfolio currently must be loaned to priority sectors, mainly agriculture and small scale industry. In addition about ten percent of credit went for food procurement during the 1980s. Thus, banks can allocate only 25%-301 of their resources after cash reserve, statutory liquidity, priority sector and food procurement requirements are satisfied. 3.03 In addition to sectoral allocations, interest rates on loans are set by the RI. Until recently, a ceiling rate limited the maximum interest rate that could be charged by a commercial bank. This has been recently supplanted by a floor rate currently set at 161 (effectively a prime rate) with higher rates for riskier loans. However, there are preferential rates applicable to priority sectors of lending, e.g. small scale industry (122 to 14?) which reduce the actual spread available to the banks. The normal interest rate on term loans of DFIs is 14%; projects located in backward districts receive term loans at a concessional rate of 12.5?. The ceiling interest rate has been highly positive throughout the 1980s compared to the average inflation rate (CPI) of 9.2%. Part of the pressure to reduce the ceiling rate stems from the capital market where convertible debentures are sold by established firms at 13.5?. Also firms can raise deposits from the public at 15?. 3.04 In spite of the fact that interest rates, including rates charged to priority sectors have been appropriate (positive in real terms), it appears that credit allocation policies in conjunction with industrial and trade policies contributed to a high degree of financing of inefficient investments. The portfolio of commercial banks are particularly affected by arrears of sick industrial companies and non-performing agricultural loans which have tied up a substantial volume of resources. Restructuring of these portfolios is essential for improving the health of the banking system. As of December 1986, commercial bank credits of Rs 49 billion were officially classified as being extended to "sick industries, which have negative net worth. Outstanding credit to sick industries alone are about 15.7? of commercial banks' credit to industry and 8.1? of their total out- standing credit. Thus there is a need to rationalize the system of finan- cial sector controls and improve the institutions' operational flexibility and profitability. A. Industrial Finance 3.05 Indian industry is financed through a complex and sophisticated network of institutions and a rapidly growing capital and money market. During the 1980s there has been a noticeable shift in the pattern of corporate financing, particularly of large established firms, away from commercial banks and specialized financial institutions to direct savings mobilization through the capital and money markets (Appendix I). Regula- tory constraints on commercial banks, the increasing size of projects - 10 - financed which often exceeded the maxim exposure limite of Individual institutions, and the freedom of firms from supervision by nominee direc- tors from the development banks and the threat of "partial' nationalization through the conversion clause conditionality of development banks have also influenced this trend. 3.06 Commercial banks are a major source of finance for industry, par- ticularly for working capital. For the small scale enterprise sector, they are also a substantial source of term finance for fixed investment. In the 1980s, about half of the total commercial bank credit has been allocated to the industrial sector although the share of medium and large scale firm has been declining. In 1987-88, commercial banks$ not increase in bank credit to industry was about Rs 50 billion compared to total disbursements by specialized financial institutions of about Rs 63 billion. 3.07 Besides commercial banks, the term financing needs of medium and large scale private industrial firms are served by four development finance institutions (DFIs) operating nationally - the Industrial Development Bank of India (IDBI), the Industrial Finance Corporation of India (IFCI), the Industrial Reconstruction Bank of India (IRBI) and ICICI. IDBI acts in an apex and coordinating role and a substantial amount of its lending involves refinance of loans made by institutions operating at the state level - State Finance Corporations (SFCs) and the State Industrial Development Corporations (SIDCs). Projects with capital costs up to Rs 30 million are financed by state level institutions and commercial banks with bigger projects financed by the national institutions. However, there are no limits on the size of projects that the national institutions can finance nor are their credit facilities subject to a floor. 3.08 In addition to the above mentioned DFIs, the Life Insurance Corporation of India (LIC), and the General Insurance Corporation of India (GIC) and the Unit Trust of India (UTI), a mutual fund set up in 1964, are also increasingly involved in term finance of industry although a substan- tial part of the insurance institutions' resources are required to be invested in Government securities and other approved Investments. Much of the funding of these three institutions goes through the capital market where they are important net buyers as well as underwriters but they are also direct participants in loans of the DFIs. In recent years, UTI has also increased its participation in short-term financing. The Export- Import Bank of India, set up in 1982 to take over the export credit functions of IDBI, is also involved in export financing and promotion through inter alia the management of an Export Marketing Fund established under a recent World Bank loan. 3.09 ICICI estimates that the share of the specialized financial insti- tutions (includes the four DFIs, LIC, GIC and UTI) in financing gross fixed capital formation4/ In the private sector (including corporate, cooperatives and households) has increased from about 162 in 1980-81 to 23.62 in 1986-87. Given the trend towards the use of capital and money market facilities by larger established firms, this suggests that a growing 4/ Refers to expenditures in machinery and equipment only. * 11 - percentage of institutional lending is being channelled to medium-sized enterprisest this trend is particularly evident in the case of IDBI. ICICI is the largest lender of foreign exchange among the three development banks (IDBI and 1701) accounting for about 42% of total foreign currency approvals in 1987-88. Cumulatively, up to the end of March 1988, the breakdown of sanctions by all specialized financial institutions were as followes Rupee loans (772), foreign exchange loans (8.5), underwriting and direct subscriptions to sharesidebentures (121) and guarantees (1.82). After adjustment of inter-institutional flows, IDBI's share of total credit granted by term financial institutions (net of IDBI's refinancing and bill discounting activity) vas about 40Z in 1987188. The shares of the other institutions are currently about 112 for ICICI, and 9.51 for IFCI, with 17.61 accounted for by the three investment institutions (UTI, LIC and GIC). The State level institutions contribute to total institutional assistance with 23?. B. The Policy Framework for Term Finance 3.10 The All-India development finance institutions and banks have adopted uniform business and operational policies with regard to term industrial finance, which are further cemented by consortium arrangements for projects with an investment over Rs 500 million, and by collective consensus decisions on credit matters at different levels. The financial institutions maintain close working relationships with each other in all matters relating to policy formulation, sectoral strategies, procedural improvements, project appraisal and follow-up. Such coordination is ensured primarily through the fora of Inter-Institutional Meetings (11es) and Senior Executive Meetings (SEMs), at which the Chief Executives of All- India institutions discuss issues of mutual concern, including specific industrial projects. Commnon application forms, the 'lead' institution concept and the OProject Financing Participation Certificate Scheme, have also been introduced and universal guidelines adopted with respect to contractual clauses calling for the convertibility of part of loans into equity of the borrowing companies, at the institutions' option.5/ In addi- tion, while not statutorily limited in this respect, the DFI's have adopted certain norms and guidelines for term financing. The important parameters applied to finance a project are: (i) promoters' contribution of 22.5% of 5/ The options can be exercised for either of two reasonst when the insti- tutions' loan risk increases because of poor performance by the company; or, when a company performs very well, pays high dividends, and its shares appreciate, the institution feels justified in reaping benefits to vhch it has contributed. The financial institutions argue that exercising the convertibility option in the second case allows them to reduce their lending margins in the measure that their investment income supplements them. On the other hand, while industrial managers object to the convertibility clause as a source of uncertainty for corporate planning, in fact the institutions have a good record of supporting capable management and acting against poor management only in extreme cases and in concurrence with other shareholders. - 12 - the project costill (ii) debt-equity ratio of 1.5 to 1; (111) debt-service coverage ratio between 1.5 and 2.0. The direct loans are repayable normally within a period of 8-10 years with a moratorium of 2-3 years. 3.11 All these arrangements have made the centralized administration of term financing much simpler, but have reduced the term financing options available to industrial entrepreneurs to a single, global, monolithic system. Under these conditions, the justification for different institu- tional roles in terms of financial expertise, knowledge of local condi- tions, client relationships and other factors has been lost. The financial institutions should be encouraged to frame their operations in accordance with their particular skills and advantages, while freely developing the intra-institutional relationships that best fit their business strategy, including those with banks and other intermediaries in the capital and money markets. C. Issues Involving DPI. 3.12 Developments in three areas have the potential of significantly affecting future DFI operations including possibly their future role in the financial sector. These ares (i) the problem of the increasing number of loans to hard core "sick' enterprises in DFI portfolios; (ii) the increas- ing cost of domestic resource mobilization because of having to turn to the capital market for Rupee resources, and the adverse impact of this shift on spreads and profitability; and (III) the increasing competition from the growing capital market particularly in the financing of projects of estab- lished larger firms which are less risky. 3.13 All of the DFIs face a problem with non-performing loans in their portfolio which so far has been slow to respond to remedial actions. Port- folio quality has deteriorated for the same reasons as commercial banks. Over 30% of IDBI's direct lending (15? of the portfolio) and 9Z of ICICI's portfolio is affected by arrears. IFCI's situation seems similar to ICICI's. In addition, the arrears figures may understate the problem, because of liberal rescheduling policies. Problems may also arise with some existing borrowers in foreign exchange, who may not be able to cover their exchange losses. Finally, IDBI's refinance to SFCs and SIDCs (over 30? of its portfolio) may present problems; these institutions suffer from large arrears and some of the guaranteeing States are experiencing budget problems. 3.14 Even though Rs 15.45 billion of domestic resources were raised through sale of bonds/debentures during 1987-88, none of the DFIs are important direct mobilizers of funds from the public at large. Their rupee resources are raised in a market largely restricted to the same financial institutions, the commercial banks, and other contractual savings institu- tions. DFI bonds are among the approved securities eligible for SLR 6 This proportion is lower at 17.52 for projects sponsored by technician entrepreneurs, as also for those set up in 'A' and 'B' category districts, and 202 for projects set up in 'C' category district. - 13 - investment by the commercial banks and other financial institutions. These bonds are issued at interest rates below the lowest yield on comparable instruments, so that they are not marketable to the general public. Since the volume of such bonds that can be issued by DFIs is limited by GO1, they have also issued bonds at 1-2Z more than the costs of funds under the SLR requirements with UTI, LIC and pension funds. However, as GOI itself begins to market its securities directly to the public at more competitive yields, it will be difficult for these institutions to continue to operate in a preferential captive market. Mobilizing larger volumes of resources from the market would most likely result in an increase in lending rates, reduced competitiveness and the need to redefine their role in the financial system. 3.15 A most significant recent development affecting DFIs is that the institutions are now beginning to experience serious competition: from the capital markets in the domestic front, and to a lesser extent from foreign merchant and commercial banks with respect to international resources. In addition, leasing has emerged as another important source of financing for industrial equipment. Based on statutory returns submitted by leasing companies to RBI, data as of March 31, 1986 indicates that some 470 firms (including 131 financial companies which have done leasing) were engaged in leasing. However, only some 40 firms are actively engaged. The capital market option is attractive to corporate borrowers in a number of instances in spite of similar long term costs, and sometimes higher up-front costs compared to institutional financing. In the first place, the larger firms' requirements are often very large and the simplest way of accommodating them is an equity or debenture issue, which merchant banks are well prepared to manage. In other cases, because of the greater availability of foreign exchange for imports of industrial equipment, it is pragmatic for firms to raise resources locally in the market rather than assume the exchange risk of a foreign currency loan from a financial institution. Entrepreneurs also regard market financing as preferable to DFI financing which involves such restrictions on their autonomy as the convertibility clause and periodic reporting requirements. 3.16 Fortunately, the institutions have the capacity to face this competition in some measure. The diversification of their activities into leasing, merchant banking, and venture capital, and their growing contacts with the international capital market through their resource mobilization activities have given them the financial expertise to take advantage of developments in these areas. On the other hand, a new financial environ- ment is developing, in which their traditional developmental role of assisting those worthy projects which do not have access to market sources of financing, will be increasingly important. IV. HISTORICAL REVIEW OF OPERATIONS 4.01 ICICI was one of the first development finance institutions to be established with the support of the World Bank. Over the past thirty-five years, it has grown from a minor institution to one of the major industrial financial institutions in India and possibly the most innovative one. The - 14 - Bank played a catalytic role in ICICI's establishment, helping to set up the committee to draft its Articles of Association, assisting in formulat- ing policies and procedures and training staff. It was instrumental in mobilizing equity from U.K. and U.S. institutions as well as in obtaining Government support in the form of an interest free long-term loan. It also approved a US$10 million loan even before the legal formation of ICICI. A. 1955-1964 4.02 During the first ten years (1955-64), the Bank made five loans totalling US$70 million while another US$15 million equivalent was provided by Kfdf and USAID. ICICI's activities during this period involved extending tem loans in both foreign exchange and rupees as well as engaging in underwriting and direct subscriptions of shares to strengthen the capital structure of horrowers. Total annual approvals grew from a modest Re 35 million in 1955 to Ra 253 million in 1964 at an annual average growth rate of 24.5%. Out of the total assistance of Rs 1023 million approved to 328 firms during this period, foreign exchange loans comprised 492, rupee loans 252, and underwriting and direct subscriptions of shares (262). Total assets grew from Rs 126 million in 1955 to Rs 520 million in 1964 at an annual average of 17?. Industries with major shares in the portfolio were chemicals (14.5?), basic metals (13.8?), machinery (19.4Z) and paper (7%). Two-thirds of its loans were to new enterprises and the average loan size was Re 3.0 million. ICICI was consistently profitable from the first year of operation and return on equity averaged 10? by 1962. The Staff Appraisal Report (SAR) of the sixth loan noted *after ten years of opera- tion. ICICI has become a well established development finance institution, with a sound organization, competent management and staff and a satisfac- tory financial position. In recognition of ICICI's strength, the individ- ual subloan free limit was raised to US$2 million with no aggregate free limit. Even during the first decade of its operation, ICICI management took a broader view of its role in the economy. It helped to set up the India Investment Center to attract investments in India. B. 1965-1974 4.03 The second decade (1965-74) saw a consolidation of growth as well as diversification of ICICI operations. The 1966 devaluation of the rupee adversely affected many of ICICI's clients but the fact that it did not lead to major portfolio problems attests to ICICI's management capabili- ties. Nevertheless, annual approvals grew slower at an average annual rate of 17? between 1965-74 and totalled Rs 4.1 billion. Of this, foreign currency loans accounted for 60?, rupee loans (242) and the balance repre- sented underwriting and direct subscription to share of borrowers. The Bank made five loans during this period totalling US$240 million. The nationalization of the major commercial banks who were shareholders in 1969 led to majority shareholding of ICICI passing over to the Government. How- ever, the Board structure remained unchanged signalling the Government desire to maintain the status quo. 4.04 In response to criticism that ICICI's operations were too concen- trated in the Western region, ICICI opened branch offices in Madras and - 15 - Calcutta. It also established its Merchant Banking Department in 1973 to enhance its capital market activities. ICICI started to diversify its sources of rupee resources by issuing debentures in 1967 and raised a total of Re 300 million in four issues by 1974. By the time of the ninth loan (1971) the Bank took a decision to slowly wean ICICI away from exclusive reliance on official sources of finance. In 1973, ICICI raised SP 8 million through a public bond issue, its first foray at mobilizing foreign resources from commercial sources. 4.05 During this period, Bank appraisal reports had expressed concern at the arrears level which affected 14% of the portfolio in 1969-70. Nevertheless, profitability was maintained at a robust 122. The Bank and ICICI carried out a joint study in 1973 to examine the development impact of ICICI's lending. The study showed that ex-post economic rates of return for a sample of projects were over 122 for three quarters of the sample and over 20Z for half of the sample. ICICI strengthened its economic analysis by adopting the use of the Little-Mirlees method of project appraisal. At the Bank's suggestion, it set up a project promotion unit. In collabora- tion with IDBI and IFCI, it also set up Technical Consultancy Organizations (TC0s) in different states to help support development of small scale in- dustry. The SAR of the tenth loan noted that *ICICI's achievements... shows its suitability and creditworthiness as an intermediary through which the Bank can continue to play an important role in providing assistance to Indian industry". C. 1975-1979 71 4.06 ICICI's achievements during the second half of the 1970s is par- ticularly commendable in light of the difficult adjustment problem faced by the Indian economy due to the two oil price hikes and the severe drought during 1979-80. Total annual approvals grew from Rs 620 million to Re 1.96 billion and total assets from s 2.9 billion to Rs 5.6 billion between 1975-79, while Gross Profits more than doubled from Rs 49.5 million to Rs 109 million. The major problem emerging at the end of this period was the large increase in problem loans. Principal outstanding affected by arrears represented more than 192 of the total outstanding portfolio. Nevertheless, ICICI still managed to achieve a return on net worth of 16.62 in 1979. The Bank made two loans to ICICI totalling US$180 million during this period. It encouraged ICICI to undertake more project promotion, support projects in backward areas and diversify its foreign borrowings. In response ICICI raised US$20 million in the euromarkets at Libor + 12, in 1978. Also in 1977, at the Bank's urging ICICI adopted for the first time a statement of operating strategy identifying broad areas of priority in its lending. 4.07 ICICI lending in this period continued to focus on the more modern industry segments of India - chemicals, machinery, pulp and paper - and for medium and large projects. However, the poor export performance of Indian 71 Achievements in the 1980s is covered under the evaluation of the thirteenth and fourteenth loans, the main topic of this report. . 16 - industry came to the fore following the second oil price hike. ICICI embarked on a study of the problems of manufactured exports, including incentives and penetration pricing. The major institutional development during this period was the build up of capability for economic and sector studies which complemented its strength in the economic analysis of projects developed earlier. V. IMPLEMENTATION PERFORMANCE OF THE THIRTEENTH AND FOURTEENTH LOANS 5.01 The objectives of the two loans were to (I) continue to utilize ICICI as an efficient channel for financing high priority industrial proj- ects; (ii) assist ICICI in diversifying its sources of foreign resources through commercial foreign borrowings; and (iii) assist ICICI in selective- ly expanding its program of industrial studies and other development activ- ities, ensuring that these complement its mainstream financing operations and make the best use of its experience and resources. These objectives broadly were similar to those established under the eleventh and twelfth loans implemented between 1975-83 which had some additional areas of emphasis.81 Under the thirteenth loan, ICICI targetted two major areas for focusing its studies program: (i) major bottlenecks to industrial growth and performance; and (ii) measures to encourage improvement in industrial efficiency and performance. An auxiliary area was to develop its capacity to provide training and consultancy services to DFIs in other developing countries. Two major studies were programmed in the context of high energy cost and power shortages in India. The first involved a study of energy conservation, economics of use of alternative fuels and of backup generat- ing capacity and optimal scheduling of operations to match power availabil- ity. The second focused on the supply aspects of equipment for electrical power generation, transmission and distribution. A major parallel objec- tive of the fourteenth loan was to assist ICICI to increase its proportion of foreign commercial borrowings to other foreign sources of funds from a ratio of 50:70 established under the thirteenth loan to 50:50 in order to further reduce dependence on World Bank resources. An additional major study on constraints facing manufactured exports was included on top of the energy conservation and electrical equipment studies. ICICI also restated its overall role in the area of industrial promotion, placing particular emphasis on promoting specific investment opportunities that were to be identified by the studies aimed at improving industrial efficiency and expanding exports. A. Utilization of Loan Proceeds 5.02 Due to strong demand for foreign currency funds, the loans were committed and disbursed faster than projected at appraisal. The thirteenth loan was committed fully during 1980-81 and 962 was disbursed by the end of 1983. The fourteenth loan was committed between 1982-85 with over 91% also S These included strengthening of regional offices and the sector information base to guide lending strategy. - 17 - being disbursed by the end of 1985, representing a continuing improvement in the time lag between commitments and disbursements. 5.03 The thirteenth loan assisted 121 subprojects while the fourteenth assisted 275 subprojects. The average subloan size was US$791,000 and US$538,000 respectively.91 This was due to the fact that more smaller sub- loans were made under the fourteenth loan - subloans up to US$0.5 million comprised 56 in number (461) and utilized 161 of the assistance under the thirteenth loan; whereas the same size group comprised 173 (631) in number and received 30.4Z of total assistance under the fourteenth loan. New subprojects of new companies numbered 17 and 62 respectively and utilized 142 and 21.71 respectively of foreign currency financing from each loan as well as other sources.101 This is an improvement over the performance in the eleventh and twelfth loans to ICICI under which new subprojects of new firms comprised 131 by number and 15% of the loan amount. 5.04 Judged against national industrial priorities set by the Govern- ment (export promotion, backward area development, etc.) 55Z of the assis- tance under the thirteenth loan and 512 under the fourteenth went to high priority industries. Assistance to backward areas under the thirteenth loan comprised 43 projects (361 in number), which received 402 of the total foreign exchange loan. The comparable figures under the fourteenth loan were 88 projects (321 in number) receiving 352 of total assistance. These percentage shares were broadly similar to the share of backward regions in the overall assistance provided by ICICIII/ since the mid-1970s when the share of backward regions in total cumulative approvals reached 401, up from about 121 in 1970. As of March 1988, this share was still about 40%, although annual percentage shares of disbursements to backward regions to total disbursements in the 1980s had exceeded 541 in several years. The annual shares have tended to fluctuate depending on the size of individual investments. 91 The average loan size under the eleventh and twelfth loans was US$429,000. 10/ In the past, the Bank had felt that financing of new subprojects of new companies was somehow more *developmental" than assisting expansionlmodernization projects. ICICI's viewpoint was that expansion to minimum economic size and modernization were equally important priorities in its strategy of industrial development. Also new subprojects of new companies are of smaller size, which tend to be financed by the state finance corporation instead of the all-India development banks. In fact, the reason for tne fairly large number of smaller subloans which more often tend to involve replacement/balancing/modernization projects was that the government required firms to contract loans in foreign exchange from the DFIs, particularly ICICI for import of the equipment. More recently, under the expanded Open General License (OGL) scheme, actual users are permitted to import machinery without being required to contract foreign exchange loans from DFla. 11 Including both local and foreign currency assistance. 18 - 5.05 The bulk of the assistance under both loans vent to five industry groups; the relative shares of each loan are indicated in parenthesess chemical and petroleum products (262, 202); fabricated metal products and machinery manufacture (17X, 18X); automobile and ancillary (12%, 12Z); cement (9?, 152) and textiles (82, 8.62). The shares of these five indus- tries in the loans were about 732, broadly consistent with the overall distribution of these industries in ICICI's portfolio. It also reflects the strategic orientation of ICICI's lending towards the more non- traditional industrial branches. B. Time and Cost Overruns 5.06 Under the thirteenth loan, based on data on 113 projects, 472 were completed on schedule, 37? with delays up to 12 months and 161 with delays over 12 months. The corresponding figures for the fourteenth loans, based on data on 242 projects, were 45Z, 38? and 17?, indicating a slightly poorer performance. Major reasons were delays in arranging government approvals, arranging financing packages, equipment procurement etc. Under the thirteenth loan 46 (412) of the 113 projects had cost overruns. The aggregate overrun for 113 projects was 19? while the average overrun for the 46 affected projects was 301. Comparable figures for the fourteenth loan weres 102 of 242 projects (42?) had cost overruns. The aggregate overrun was 13? and the overrun for affected projects was 251. The degree of overrun was highest in the new categories but also substantial in the diversification and expansion categories. Under the thirteenth loan, over- runs were mainly in areas such as civil construction, (due to rises in the price of cement and steel), preliminary and pre-operative expenses (due to time delays), and machinery (due to increases in customs and excise taxes). Inadequate detailed engineering was another factor. In the fourteenth loan, in addition to the above, changes in project scope/design were con- tributory factors. Although the percentage of projects affected was higher in the fourteenth loan, the degree of overruns were lower. However, a review of project Implementation record over time indicates a slight dete- rioration in time and cost overruns since the late 1970s (compared to the eleventh and twelfth loans) with similar reasons being quoted for the over- runs. This occurred in spite of the decline in inflationary pressures from 1980/81. The need for a review of the system of setting contingency price estimates may be indicated. C. Financial Performance of Sub-projects 5.07 The financial performance of sub-projects assisted by both loans has been mixed (PCR para. 45). Based on data from 53 companies financed under the thirteenth loan, 31 earned profits while the remaining 22 incurred losses in the projected normal year of operation: 13 of the 22 unprofitable firms had capacity utilization rates of less than 50Z; only 24 of the 31 profitable firms (or 45? of the total sample of 53) earned a return on investment of 121 or more, projected at appraisal. For the fourteenth loan, based on data for 88 firms, of which only 67 had reached the normal year of operation, 42 firms earned profits as high as projected at appraisal with the remaining 25 incurring losses; 16 of the latter 25 were operating at below 50% capacity utilization. Thus 471 of the total sample was earning the minimum return of 121 projected at appraisal. * 19 - 5.08 Repayment performance also presents a mixed picture. Out of the 121 projects financed under the thirteenth loan, 43 sub-loans were resched- uled (361 of total loans) and 18 sub-loans (including 16 sub-loans which had rescheduled) were in arrears as of December 3, 1987. Under the four- teenth loan, 64 sub-loans out of a total of 257 sub-loans were rescheduled (232 of total sub-loans), of which 15 were in arrears as of August 1989, including five under legal action. Major reasons for the poor financial performance of sub-borrowers under both loans, cited by ICICI,12] in order of importance weres (i) inadequate demand and/or low prices arising from competition from existing producers or imports; (ii) management and tech- nical problems; (iii) high import costs; and (iv) shortage of power and raw materials. Very often these problems have compounded one another leading to intractable situations. Large investment cost overruns and time delays were important factors contributing to poor financial performance of bor- rowers, particularly under the fourteenth loan. This item was cited as a contributory factor in 27 of the 64 sub-loans that were rescheduled. Textile and jute projects financed under the loans were affected by the recession in these industries in the 1980s. The liberalization of capacity restrictions and selective import liberalization also helped to enhance market competition which lowered profit margins and actual sales volumes for some borrowers. Finally, the assumption of the foreign exchange risk coupled with high fixed interest rates also contributed adversely to profitability. 5.09 It should be noted, however, that this represents an interim assessment. The financial performance of these borrowers are closely moni- tored by ICICI and various remedial measures including financial reschedul- ing, and physical and operational restructuring actions are implemented to improve financial performance. ICICI has taken legal action against only five of the borrowers under the fourteenth loan whose financial sitstua is viewed as unviable. D. Economic Characteristics and Performance of Sub-Projects 5.10 The investment cost per job created at US$37,900 and US$45,737 respectively for the thirteenth and fourteenth loans, compared to an aver- age cost of US$32,000 reported under the eleventh and twelfth loans, attests to a fairly high capital intensity. The high average level is partly due to the large share of expansion, balancing and modernization sub-projects in total investment since typically these projects tend to be less employment-creating than new projects. Rising capital intensity is also partly due to the upsurge in domestic and world prices of machinery in the early 1980s. The export performance of projects/firms financed under both loans was modest, attesting inter alia to the adverse influence of the high level of anti-export bias prevailing until recent years. Out of a total of 26 firms which borrowed under either of the loans, exports of three firms were 20Z or more of total sales, seven firms were between 10% and 19Z and 16 firms were between 0.31 and 92. Annex Table 1 provides data on the actual economic performance of 27 sub-projects financed under both loans. Nineteen projects had ex-post ERRs ranging from 14.71 to 861. Nine of these projects had ex-post ERRs equal to or exceeding the ex ante ERRs. 121 See ICICI's PCR. * 20 - The remaining eight sub-projects had ex-post BRRs below 10% with four exhibiting negative ERRs. Major reasons for the large negative differen- tial between ex-post and ex-ante BRRs are investment cost overruns, lower capacity utilization rates, delay in reaching normal operations and lower world prices for output. VI. INSTITUTIONAL DEVELOPMENTS A. Shareholding and Role of the Board 6.01 Although ICICI started out as a private company, the Government indirectly acquired majority shareholding in ICICI when the private share- holding banks and insurance companies were nationalized in 1969. This has not affected the operational autonomy of ICICI's Board and management except with regard to complying with certain procedures for appointing auditors.13/ ICICI's Board consists of 14 members and a chairman. One member is a government nominee, two are deputy managing directors of ICICI, one represents the financial institutions, one represents the foreign shareholders and the rest are businessmen and professionals. The Board meets regularly, sets ICICI's overall policies and provides guidance to management; it also decides on proposals involving an exposure of over Rs 50 million to ICICI. The diverse representation on ICICI's Board has served the management exceedingly well, both as a source of new ideas and a sounding board for its initiatives. B. Organization Structure 6.02 ICICI underwent a major reorganization during 1982-83 in response to the changing industrial and financial environment. The major objectives were tot (i) strengthen the appraisal and supervision functions by devel- oping expertise along sectoral lines; (ii) emphasize and expand non-tradi- tional activities such as merchant banking, leasing, management services to institutions and investment services to non-resident Indians; and (iii) strengthen resource mobilization especially from international financial markets. Subsidiary objectives were to recognize the contributions of senior managers and to provide for greater mobility in the organizational hierarchy. The basic structure that resulted from the reorganization has remained intact but has been further streamlined in the intervening period. In particular, emphasis has been given to devolving decision-making author- ity to the lower managerial and professional levels and to encouraging greater participation of staff at lower levels in corporate planning. 131 It is to be expected that Government exercises a greater influence in the operational policies of the other two DFIs which are directly owned by the Government. The consortium-based lending approach may indirectly thus introduce governmental influence into ICICI (para. 7.13). * 21 - 6.03 Currently the organization is structured into two main groups - Operations and Financial Services and Resource Planning - each headed by a Deputy Managing Director reporting to the Chairman and Managing Director (Chart 1). The Operations group, which has the largest professional staff, is responsible for appraisal and supervision, portfolio monitoring, and coordination with regional branch offices. There are nine groups respons- ible for appraisal and supervision work specialized by industry and other sectors. Most legal staff who were previously in a separate legal depart- ment were brought into Operations to facilitate expeditious preparation of legal documentation and establish closer links with technical and financial staff. 6.04 The Financial Services and Resource Planning Group is sub-divided into five departments, each headed by a General Manager or Deputy General Manager, with the divisions responsible for corporate legal services, eco- nomics, and public relations directly under the Deputy Managing Director. The Merchant Banking Department, headed by a General Manager, is now responsible for all financial services - investments, leasing, lines of credit, export development as well as merchant banking. The Rehabilitation Department, responsible for rehabilitation of hard core problem projects, is under an experienced Deputy General Manager. ICICI's activities in technology development, energy conservation and development, and venture capital is structured in a separate department, also headed by a Deputy General Manager. ICICI has been giving great importance to medium and short-term corporate planning in recent years. The corporate planning function and resource mobilization, which also has assumed greater impor- tance by virtue of the need for active liability management, is structured in a separate department under a Deputy General Manager. Finally, account- ing, short-term investments, foreign exchange management, and taxation is in a department headed by a General Manager. This streamlined organization appears to be responding effectively to the changing business environment of the late 1980s with its opportunities and emerging problems. 6.05 ICICI has decentralized most of its operational activities to its regional offices in Calcutta, Madras, and New Delhi which report directly to the Deputy Managing Director in charge of operations. Initially, these were set up to follow up on loans but since 1979-80, the regional branches have become responsible for all stages of loan processing - appraisal, legal documentation and conditions, supervision - and rehabilitation of problem projects for the areas served by them. Generally, processing of (loans) projects of all sizes as well as other activities such as merchant banking, deferred credit, leasing, etc. are also handled by the regional offices. The only exception is letters of credit which is centralized at Bombay. Loan accounting and arrears information is also centralized at Bombay, but regional offices are actively involved in loan recovery and the preparation of rehabilitation programs for problem borrowers for placing before the BIFR. Decentralization of Operations, through the strengthening of the regional offices, has helped ICICI to establish closer linkages with the business communities outside Western India, enabling ICICI to get a better perspective of regional problems and potential and provide faster service to firms seeking financial assistance. ICICI has set up a small - 22 - sub-regional office in Gauhati to service clients in North Eastern India. Continued strengthening of the role of regional offices, both in tems of staffing and number, should be given greater priority in planning future institutional growth in light of the efficiencies achieved and the need to cater more effectively to evolving regional needs.141 C. Staffing 6.06 ICICI had a total staff as of March 1989 numbering 823, of which 420 were professionals. The breakdown of professional staff is as follows$ engineers (82), chartered accountants (64), master's degree in business (59), lawyers (49), economists (20) and others (143). The strong represen- tation of engineers in ICICI's staffing is notable, accounting for nearly 20Z of professional staff and points to the strong emphasis placed by the institution on technical analysis of projects and the promotion of technol- ogy oriented activities (paras. 7.02-7.03). Also notable is the fact that professional staff exceed the number of non-professionals in absolute num- bers, indicating a high level of automation of routine work, highly unusual for an institution in India. Equally significant is the high level of productivity gains achieved by ICICI management over the past ten years. Although total loan approvals grew by over 252 per annum, between 1980-88189 staff strength increased by only 22 per annum, enabling ICICI to reduce administrative expenses as a percentage of average total assets from 0.62 to 0.3U. There has been a sharp increase in professional staffing since 1985, mostly on account of the work involved in managing the large and growing portfolio, including the large number of non-performing loans, as well as on other development activities. Staff turnover has been low with an average of 2.2 staff members retiring or resigning per year between 1982-88; recruitment has been active with 134 new staff inducted between 1982 to 1989 (March), most of whom are young professionals. D. Training 6.07 ICICI has always placed great emphasis on regular training of managers and professional staff to ensure that staff skills are broadened as needed. The training division, which was established as a separate entity in 1976, conducts in-house training programs au well as sponsors staff to external programs. The division is also involved in training managers of Indian and foreign institutions on different aspects of devel- opment banking and its training services are in great demand. Senior managers of ICICI participate extensively In the in-house seminars and they are supplemented by trainers drawn from the Government, business world, and universities as required. Over the past three years (1986-89), 43 in-house training programs involving a total of 447 participants were undertaken. These in-house training programs have provided basic development banking 141 ICICI's positive experience with regional offices does indicate benefits to be obtained from decentralization. In certain countries, DFCs have been reluctant to open branch offices, citing problem with decentralization of activities such as dilution of project processing standards, etc. * 23 - skills as well as more In-depth coverage of specialized aspects of finan- cial management. Over the same period, 220 staff were nominated to short- term external training programs of up to three days, and 69 staff partici- pated in longer term training activities of more than three days duration. The external training programs have emphasized training in computer skills, communication skills, and development banking. Computer training has be- come the most important element of the training program. Computer training has received priority because of the extensive computerization of systems and procedures that have taken place in ICICI in recent years (paras. 6.15-6.16). 6.08 Another training area concerns skills in resource mobilization in international capital markets, particularly knowledge and skills in new financial instruments (swaps, options) and market practices. Training in this area has involved bringing in outside consultants as well as sending staff abroad for short visits to financial institutions with specialized expertise in these areas. Since 1989, ICICI has embarked on a major train- ing program with the assistance of technical assistance funds under the Industrial Finance and Technical Assistance project. Under the program estimated to cost US$1.5 million, over 160 staff weeks of training in computer skills, advanced financial management techniques, etc. will be provided to staff on an annual basis through external training programs of different types. The receptivity of ICICI management to the program is a sign that ICICI views its training activities as an extremely important tool in maintaining its competitive edge in a liberalizing economy. The high quality of its staff is a sign of its success in this endeavor. Z. Policy/Strateay 6.09 In 1977, ICICI adopted a formal strategy statement at the Bank's prompting, outlining six broad areas which would receive priority in lend- ings (i) export oriented industries; (ii) power and transport projects; (iii) agro-inputs and processors of agricultural outputs; (iv) mass con- sumption goods; (v) capital equipment and tools; and (vi) balancing and modernization projects. The statement also affirmed its commitment to sup- port new entrepreneurs and projects in backward areas. Subsequently, at the Bank's urging, under the fourteenth loan (1981) this statement was modified to reflect ICICI's intention to diversify its sources of foreign exchange and under the Industrial Export Project (1985), the statement was further expanded to give greater emphasis to export-oriented projects, par- ticularly engineering projects. However, in 1986 ICICI adopted a compre- hensive policy statement outlining its business policy and medium-term product line strategy in response to the risks and problems arising from - 24 - the liberalization that was taking place in the economy.151 The main elements of the new strategy designed to guide ICICI operations over the medium-term weres * Emphasis on high margin business, e.g. leasing, installment sales and the asset credit scheme which would increase the spread available to ICICI and also reduce lending risks since under leasing, the asset title resides with ICICI; in non-funded activities, the merchant banking department, planned to aggressively market advisory and consultancy services. * Assistance to projects in emerging industries such as communica- tion, electronics sponsored by highly rated companies and established entrepreneurs which carry a low level of risk. * Reducing operating costs through automation particularly through the introduction of the Client Information Storage and Retrieval System (CISR), which would speed processing of applications, enable closer monitoring of problem clients, etc., thus achieving higher standards of productivity to be attained (para. 6.16). * Improving collection performance through the adoption of a new collection strategy including new systems and procedures (para. 6.14). The strategy has been implemented with substantial success, enabling ICICI to maintain high growth and profitability. Continued weak collection performance has been the main area of shortfall. F. Operational Procedures 6.10 Project appraisal in ICICI is a comprehensive process covering technical, financial, marketing and economic aspects in depth. Since 1972, ICICI has been undertaking economic analysis following the Little-Mirlees procedure for calculating Economic Rates of Return for projects above a minimum size. It also calculates Effective Rates of Protection using both the Balassa and Corden methods and domestic resource costs. The procedures have now been computerized and are routinely undertaken. Nevertheless, ERR were not the primary factor for deciding against approving a projects commercial aspects possibly received greater importance in project 151 The statement also covered policies on maximum exposure, prudential financial indicators for borrowers, interest rate structure, appraisal and supervision procedures, procurement procedures, environmental factors to be considered in appraising projects, policies on foreign exchange risk management, accounting practice and policies regarding bad and doubtful loans, ICICI's own financial indicators, and personnel and automation policies. - 25 - appraisal until the mid-1980s. The deregulation of the economy has led to a greater concern for economic factors such as minimum economic size, international cost competitiveness, export potential and export marketing requirements, risk of technological obsolescence, project life span, etc. The impact of technological developments is considered carefully in light of the need to ensure competitiveness of the borrower. ICICI's market studies division now gives particular attention to the evolution of demand and prices in the light of capacity decontrol in many industrial products, and market studies have assumed much greater importance. It also has had to strengthen its capability in analyzing demand and cost competitiveness of Indian manufactured products in diverse foreign markets in the context of appraising export-oriented projects. The training program under the second export project to commence from June 1990 should further assist in this regard. 6.11 ICICI has also been emphasizing compliance with Government guide- lines on environmental factors for the control of pollution from industrial effluents and actively examines these aspects both during appraisal and supervision of projects. It insists on compliance with governmental regu- lations as a condition of loan approval and appraisal reports have a write- up on the environmental impact as appropriate. In this regard, 18 indus- tries have been identified for closer scrutiny on environmental aspects. Compliance with environmental requirements are monitored both through periodic reports as well as inspection during project implementation. G. Procurement Procedures 6.12 ICICI basically requires competitive bidding to evaluate the pric- ing aspects of a procurement plan. However, technological factors such as capacity, appropriateness, reliability, etc. are examined carefully before finalizing the bidding documents, in order to assist clients. Additional factors are the experience and reputation of prospective bidders. Where competitive bidding is not feasible, ICICI attempts to assess the reason- ableness of costs based on its extensive past experience. H. Supervision 6.13 ICICI uses site visits, discussions with clients, and periodic reports as follow-up procedures during project implementation. During these visits, the supervision mission reviews the technical, management, and financial aspects of the firm and prepares a detailed report for dis- cussion with the client. Borrowers are also required to prepare quarterly progress reports in addition to the annual reports. After project comple- tion, annual visits are the norm. ICICI also appoints as necessary direc- tors on the board of assisted firms. These nominee directors, who are often ICICI's senior staff, form an important link in the feedback and monitoring of borrowers. I. Collection Strategy 6.14 ICICI has adopted a new strategy to improve collection and deal effectively with firms, which either require rehabilitation or legal - 26 - action. For this purpose, it has introduced a system of classification of firms in arrears on the basis of which action plans are formulated for pursuing recovery actions. This classification is updated regularly based on comprehensive reviews of the portfolio. The strategy aims at intensify- ing follow-up of cases with maximm likelihood of recovery. It also aims at implementing rehabilitation measures, including rescheduling of dues expeditiously. ICICI has also tightened up the process of loan reachedul- ings. Such decisions now include actions to strengthen management, appoint concurrent auditors reporting to ICICI, and broaden the representation of directors on the firm's board. Conversely, ICICI may wish to examine its policy on setting grace periods and maturities to ensure that these are not overly strict and are contributing -to technical defaults. In addition to the above changes, ICICI has decentralized responsibility for loan collec- tion and each department, including the legal department, is currently responsible for collection. The introduction of a computerized on-line information system will allow officers to monitor the financial performance of clients in arrears or financial difficulties more closely. J. Management Information Systems 6.15 ICICI started using computers beginning in 1971 in analyzing its borrowers for its Corporate Study. ICICI introduced in-house computers in 1983 with the objectives of improving the quality of analysis and decision- making and the productivity of office staff through upgradation of skills. The introduction of personal computers in India during this period allowed computer usage to be decentralized throughout the organization. Currently, a global office automation plan is being introduced in stages whose central element, the Client Information Storage and Retrieval System (CISR), has been implemented at the head office and will be implemented shortly at the regional offices. The CISR is a computerized database on ICICI's assisted units. The CISR aims tos (U) improve efficiency of the decision-making process through the availability of required information on-line; (ii) improve the effectiveness of the Management Information System for better planning and control of ICICI's operations; (iii) improve communication and flow of information within the organization; (iv) improve client- service through the faster and better processing of proposals. The data- base covers the profile of the client (including ownership pattern and management profile), production facilities, financial performance for the past four years, details of assisted projects, and ICICI's assistance profile. 6.16 For the purposes of the CISR, ICICI's portfolio of over 2000 clients is divided into four regions. The data for all of ICICI's clients in the Western Region (approximately 900) reside on a central machine at the head office in Bombay and are accessed by about 90 IBM PC compatibles serving as terminals. Data on firms located in the northern, southern, and eastern regions are handled by the respective regional offices at Delhi, Madras and Calcutta. In addition, the head office also coordinates the entire operations and hence the main database is in Bombay, while the regional databases are subsets of the main database. While the regional databases are to be updated directly by the regional offices, the central - 27 - database at Bombay would be updated at regular intervals through a wide area data network, initially using dial-up modems and later leased lines or a public data network. VIZ. REVIEW OF ICICI'S ACHIEVEMENTS IN THE 1980S A. Financial Assistance Activities 7.01 During the 1980s, ICICI greatly expanded its financial assistance through a variety of new instruments. In addition to the traditional project finance activities in the form of foreign and local currency term loans, underwriting and direct subscription to the borrowing firms, equity (both ordinary equity and preference share) and debentures, and guarantees, ICICI introduced new financing instruments in response to growing competi- tion from commercial banks and the capital market as well as to meet the changing financial needs of its clients, particularly for equipment fi- nance. These include leasing, both in local and foreign currency, deferred (buyer) credit schemes to finance the purchase of locally manufactured ma- chinery, installment sale, and the recently introduced asset credit scheme. ICICI's merchant banking department, which started operations in 1973, also expanded and diversified its activities, beyond loan syndication and issue management to include financial advisory services covering mergers and acquisitions, management/organizational restructuring, etc. These initia- tives reflect ICICI's new operational strategy adopted in 1986 in response to the growing risk in project financing arising from the economic liberal- ization, the higher cost of resources and consequent pressure on profit margins, deteriorating collection and portfolio performance and the need to contain operating costs. 7.02 The major thrust of ICICI's project financing activities in the 1980s has centered on projects and activities aimed at technology upgrada- tion and improving international competitiveness of Indian industry. This has led to the concentration of assistance in the technology intensive industries such as chemicals and engineering, as well as in projects to improve the international competitiveness of industry in export markets through both improvements in product quality and reduction of costs. Mod- ernization projects have also been an important focus of activity, particu- larly in the traditional jute, textiles and cement industries. ICICI has supplemented its project financing activities with other technologically oriented initiatives such as promotion of the Technology Development and Information Company of India (TDICI), a specialized venture capital manage- ment company to support indigenously developed hi-tech projects; the Program for the Advancement of Commercial Technology (PACT), the Program for Acceleration of Commercial Energy Research (PACER), and Science and Technology Parks (STEPs) (Appendix II). 7.03 The Bank's lending to ICICI since 1985 has also complemented and strengthened this technology oriention. Following the fourteenth loan in 1981, all Bank loans except for the Industrial Finance and Technical Assis- tance Project (1987) have had clear technology development objectives. The - 28 - first Industrial Export Project -- Engineering Products (1985) aimed at improving the export capability of engineering goods' manufacturing firms through both financial and technical assistance. ICICI administered a special productivity fund established under the project to provide tech- nical assistance to borrowing firms to help upgrade technical capability. The Cement Industry Modernization Project (1985) was designed to rehabili- tate and convert energy inefficient plants through using the new dry pro- cess technology. The second export project (1988) aimed at improving the export capability of Indian industry through a comprehensive program of technical assistance. The Electronic Industry Development Project (1988) was formulated to strengthen the production capacity and efficiency of the electronics industry, particularly of training of electronics technicians and workers. Finally, the Industrial Technology Development project (1989) was developed to strengthen technology acquisition, development and commer- cialization skills in India. The project comprises three components: (i) supporting technological innovations by small and medium scale enterprises through support to four venture capital entities; (ii) strengthening the capabilities of research and standards institutions to provide technolog- ical assistance to industry; and (iii) promoting quick imports of technol- ogy and know-how through a Technical Development Fund. ICICI's role in the project is to manage the technical services component which includes loans to the technical institutions as well as management of a sponsored R&D promotion fund. 7.04 ICICI's assistance operations for 1982-1988189 are summarized in Annex Tables 2, 3, and 4. Cumulative project finance approvals (term loans, guarantees, underwriting, and direct subscriptions of shares) since inception up to the end of March 1989 totalled Rs 79,239 million, which was spread over 2,791 companies for 5,884 projects; 1,596 of these companies were new companies and 603 projects (10.22) were promoted by first genera- tion new entrepreneurs. Disbursements amounted to Rs 56,933 million, of which foreign currency disbursements (Rs 27,914 million) were slightly below half (492). Project finance approvals showed strong growth during this period (1982-1988189) growing at an average annual rate of over 262; within this category, foreign currency term loans approvals increased at an annual average rate of 342 during this period, increasing its share from 292 to 33% in total project finance approvals.16/ 7.05 However, the new financing instruments introduced by ICIUI in recent years (leasing, deferred credit, installment sales and asset credit) were clearly more dynamic growth areas. The share of these instruments in total approvals increased from about 92 in 1982 to over 222 in 1988189. In particular, leasing was the star performer - annual lease approvals in- creased from about Rs 121 million to Rs 1,525 million during this period (about 502 per annum) making ICICI the largest lessor in the country. To a large extent, ICICI's entry into leasing contributed to the acceptance of the leasing concept by the business community as a commercially viable 161 As of March 31, 1989, the share of foreign currency approvals in total project approvals on a cumulative basis was 442. - 29 - instrument for acquisition of capital assets.17/ ICICI's leasing division marketed the concept actively by providing training to prospective firms and support to other lessor institutions and agencies through seminars. Leasing clients include medium and large firms in both the private and pub- lic sectors. ICICI's leased asset portfolio includes computers, rolling stock (leased for the first time in India), equipment for ship moderniza- tion, sophisticated medical equipment, food processing equipment, power generation and chemical plants. ICICI has also recently introduced con- sortium leasing, project leasing, and other innovative financing mecha- nisms, such as foreign currency leasing for acquisitions of imported equipment. Leasing and other financing schemes (see below) have enabled ICICI to promote investments in new industries outside its traditional spheres, e.g. hotels, information and statistical agencies, data processing industry, etc. 7.06 Leasing has enabled ICICI to capture the capital allowances which have been -ritical in managing its tax obligations. However, some clients prefer to avail of the capital allowances and ICICI introduced two new schemes -- the installment sale and asset credit schemes for these clients. These schemes also provide 1002 financing for asset acquisition. Under the installment sale scheme, repayment is over three of five years with monthly repayments, while in the asset credit scheme, repayment is over a fixed 54 month period at monthly intervals. Currently ICICI charges an annual interest rate of 15.72% plus a 12 front-end fee, thus obtaining a larger margin compared to term loans. Both schemer have received very favorable responses among clients. Approvals under ins:allment sale and asset credit were Rs 400 million and Re 1 billion in 1981 -89. Merchant Banking 7.07 ICICI's Merchant Banking Division (MBD) has emerged as the largest merchant bank in India. Its major activities are assisting companies in raising funds in the capital market (equity, debentures, convertibles), arranging syndication of term loans and leases with financial institutions, and providing advisory services on mergers, restructuring, project finance, etc. Between 1980 and October 1989, MBD has handled 604 proposals and raised a total of Rs 110.5 billion, of which Rs 91.3 billion was from the capital market (Annex Table 5) and Rs 29 billion involved syndication of term loans. The major increase in the activities of the MBD coincided with the liberalization measures introduced in 1985. Total amounts raised annually between 1984-1988/89 increased at an average annual rate of 412, although there was a significant slowdown in growth during 1988-89. The 17/ The main advantages of leasing in India are full financing of equipment cost, flexible rental profiles, simplicity and speed in obtaining financing, no restrictive covenants, preservation of other lines of credit, and arbitrage in tax allowances with lessor, particularly in cases where lessee cannot utilize capital allowances. - 30 - MBD has also been active in mergers and reconstruction proposals and com- pleted 19 assignments since 1982. Since 1986, it commenced providing advisory services covering foreign currency and project finance. More recently, it has investigated new areas such as the private financing of infrastructural facilities and floating of overseas mutual funds for clients. Characteristics of Assisted Projects 7.08 In line with the priorities stated in its policy statement, during the 1980*, ICICI has emphasized support for projects involving balancing, modernization and expansion (MHE) of plant and equipment in order to improve efficiency and competitiveness of Indian firms. Between 1980-1988189, such BME projects accounted for about 541 of total approvals with the balance (40?) being accounted for by new and diversificationi8l projects (Annex Table 6). New projects promoted by new entrepreneurs accounted for about 10% of annual loan approvals during this period, a slight increase in comparison to the share of such projects (8.8%) in total cumulative approvals as of March 31, 1989 (Annex Table 7). 7.09 ICICI'c clientele have tended to be medium and larger size com- panies because of its emphasis on BME projects of existing companies. The consortium financing arrangement through which ICICI finances the bulk of its loans (para. 7.12) may also be a factor influencing upwards the size of firms and projects financed. In contrast, small loans account for a sub- stantial share of total loans. Analysis of loan approvals by size (Annex Table 8) indicates that for rupee lending, loans up to Rs 15 million accounted for 85? of loans by number and 52Z by amount in 1986; these per- centages were 72? and 30? in 1988/89. The average loan sizes were Rs 11 million and Rs 14 million respectively in these years. For foreign cur- rency approvals, loans up to Rs 15 million accounted for 75? by number and 31? by amount in 1986; these percentages were 76Z and 16? in 1988189. The average loan sizes were Rs 16.9 million and Rs 22.9 million respectively. The relatively large share of smaller loans may stem from the emphasis on balancing and modernization projects which involve acquisition of specific equipment items rather than entire production systeam. Sub-Sectoral and Regional Distribution 7.10 The sub-sectoral distribution of ICICI's financial assistance re- flects its emphasis on non-traditional and technologically advanced indus- tries where the size of projects and firms tend to be large (Annex Table 9). Based on cumulative approvals as of March 31, 1989, the share of chem- icals and fertilizer was 24.72, followed by engineering (20.8?), textiles (10.4?), basic metals (9.2?) and cement (8.5?). This pattern also reflects the major concentration of lending in recent years partly arising from the focus of World Bank loans to specific industries, e.g. cement and engineer- ing. There has been a modest decline in the share of textiles and non- electrical machinery industries in the last few years while lending to the services sector has increased. 181 Diversification projects represent new projects promoted by existing companies. - 31 - 7.11 Industrialization of backward districts has been a priority of the government. Reflecting this priority, ICICI's lending to projects located in backward areas has been substantial, accounting for about 45? of total cumulative approvals as of March 31, 1989. In recent years, the share of annual approvals to backward districts in total loan approvals has in- creased substantially, averaging about 52?. There has been some criticism in the past that ICICI lending to backward districts was focussed on the backward districts of more advanced states. While this may be correct, the major factor affecting the private sector's decision to invest besides investment and tax incentives from the Government is the availability of infrastructure. The more advanced states have better infrastructure in their backward districts compared to less advanced states which naturally influences the choice of location. The skewed geographical distribution of ICICI's lending, another area of concern to the Bank during the 1970s, has substantially improved during the 1980s, although the Eastern region's share has continued to decline (Annex Table 10). The share of the western region (Gujarat and Maharashtra) in total cumulative approvals declined from 442 as of December 31, 1979 to 38? as of March 31, 1989, while there was a significant increase in the share of the Northern region from 152 to 25%. The opening of regional offices initially was viewed as a mechanism for dealing with this issue. Although regional offices have been extremely effective in decentralizing project appraisal and supervision by bringing these activities closer to the location of projects, other factors have clearly played a more critical role in influencing the regional location of projects. Consortium Financing 7.12 As discussed earlier (paras. 3.10-3.11) the all-India term fina-ce institutions (IDBI, ICICI, IFCI) have adopted a consortium arrangement for financing all projects costing over Rs 50.0 million. Since 1979, the share of ICICI's approvals under consortium arrangements to total approvals have ranged between 70Z to 752; also the share of ICICI's approvals as a lead institution where it has primary responsibility for appraisal and super- vision to its total approvals made under consortium arrangements has aver- aged around 40% during this period (Annex Table 11). This implies that only about 60Z of its loan approvals are appraised and supervised directly by ICICI with the rest being managed by other institutions. 7.13 Consortium financing has both its positive and negative aspects. Besides the sharing of the risk on large projects, loan administration pro- cedures have been streamlined and simplified, reducing administration costs. Borrowers also find it easier to deal with a single financial institution. However, the adoption of the system has undoubtedly contrib- uted towards a monolithic financial system with very little differentiation between financial institutions. The system would appear to constrain the independence and ability of an individual institution to target its lending in particular segments of industry, limit its exposure to specific industries and regions or focus on certain size class of projects or firms. Under the present arrangement, non-lead banks are under pressure to lend to a project even if that project does not fit within the bank's priorities or strategy. There appears to be a diffusion of responsibilities for - 32 - appraisal and leading decisions. Supervision of problem loans and measure to expedite collection also remains within the purview of the lead institution, which may also reduce the non-lead institution's ability to strengthen loan recovery actions. On the above grounds, modification to the consortium arrangement appears warranted. Risk sharing through loan syndication is a valid strategy for any institution. However, by making the system voluntary, individual institutions would be free to arrange syndications for specific projects and invite appropriate institutions to participate. By allowing greater freedom and flexibility to commercial banks to participate in such syndications, the number of participants would increase and the capability of commercial banks to finance investment projects enhanced. An element of competition could be introduced although price competition would still be absent without relaxation of interest rate controls on term lending.191 B. Other Development Activities 7.14 Besides its mainstream project financing activities, over the years ICICI has initiated a vast range of development activities aimed at creating and supporting a network of institutions to address critical deficiencies adversely affecting India's economic and social development. During the 1980s, the major institutional initiatives have been in tech- nology development, particularly promotion of indigenous technology, technical assistance to small industry; training of foremen; entrepreneur- ship development; rural development planning and training; training and research in financial management; introduction of a credit rating agency; housing and shipping finance; and training of staff of overseas development finance institutions.201 Some of these new initiatives are elaborated in Appendix II. C. Resource Mobilization and Liability Management 7.15 Until the mid-1980s, ICICI funded its rupee assets mainly through borrowings from IDBI at concessional rates and through the public issue of bonds and debentures, which qualified as trust certificates and were bought by financial institutions to meet their statutory liquidity requirements. However, its average cost of rupee borrowings has gradually increased from 7.08% in 1980 to 9.9% in 1988-89 and is expected to reach 10.22 in 1989-90 (Annex Table 12). This increase has resulted from two factors. First, because ICICI is restricted to a 102 annual growth rate in its concessional borrowings from the capital market which has been significantly below the growth rate of its operations averaging 252 p.a. The additional resources 191 See also World Bank (1987) India: Credit and Capital Markets Study for similar assessment and conclusions. ICICI states that it does "not agree with the hypothesis that consortium financing would led to greater Government influence* (see para. 4, Appendix IV). It also states that it is pursuing a conscious strategy of financing projects outside the consortium (para. 3, Appendix III). 20/ The availability of funding from the RfW interest differential fund has assisted ICICI to step up its broader development activities in the 1980s. - 33 - were raised at 12.52 to 13.02 from various institutions such as the Army Insurance Fund, SCICI, UTI, etc. In 1980, 70Z of rupee borrowings were at concessional rates, whereas by 1988 this share had declined to about 542. Second, the rates paid on concessional borrowings by ICICI increased from 7.25? in 1980 to 11.5? in 1989. ICICI also raised Re 135 million in 1981 in the form of convertible debentures which have been fully converted into equity. It also raised an additional Rs 863 million in convertible deben- tures in 1989. The increasing cost of rupee funds has put pressure on spreads on rupee term loans and has prompted ICICI to explore alternate, more profitable activities as well as non-funded activities such as mer- chant banking. Foreign Currency Borrowings 7.16 Until the late 1970s, ICICI relied mainly on official sources of foreign exchange to fund its foreign currency lending which included besides the World Bank, Kreditanstalt fur Weideranfbau (Kf), USAID, and export credit agencies. From 1978, ICICI started to systematically diversify its foreign currency borrowings by entering the commercial euro- currency market. The Bank encouraged this diversification since it felt that ICICI, as a mature DFC, should gradually reduce its reliance on the Bank. Thus, under the fourteenth loan (1981) ICICI agreed to raise from sources other than KfW an additional US$150 million over the next two years to match 1:1 the Bank loan. ICICI successfully mobilized these resources21 and has since then increasingly diversified its borrowings. The Bank's share of ICICI's total foreign currency approvals (i.e. financed from Bank loans) in 1980 was 65?, which declined to about 10? in 1985 (Annex Table 13). With the resumption of Bank lending from 1985 this share has in- creased to 48.72 in 1988-89. Nevertheless, Bank loans disbursed and out- standing comprised about 8.8% of ICICI's total foreign currency borrowings outstanding as of March 31, 1989, compared to 77? as of end of 1980. 7.17 ICICI's foreign funding operations have become increasingly sophisticated as it has taken up the recent developments in financial engi- neering in international capital markets. Since November 1987 it has been issuing Euro-commercial paper (ECP) backed by a note issuance facility (NIP) from a group of banks which allows it to roll-over the paper even if the tranche is not fully absorbed by the market. In addition, ICICI has been engaging in interest rate and currency swaps in order to convert its floating rate obligations into fixed rate ones using a tender panel mechanism. Until September 1989, ICICI had concluded 12 swap transactions. ICICI has established a four person liability management team to handle these transactions who are in the process of upgrading their skills and 211 The resources were mobilized as followes US$30 million through a FRN issue in 1981; a tri-currency euro loan of SP30 million, DM30 million and Yen 3 billion in 1981; a euro loan of US$12 million in 1982; a euro-currency loan of US$30 million, DM45 million and a Swiss franc credit of 10 million in 1983. In addition, ICICI obtained DM65 million from KfW to supplement its commercial borrowings between 1982 to 1984. - 34 - developing a liability management strategy. The Bank has provided some technical assistance to ICICI in this area. In the case of the CP program, ICICI has developed the sophisticated computerized software in- house to handle the issue procedures. Appendix III reviews the ECP and swap programs in greater detail. D. Portfolio Quality 7.18 Portfolio quality has deteriorated, particularly in recent years. The collection ratio before rescheduling has steadily deteriorated from 74.92 in 1983 to 68.42 in 1988/89 (Annex Table 9).22 The same ratio after rescheduling has also declined from 82.82 to 77.22 in the same period. Arrears of principal before rescheduling as a percentage of total loans outstanding have increased from 2.02 in 1983 to 2.82 in 1988/89 (Annex Table 15). The share of the portfolio (loans and debentures) affected by arrears was 11.72 during 1984-85 but is estimated to have declined to 7.72 as of March 1989; if the 125 companies under legal action are included in the tally, 9.02 of the portfolio by amount was affected by arrears as of 1989 (Annex Table 16). However, the long form audit of the portfolio presents a picture which raises same concern (Annex Table 17). In addition to the 327 companies with serious problems (i.e. categories 4, 5, 6, and 7) there were 408 companies operating at a loss (excluding companies commenc- ing operations recently) accounting for 18.6Z of loans outstanding. Total arrears of this group (category 3D) was e 424.2 million or over 352 of total arrears. Overall about 752 of all amounts in arrears represent arrears over two years (Annex Table 18). 7.19 Analysis of the distribution of arrears by industrial branches indicates that the arrears are concentrated in five or six branches and this pattern has not changed significantly in the past several years (Annex Table 19). In 1989, 81.42 of total arrears were distributed among the following six industries* sugar (16.62); paper (13.62); textiles (17.02); cement (17.02); basic metals (9.9Z); and chemicals (7.8%). The shares of cement and chemicals in total arrears have increased in recent years. This pattern of concentration of arrears in certain industries and the chronic nature of the arrears would suggest that much of the arrears are in firms with deep-seated structural problems which have come to the fore with the deregulation and liberalization measures adopted in the past few years. Rehabilitation programs have been developed for many of these firm, but some of these firms are probably unviable and need to be legally shut down. The BIPR needs to devise practical steps to facilitate quick exit, particu- larly in regard to disposal of assets and dealing with retrenched labor. In this context, it is also very important that a long-term view of specific Industry trends (demand, supply, cost competitiveness, etc.) be developed on the basis of which the restructuring decisions are taken. ICICI has already undertaken a study of the cement industry which should facilitate this exercise for cement firms in its portfolio. Similar up- dated studies of the other industries should be prepared if not available. 22/ ICICI reported that for the 12 months ending September 30, 1989, this ratio has improved to 73Z. - 35 - 7.20 ICICI is well aware of the deteriorating collection performance and the portfolio problem. It adopted a new collection strategy and tightened up conditions for rescheduling loans (para. 6.14). Its product diversification strategy was also a step in the direction of reducing risk. Nevertheless, the economic enviroment of the 1990s is likely to pose greater risks. Monitoring of rescheduled loans with the view to identi- fying firms before they become sick and Implementing remedial measures would seem particularly important. In this context close monitoring of all non-profitable firms in the portfolio which are in arrears appear to be also a priority. Remedial measures would of course need to be based on a broader view of market trends and the competitiveness of the firms produc- tion capability including management. Onlending Terms 7.21 ICICI's standard rate of interest for subloans from euro-currency sources bear a spread of 2.01 over the borrowing cost. Interest rates on domestic currency loans also range from 11.51 to 142 with a 12 p.a. sur- charge on interest levied on companies whose shares are not listed on a stock exchange. ICICI charges a 12 p.a. commitment fee on foreign currency loans, and a commitment fee ranging between 0.252 and 12 p.a. on domestic currency loans. ICICI's standard terms provide for maximum loan maturities of up to 15 years, including up to three years grace, which conform to those offered by the other all-India term-lending institutions. In the past, ICICI's sub-borrowers bore the exchange risk on foreign currency loans, but for the Industrial Export (Engineering Industries), Cement and the Industrial Finance and Technical Assistance Loan, the Government assumed this exchange risk. More recently, ICICI, together with IDBI and IFCI, has developed a scheme to allow borrowers to partially hedge their exchange risk by paying an exchange risk premium. The scheme covers recent Bank loans to ICICI (Export II, Electronics, Technology) as well as its comercial borrowings. The scheme designated as the Exchange Risk Administration Scheme (ERAS) was initiated on April 1, 1989 on a trial basis for two years but may be extended thereafter. However, borrowers who participate in the scheme will be covered for the full duration of the loan. Prepayment is not allowed. The largest single loan eligible for coverage under ERAS has been fixed at US$60 million. Under ERAS, the for- eign currency loan would be converted into a rupee loan with a variable onlending rate, set every six months, to vary within a band. The onlending rate is based on the composite cost of three elements: (i) the weighted average interest cost of borrowings in the currency pool; (11) the spread; and (iii) an exchange risk premium. Should the exchange risk be not fully met by the exchange risk premium, the Government would meet the cash requirements. The interest rate band for loans committed between April and December 1989 was set to vary between 15? p.a. to 182 p.a. and the variable rate was set at 15? p.a. Although ERAS represents a practical second best approach to the problem, it could be a potentially costly approach to reducing the uncertainty stemming from exchange rate fluctuations unless - 36 - the financial performance of the scheme is carefully monitored and the onlending rate adjusted as needed.231 E. Financial Performance and Prospects 7.22 ICICI's financial performance in the 1980s as indicated in Annex Tables 20 to 23 has been robust. Total assets increased from Rs 5.6 billion as of the end of 1979 to over Rs 45 billion as of March 1989, at an annual average rate of over 251. Profits after tax as a percentage of average networth (inclusive of capital gains) averaged about 23Z between 1981-841 it increased to an average of about 26% during 1985-1988189, partly because of large capital gains in the latter period. Profits after tax as a percentage of average networth (exclusive of capital gains) averaged about 20.22 during 1985-1988/89 with a declining trend in the last two years. Profitability during the last couple of years would have been lower except for the large increase in leasing activity which not only has a high margin but also allows ICICI to reduce taxable income through capital allowances. Two factors which have depressed profitability in the past year, are likely to adversely affect it in the future. The first is the rising cost of mobilizing rupee resources because of the need to borrow at closer to market rates. The second is the increasing cost of loan losses stemning from declining portfolio quality. The gross risk factor241 which averaged about 1.0% during 1980-82 increased on average to 1.86Z during 1986-89 (Annex Table 12). Also, rupee loan interest rates have remained unchanged over the past few years. Thus overall net spreads which averaged at about 2.8% during 1984-86 have declined to 2.1% in 1987/88 and 1.71 in 1988/89. The debt-equity ratio has remained below 10:1 in the past three years and the debt-service cover at 1.4 in 1988/89 was satisfactory. ProJected Financial Performance 7.23 In light of the growing competition from the capital market, ICICI conservatively projects its project finance activities to grow at 15% p.a. over the next five years. Growth of leasing is assumed to also slow down to 10? p.a. because of customer preference for utilizing capital allow- ances; but the other newly introduced products - asset credit, installment 23/ The premium for exchange risk that is initially fixed is based on the expected devaluation of the rupee compared to the basket. If the actual devaluation exceeds the expected devaluation, the onlending rate charged would not cover the actual exchange risk. Thus, there is a need to monitor this differential carefully. Experience with the Foreign Exchange Risk Insurance Scheme in Turkey indicates a large shortfall in the fund that has to be covered by the Government. However, the situation in Turkey differs considerably from India in the sense that inflation in Turkey has been very high and volatile; the base lending rate is fixed and has been set substantially below inflation. 24/ Risk is defined as the loss due to write-offs and provisions for bad debt before writebacks. - 37 - sale - and lines of credit are projected to grow at 251 p.a. Based on the assumption that the present structure and levels of term Interest rates for loans (12.52-142), rupee borrowing costs from guaranteed bonds and deben- tures (11.52), and comercial borrowings (132) will be maintained and a slight improvement in the collection ratio (802) would occur, overall spreads on loans are projected to deteriorate sharply from 1.71 in 1989/90 to 0.92 in 1993-94 (Annex Table 22). This would result in a lower but still satisfactory level of profitability (return on networth would decline to about 17.32 in 1993-94) compared to the average level of the past five years (Annex Table 23). The above scenario takes into account ICICI's new strategy of emphasis on the new more profitable product lines, and non- funded merchant banking activities, as well as the likely evolution of borrowing costs. Thus, while the average yield on loans would grow from 10.62 in 1988-89 to 11.81 in 1993-94, or by 1.21, average borrowing costs are expected to increase from 8.91 p.a. to 10.92 p.a. or by 2.01 p.a. The scenario suggest the need for a review of lending interest rates taking into account interest rates prevailing in financial markets. 7.24 The financial institutions have recently made a representation to GOI for an increase in their base rupee lending rate from 141 to 152 as well as flexibility to charge a premium for risky projects. Objective criteria should be developed for setting premiums or discounts in order to avoid extraneous influences in such decisions. This proposal would be consistent with the current interest rate structure applicable to commer- cial banks which involve a floor of 161. The adjustment would also bring the rate closer to alternative sources of term finance in the market, e.g. non-convertible debentures. The institutions have also proposed elimina- tion of concessional rates of interest for activities such as moderniza- tion, energy conservation and for projects in backward areas to increase their overall spread. Prima facie projects for modernization and energy conservation need no subsidies. The experience of industrial development of backward areas in India indicates that factors other than interest rate subsidies have played a more influential role in project location choices. The Government itself has recognized this by promoting the growth centers policy for industrialization of backward areas. F. Perspective on ICICI's Future Role in the Financial System 7.25 Until recently, D1 faced very limited competition in the financ- ing of projects from alternative sources. The growth of the capital market has provided both established large firms as well as smaller newer firms access to long-term finance at competitive costs, although smaller firm's access is limited. The introduction of new instruments such as convertible debentures and convertible preference shares has broadened the market. The market has thus developTd as an increasingly viable and attractive alterna- tive source of financitj for large firms without some of the restrictions that accompany loans from DFIs such as nominee directors, strict reporting requirements, etc. ICICI's onlending rates are likely to increase in the future, stemming from the increased cost of mobilizing resources from the market as well as the higher risks of lending in a more competitive envi- ronment. It is likely that larger firms would raise project financing, * 38 - particularly large amounts from the market at lower cost although they most probably would still have to depend on ICICI for providing loans or guaran. tees for their foreign currency needs for importing capital goods. ICICI has been extremely effective in diversifying its foreign currency resources and managing exposure through swaps and other financial engineering tools and is thus likely to mobilize resources at finer spreads than even the large firms. The ERAS scheme is a response to dealing with borrowers who cannot hedge against the foreign exchange risk. It should also reduce the credit risk of ICIC. 7.26 In the rupee financing area, ICICI's future clients are increas- ingly likely to be medium size firms who have limited access to the capital market. Commercial banks could eventually become a source of competition for these clients. However, ICICI strategy of assistance through innova- tive credit products have proved extremely successful, allowing both higher margins and lower risk to ICICI. It is unlikely that ICICI will be effec- tively challenged in this area in the medium term. However, ICICI needs to explore innovative mechanisms for mobilizing rupee resources at low cost to keep funding costs down. The Merchant Banking Department has been a major profit center for ICICI and offers enormous potential with the rapid growth of financial markets. Further emphasis on the execution of financial advisory services for both local and foreign investors might offer scope for increasing income opportunities. Should the present system of consor- tium financing be dismantled or made voluntary, ICICI will have the oppor- tunity to differentiate itself from the other term finance institutions. This may necessitate a taking a fresh look at its goals, policies, strate- gies in light of its comparative advantages. VIII. BANK RELATIONSHIP WITH ICICI Impact of Bank Lending Through ICICI 8.01 The Bank's contribution to ICIC's institution building was sub- stantial in the first decade of the relationship. Bank inputs to strength- ening appraisal and supervision procedures, as well as to financial plan- ning and management of the institution, was valuable. However, as ICICI matured as an institution and developed its own capabilities, the Bank's contribution to institution building became less relevant by the late six- ties. Nevertheless, Bank involvement with ICICI, apart from the resource transfer role, continued to be viewed as important by ICICI management both in terms of ICICI's efforts to mobilize resources in international capital markets as well as opportunities for exchange of views on industrial poli- cies and strategies. Since all of the creditsloans to ICICI until the early 1980s were general lines of credit without a specific sectoral or sub-sectoral objective, the Bank's own analysis of sectoral or sub-sectoral issues in the context of loan appraisal tended to be somewhat general. The paucity of sectoralisub-sectoral studies by the Bank in the seventies may have hampered an effective exchange on industrial policy issues. In fact, the Bank could have encouraged ICICI to do more industrial sector studies - 39 - and build up a greater capacity in these areas early on. The Bank's exclusive reliance on ICICI as a financial intermediary did result in a poorer regional distribution of projects supported. It also precluded the bank frm exploring alternative institutional channels for financing industry and encouraging greater competition in the financial sector. 8.02 Although the Bank had been well aware of the adverse impact of Government's industrial strategies and policies on industrial efficiency and competitiveness, it did little to address these issues in any substan- tial way through its lending through financial intermediaries until the early 1980s. Policy changes, when suggested for example to increase exports, tended to focus mainly on incentives to redress the bias against exports arising from the system of protection. However, issues relating to the supply response and capability of Indian industry to compete in export markets tended to be dealt with on the surface or not at all. Thus the scarcity of highly trained production engineers and managers or the lack of technical information needed to support the efficient development of specific industrial subsectors were not addressed adequately in Bank lend- ing. Since loans to ICICI were general lines of credit (until the four- teenth loan), issues relating to specific subsectors or in functional areas, e.g. exports, R&D, technology transfer, etc., were not analyzed in depth. The limited number of in-depth sectoral or sub-sectoral studies by the Bank during the seventies may have contributed to this situation. The focus on institutional issues relating to the financial intermediaries may have also been another factor. 8.03 However, since the early 1980s, there has been a complete change in the Bank's approach to assisting Indian industry. This has been brought about by the comprehensive and in-depth sector studies undertaken by the Bank in a number of critical areas. The Bank also encouraged ICICI to undertake specific subsector studies, e.g. electrical power equipment, automotive parts, exports-oriented industries and the cement sector. These studies helped the Bank to formulate projects to explicitly deal with the problems of the specific industries in a comprehensive manner, e.g. modern- ization of cement industries. The policy dialogue with the Government based on these sectoral studies has been much more productive and while it would be difficult to conclude any cause-effect relationship, considerable movement has taken place in such areas as reduction of import restrictions, streamlining of export procedures, reducing the incentive bias against exports and putting a large number of capital goods on OGL. Bank projects based on these sector studies, e.g. Engineering exports (1985), have been better designed to support these policy changes and have attempted to meet some of the non-financial bottlenecks impeding efficient industrialization, e.g. information, technical assistance and training needs of industrial exporters, besides providing investment capital. Recently approved projects - Electronics Industry, Export Development and Technology Develop- ment - follow this pattern by supporting institutional strengthening in relevant areas, thus complementing the policy reforms that have taken place. However, given the distance that still has to be traversed to mod- ernize and improve the competitiveness of Indian industry, the importance of continued reform in trade, incentives and Internal competition policies - 40 - cannot be overemphasized. Such policy reforms need to be complemented by extensive efforts in training of technicians, engineers and managers in all branches of industry to bring quality of skills to world standards. The pilot training component of the Electronics Industry project is a good initial effort in this direction. So is the recently approved project for vocational education. The SSI sector has suffered benign neglect from the Bank following the poor outcome of previous projects in this area. Given the importance of SSI in employment generation, exports and linkages to large industries, there is clearly a need for revival of support for SSI development in the form of strengthening technical assistance programs and provision of investment finance. Conclusions 8.04 After thirty-five years of operation, ICICI has developed into one of the most dynamic and innovative financial institution in India with an Important influence on policy formulation in both the industrial and finan- cial sectors. It has evolved from a traditional development finance insti- tution dependent on official sources of foreign currency to an institution that is able to mobilize resources from the international capital markets on its own credit rating. The major part of its foreign currency resources currently come from commercial sources in the international capital markets at fine spreads. It also has successfully tapped the local financial market to mobilize rupee resources for rupee financing activities, which include, besides term lending, a variety of innovative products that have enabled ICICI to maintain a high level of profitability. Its merchant bank, leasing business, and venture capital fund are the largest and most innovative in India. Its contributions to the development of the indus- trial sector go beyond the mere provision of financial assistance to its clients. It has been a catalyst in establishing institutional mechanism to deal with issues which it believes are critical bottlenecks to sound industrial development, e.g. training of managers and technicians, entre- preneurship development, etc. Its industrial sector work, initiated from the late 1970s, has contributed to analyzing the major factors affecting the efficiency and competitiveness of Indian industry. Working in close partnership with the Bank, it has helped to shape the design of the Bank's new lending strategy adopted since 1985, which focuses on expansion of manufactured exports. During the 1980s, ICICI has turned into a major force in the technological upgrading of Indian industry in order to meet the quality and cost competitiveness requirements of export markets. 8.05 ICICI has been able to strike a good balance between its develop- mental objectives and commercial requirements. Return on equity has aver- aged over 232 in the past five years and assets have grown at an annual average rate of 262. Nevertheless, the economic liberalization measure introduced in recent years as well as other changes raise some concerns with regard to ICIC1's future performance. The major issues are: (i) the rising cost of rupee resources as well as higher risks, which makes term lending in rupes on the margin barely profitable at current lending ratees (ii) the pressure on profitability as spreads continue to decline; (iii) a portfolio with a modeLately large percentage of loans in arrears but in - 41 - firms with long-term structural problems, as well as a significant exposure to firms which are operating at a loss and have the potential of becoming non-performing loans; and (iv) the emerging competition from the rapidly growing capital market which is attracting away large, well-established firms, and hence, less risky firms from financial institutions. ICICI has already adopted measures to address these problems, including introducing new lending instruments, expansion of its merchant banking activities and adopting a new, more cost-effective collection strategy. It also has requested an increase in rupee lending rates. These measures are already starting to show results, but some problems are structural and are likely to take longer to resolve, such as the portfolio problem. The consortium approach to financing of large projects, adopted by the three DFIs in India, has certain undesirable characteristics and consideration should be given to its replacement by a voluntary system of loan syndication in which commercial banks and other institutions can participate. This will provide ICICI with the opportunity to differentiate itself from the other tern finance institutions for which purpose it may need to take a fresh look at its goals, policies, and strategies in light of its comparative advantages. 8.06 Given that development banks in most developing countries have encountered serious problems in the past decade, the question naturally arises as to what factors account for ICICI's favorable performance. These can be grouped into two broad categories. The first are external factors - principally the macroeconomic and industrial policies pursued by the Government. In India, these policies have generally created a relatively stable economic environment with low inflation and moderate GNP growth. Incentives to savings and investment have been reasonable and the private sector has not been crowded out by the Government, although budgetary defi- cits have been high. Real interest rates have been at reasonable levels. Liberalization of imports, export incentives, including realistic exchange rates and deregulation of internal controls have led to greater competition and adversely affected some firms and industries. But, on the whole the economic environment was not a negative factor to firms' financial perfor- mance during the 19809, as was the case in many developing countries, although the overall policy environment was not as conducive to efficiency and high growth. 8.07 The second set of factors-internal to ICICI-provide the more relevant explanation to the question. Over the years ICICI has developed into a highly efficient institution with strong and committed leadership, superior management practices, and highly skilled and motivated staff. Its institutional goals and objectives are clear; professional staff at all levels participate in the annual budget process to set realistic goals and are committed to their achievement. ICICI's performance evaluation systems are transparent; it is able to recruit and retain highly qualified staff; turnover is very low; staff skills are enhanced continuously through training. Staffing costs have been low due to extensive automation and computerization. ICICI has been consequently able to adopt and apply high standards to all aspects of project finance - appraisal, supervision, collection and rehabilitation. It has been able to anticipate potential problems and take corrective action. It has been able to innovate new - 42 - products and services to enhance its profitability as well as adopt new innovations in financial engineering to reduce borrowing costs. At the same time, its own financial management practices have been extremely conservative. Finally, Government ownership has not affected the autonomy of the management In running ICICI as a comercial institution. APPENDIX I Page 1 of 3 PROJECT PERPORMANC8 AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) IRTEENTH AND FOURTZTE INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) THE CAPITAL MARKET 1. India's capital market today ranks among the largest in the developing world. The market is composed of 16 regional exchanges trading shares, debentures and long term government debt. Bombay is by far the most important exchange in terms of number and market value of listed companies and turnover. Nearly 6000 firms are listed on the Indian Stock Exchanges; market capitalization of listed firms as of March 1989 at Re 550 billion (about 132 of GDP) was slightly smaller than Brazil, Malaysia, Singapore and Denmark. Large companies now raise about 202 of their new funding in the market; for them it has become a viable, low cost source of funds and a way around the limits on bank credit. 2. The government securities market forms the largest segment of the capital market. The Central and State Governments finance a large portion of their growing deficits through sales of long term instruments. Comuercial banks, the LIC and the GIC. and the provident funds are the major purchasers of any issue in order to satisfy Government/RBI requirements on portfolio composition. Individuals own only small amounts of government debt*11 Moreover, the institutions tend to hold issues to maturity because of portfolio requirements. Hence, the secondary market is narrow. In the past, these bonds have had very low coupons but, in recent years, rates have increased in line with the Chakravarty Committee's recommendations to move closer to market rates. In the last two years, the RBI has built up a treasury bill market, both primary and secondary, through Improvements in the regulatory and tax framework. 3. The growth of the market for private issues during the 1980s has been dramatic. Total resources mobilized by the private sector through equity, preference shares, and debentures increased from Re 1.64 billion in 1980 to Re 25.67 billion in 1986-87, but fell to Re 17.63 billion in 1987-88 because of problems arising from the drought, some loss of confidence because of failures of some financial companies, and increased mobilization by public sector units. It has rebounded in 1988-89 and the total volume is forecasted to reach about Rs 30 billion. The larger part of the resources mobilized has been through. debentures, particularly convertible debentures, which accounted for some 802 of private debentures issued during 1987-89. The interest rate on convertible debentures has 11 Mainly in the form of National Saving Certificates and small saving Instruments. - 44 - APMIX I Page 2 of 3 been fixed at 14.0% for non MRTPIFERA companies and 12.5% for MRTP/FERA companies. New companies have raised substantial amounts of resources in the market, which peaked in 1986-87 when a total of 246 issues raised about Re 7.3 billion. In the same year, existing firms raised about Re 18.3 billion through 278 issues. The average size of issues has steadily increased from Re 10 million in 1983-84 to Rs 50 million in 1985-86 to Rs 180 million in 1988-89. The rapid increase in 1988-89 stems primarily from four major issues of about Rs 4 billion each, involving steel and petrochemical projects which prior to the recent liberalization would have been in the public sector. Bonds floated by public sector units, some of which have tax saving features increased from Re 3.5 billion in 1985-86 to about Re 22.5 billion in 1988-89. Total resources mobilized by the private and public corporate sector in 1987-88 totalled over Re 35 billion. 4. The UTI has played a major role in the run up of the market since it has been extremely successful in mobilizing resources. Its investible resources increased from Rs 8.7 billion in 1982-83 to over Re 100 billion in 1988-89. At the current rate of growth, it appears that Re 215 billion would be mobilized through the capital market in the seventh plan period, an increase of over six times the amount mobilized in the sixth plan period. Expectations are that Re 500 billion can be mobilized in the eighth plan period. 5. Much of this surge in capital markets activity stems from both the liberalization of industrial policies which has allowed a rapid growth of new investment and new firm entry as well as expansion by MRTP firms and progressive relaxation of regulations governing capital market activity. For example, restrictions on the purposes for which companies could issue securities have been relaxed to allow floatation of debentures to fund new companies, mergerslacquisitions and working capital. The quantitative limit for issues exempt from controls on capital issues have been doubled to Rs 10 million and listing requirements eased. Public sector firms are allowed to issue bonds to raise resources, and measures were adopted to allow establishment of mutual funds by banks. More recently, the securities market (regulation) act has been amended to allow corporate membership in stock exchanges, an over-the-counter market and two new instrument - certificate of deposit and commercial paper - are being introduced. In terms of institutional strengthening, the Securities and Exchange Board of India (SEBI) has been established to regulate the stock exchanges. A credit rating agency (CRISIL) has been set up by the financial institutions and a stock holding corporation has been established to introduce a book entry system of transfer of shares and other types of scrips to reduce the enormous paperwork involved in the present system. 6. Nevertheless, there remains a number of problems which merit attention. First, the market remains mainly a new issue market. Secondary trading is largely limited to a few issues--on the Bombay exchange 25 shares account for about 50Z of trading; only about half of the listed shares are traded and less than a quarter are traded every week. Secondly, - 45 APPENIX I Page 3 of 3 the trading is highly speculativet only about 51 of trades result in delivery, the rest are reversed in the settlement period or, in the case of *specified' shares, can be carried on payment of a carry-over margin. Market makers have limited capital and operate in only a restricted fashion, resulting in wide swings in prices and large margins between quoted bid and asked prices. Third, settlement procedures are weak relative to the fairly large volumes of trades. About 25Z of trades are Imismatched'. Fourth, Insider trading is unregulated, although it must be admitted that the definition and regulation of insider trading has proved difficult worldwide. Finally, there remains lack of information on both the markets' activities and the issues themselves. - 47 - APPENDIX II Page 1 of 4 PROJECT PERMORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THIRTEENTH AND FOURTEENTH INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) MAJOR DEVELOPMENT ACTIVITIES INITIATED IN THE 19808 A. Technology Development /Venture Capital 1. Since 1986, ICICI has been assisting small projects based on indigenous R&D efforts through conditional grants and soft loans in areas such as computer technology, pharmaceuticals, biotechnology, etc. In September 1988, it set up a specialized company - the TDICI - to provide venture capital support to projects based on indigenous efforts to develop and commercialize innovative technologies. TDICI started operations from July 1, 1988, managing an initial fund of Rs 200 million subscribed equally by ICICI and the UTI, which has been committed to some 45 innovative projects as of October 31, 1989. The Bank is also providing financing for TDICI through its Industrial Technology Development Project. TDICI expects to approve equity participation and/or conditional loans of about Re 350 million - Rs 400 million during 1989/90 for which a second venture capital fund would be floated. TDICI has also started a technology information service for Indian industry. This service is based on real time computerized links to international services and data banks on science and technology with trained personnel helping to search and interpret information. TDICI hopes to provide more broad based consultancy services to industry based on information searches in the near future. Besides providing funding for the venture capital funds, ICICI's professional staff from the PACT and venture capital division have been involved in helping to appraise financing proposals. ICICI has seconded three staff members to assume key managerial positions. TDICI currently employs 17 professionals of which three are engaged In the information search areas it claims to have built up a network of 800 professionals throughout India to help in assessing project proposals. TDICI has already become a model for promoting private sector innovLion In technology and three additional venture capital firms have been launched recently and are being assisted by the Bank. B. Management of Research and Development Funds for Technological Development Program for the Advancement of Commercial Technology (PACT) 2. In 1987, USAID set up a program to support commercially oriented R&D activity with a grant of US$10 million under ICICI's management. Each project is jointly undertaken by an Indian and U.S. firm. As of - 48 - APPENDIX II Page 2 of 4 March 31, 1989, 20 projects have received funding approvals totalling RS 200 million for the development of Innovative products and processes in areas such as biotechnology, computer software and pharmaceuticals. Of these, four projects are near commercialization. The PACT program has helped ICICI gain experience in assessing the risk of R&D projects and identifying the critical ingredients required for improving the chances of success. To that extent, it has been a successful learning experience for honing the appraisal skills of ICICI's staff in this new activity and preparing the ground for its subsequent broad-based foray into venture capital finance. Program for Acceleration of Comercial Energy Research (PACER) 3. PACER has also been financed by a grant from USAID of US$20 million to promote consortium research and technology projects in the energy sector. As of October 1989, over 160 inquiries had been received by ICICI for financial assistance under the program of which 12 had been approved, for a total cost of Rs 44 million, with PACER share being Rs 20.5 million. 4. The consortium projects approved so far mainly involve development of new processes and equipment for energy conservation, attaining higher energy efficiency use of alternative fuels, etc. Research projects to be undertaken by private and public research organizations cover studies in such areas as optimal utilization of natural gas, policy for use of natural gas in the transport sector, policies for smoothing the load duration curve in India, etc. Applications in the pipeline cover a wide range of proposals involving energy conservation and new process development. As in the case of the PACT program, ICICI has started to acquire substantial experience in the appraisal of these R&D projects in the energy field, which should serve it well in energy projects in the future. C. Programs for Small Enterprise Development 5. Although ICICI does not lead to small scale industry which are financed by the State Finance Corporations and commercial banks together with IFCI and IDBI, it has promoted the establishment of a network of 17 industrial and technical consultancy organizations (ITC0s) in various states to provide consulting assistance to small scale firms. ICICI has directly supported the establishment of ITC0s in Gujarat, Maharashtra and Tamil Nadu and its contributions for the entire network so far totals Rs 5.0 million. The ITC0s have had varying degrees of success in assisting small scale industry. Given that a number of other organizations are also involved in this important activity, it would be appropriate for ICICI perhaps, with the help of specialists, to undertake a study to evaluate the functioning of the ITC0s and to devise new approaches to make these institutions more effective. D. Science and Technology Parks 6. The Government of India (Department of Science and Technology) together with other state government and state level agencies have - 49 - APPENDIX II Page 3 of 4 forulated a program to enable institutions of technology to provide facilities to entrepreneurs wit:4 technical backgrounds to conduct research and development activities to develop new productslprocesses. The program calls for STEPs to be established in leading technical institutions in different states.11 ICICI has been actively supporting this program and provided Re 7.9 million in the form of loans and grants for establishing three STEPs in Karnataka, Bihar and Tamil Nadu. ICICI hopes to utilize its experience in the science and technology field to help provide effective advice in the development of these programs. Z. Training 7. ICICI has always viewed training as a crititally important adjunct to finance in ensuring sustainable industrial development. In the late 1970s it helped establish the Indian Institute of Foremen Training (IIFT) at Kansbahal, Orissa to meet the acute need for qualified shop level supervisory personnel. IIFT, which received extensive technical assistance from the U.K. government in terms of machinery, laboratory equipment, faculty training, etc., has developed substantial capability during the 1980s in conducting training programs in maintenance management, micro- processors, instrumentation, etc. It is currently establishing a program, based on condition-based maintenance principles for machinery maintenance with the assistance of the University of Manchester, U.K. The institute has been able to secure substantial financial support from the corporate sector, a mark of its success in the training field. F. Entrepreneurship Development 8. ICICI has also been actively supporting training in entrepreneurship development for educated unemployed individuals to assist them in establishing small scale manufacturing or service businesses. The Entrepreneurship Development Institute of India (EDII) based at Ahmedabad has taken the lead in India in developing training programs for entrepreneurs and trainers from other institutions as well as conducting research and consultancy studies in this field. These programs have had considerable success in assisting individuals in starting small businesses. ICICI provided Rs 10 million in assistance to EDII in support of its various activities. ICICI has also provided grants totalling Rs 6.20 million towards meeting part of the cost of some 787 entrepreneurship development programs organized in various states over the past five years for the promotion of small scale industries. ITC0s and other agencies have been engaged in this effort under the guidance of EDI. These programs reputedly have had considerable success in stimulating entrepreneurial activity. However, it might be appropriate for ICICI to include this area of training in the proposed study on the role of ITC0s (para. 7.17) to evaluate their impact. Rural development is another important area of interest to ICICI. It has actively supported strengthening of rural development institutions through training and support to four voluntary organizations. 11 The program is similar in concept to the incubator programs established by some U.S. universities to promote small business development. - 50 - APPENDIX II Page 4 of 4 G. Training for Other DFCs 9. ICICI has continued to provide training to DFCs in other developing countries on a selective basis. Over the past ten years, it has provided 142 person-months of advisory assistance and training to DFCs in Ghana, Jamaica, Nepal and Sri Lanka as part of Bank/IDA/KfW-assisted projects. Subjects covered include policies, operating procedures (appraisal, supervision, collection, disbursement, etc.), management information and control systems, etc. These advisory services and training have been particularly effective and well received. H. Role in the Development of Financial Institutions and Markets 10. In recent years, ICICI has promoted the establishment of two specialized financial institutions -- the Housing Development Finance Corporation (NDFC) and the Shipping Credit and Investment Company of India Ltd. (SCICI). HDFC, established in 1977, has become a major source of long-term housing finance for middle income households, mobilizing rupee resources from the money markets and charitable trusts. It has also received resources from the World Bank. SCICI, established in 1986, has been set up to provide development finance to the shipping and deep-sea fishing industries. SCICI basically took over the activities of the Shipping Development Fund Committee (SDFC), which was set up under the Government of India for the same purposes. Besides subscribing to 202 of the issued capital of SCICI of Rs 500 million, ICICI has seconded senior managers to the new bank to help define policies and procedures. SCICI operations have taken off with approvals reaching over Rs 1.4 billion during 1987-88. It also mobilized US$79 million from commercial sources in this period. 1. Credit Rating Services 11. The lack of adequate financial information on firms selling equity and debt instruments has been a major factor affecting the growth of the Indian capital market. To rectify this gap, ICICI promoted the CRISIL. Other shareholders include various Indian banks, foreign banks, insurance companies and the Asian Development Bank. CRISIL's principal objective is to rate debt obligations of Indian companies which include debentures, fixed deposits, preference shares and short-term instruments. CRISIL's rating refers to a particular debt instrument and not to the company as a whole. Between 1988, when it was established and mid-1989, CRISIL had completed ratings of 41 fixed deposit schemes, 20 debenture issues and 12 short-term paper issues totalling almost Re 20 billion. CRISIL ratings are to be required on a mandatory basis for the issue of commercial paper by companies. CRISIL at present has a staff of 22 professionals and plans to open branch offices in Delhi and Madras. During its short existence, its rating services have been recognized as filling an extremely important information gap both by Investors and borrowers. CRISIL's establishment has been viewed as a milestone in the growth of India's financial markets and should help to differentiate stronger firms from weak ones and influence their cost of mobilizing resources. - 51 - APPENDIX III Page 1 of 4 PROJECT PERFORMANCE AUDIT REPORT INDIA INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. (ICICI) THIRTEENTH AND FOURTEENTB INDUSTRIAL CREDIT AND INVESTMENT PROJECTS (LOANS 1843-IN AND 2051-IN) ICICI'S SURO COMMERCIAL PAPER AND SWAP PROGRAMiI Euro Comercial Paper Program 1. ICICI's central objective in its foreign currency borrowing program is to continually look for low cost borrowing opportunities that become available in the international markets. In the past few years the Euro-markets have become increasingly disintermediated. As a result of the globalization of these markets, it has increasingly become possible for investors to lend directly to borrowers without the intermediation of banks. This has made it possible to achieve significant reductions in borrowing costs. Euro-Commercial Paper is a product of this disintermediation process. Basic Characteristics 2. Euro-Commercial Paper (ECP) is a short-term debt instrument with maturities ranging from seven days to a year. The maximum liquidity in the present market is in the three-month range. Unlike its counterpart in the U. S., which is priced off a Commercial Paper Index, ECP is priced off LIBOR, but there has been an increasing trend towards quoting an absolute rate of interest for the paper. ECP is normally issued at a discount to face value, i.e.. the redemption value, which is the Face value, inclusive of interest. ZCP is sold normally by a group of Dealers (normally investment banks) to a very wide investor base, which includes Institutions (Financial, Insurance), Corporate bodies, and Trusts. Since the capacity of the market to absorb paper on any ona day is limited, the paper is normally issued in tranches of US$25 million to US$30 million at any one time, and the total ar, mt required is built up over time. 3. ECP is typically used by investors to park their short-term liquidity at a yield higher than otherwise obtainable in the interbank market. Issuers normally use it to finance working capital needs. Since ICICI needs funds typi4ally for periods up to seven years, the Instrument has had to be enhanced. The following enhancements have been introduced to lengthen the effective maturity. ,I Adapted from a note prepared by ICICI. - 52 - APPENDIX III Page 2 of 4 (a) Roll Over: To convert the short-term instrument into a medium- term one, the paper is issued on roll over basis in which the paper coming up for maturity at the end of a three-month period would be reissued again for a further three months. This cycle would continue for seven years. (b) The NIPs In order to provide for the uncertainty regarding the issue of paper in the BCP market, a Note Issue Facility (NIF) with a group of banks was signed simultaneously with the ECP facility. This is a two part facility (also known as a Multi Option Facility - MOP). The first enables ICICI to invite a Tender Panel of Banks to submit telex bids for the paper not sold through the ECP Program. The second is essentially a commitment by the banks with whom the facility has been signed to purchase any paper not subscribed by the market at a negotiated maximum rate of interest. The NIF, therefore, ensures that the funds required to roll over any maturing tranche are available on time. (c) The Odd Notes The issue of notes at a discount posed a further problem in that the principal amount on which the floating rate of interest is levied became a variable amount dependent on the rate of interest prevailing at the time of the issue of notes. For onlending purposes it was necessary to ensure that a constant amount of Principal was raised each time, and in order to comply with the terms and conditions of the Note Issue Facility; it was also necessary to raise a principal amount that was an integral multiple of US$500,000. The arrangers for the facility agreed to provide for the issue of an Odd Note for an amount that would enable ICICI to meet both these criteria. (d) The Bridge Facility. The ECP market operates on a spot basis, i.e., delivery takes place two days after the transaction is entered into. However, the NIF requires at least a four day notice period prior to the delivery date. A separate agreement for a short-term bridge. facility was signed to obtain the necessary funds for the interim two-day periA between the NIF and the ECP. (e) The Basis Swaps ECP may be issued with a tenure ranging from seven days to one year and notes under the Note Issue Facility may be issued for one, two, three, or six month tenures. However, for the purpose of swapping the proceeds of the ECP, it was necessary that the floating rate payments by ICICI should have a present pattern of flows. A Basis Swap was therefore entered into which allowed ICICI, at its option, to receive one, two, three, or six month LIBOR necessary to service the ECP and to pay in exchange six monthly LIBOR on a fixed semi-annual basis (on March 17 and September 17 of each year). This allowed ICICI to operate with complete flexibility in the BCPINIP market since ICICI retains the option to pay one, two, three, or six month LIBOR and therefore to - 53 - APPENDIX III Page 3 of 4 issue one, two, three, or six month paper. At the same time ICICI would be able to achieve the best rates in the Swap markets since these markets operate mainly on a six month LIBOR basis. It is important to note, however, that this last enhancement is necessary only if fixed rate funding through swaps is desired, it is possible to onlend the proceeds of the BCP on a floating rate basis without entering into the Basis Swaps. Issue Procedures 4. Feedback on market sentiment is obtained from the group of dealers appointed for the ECP Program every day. A few days before the actual issue Date for a particular tranche, all the dealers are informed of the details of the forthcoming issue (normally four days prior to the issue Date). Two days prior to the Issue Date bids for the Tranche are invited, analyzed and awarded. And, on the Issue Date the funds are actually transferred. 5. Since time is of essence in most of the above transactions, the entire process has been computerised. The software that has been designed in-house assists the ICICI dealer in carrying out all the mathematical computations Involved; it automatically generates all the telex messages that are required to be sent as well as all the documents that are needed for maintaining internal records. Whenever required it also provides sumary analyses of dealer performance and the performance of the ECP Program as a whole. Swap Projram 6. The rapid rate of innovation in the international markets has given rise to many instruments which allow participants to better manage interest and currency rate risks. These include Currency and Interest Rate Swaps; Caps, Collars and Floors; Forward Rate Agreements; Options of every description; and Forward Contracts. Currency and Interest Rate Swaps allow participants to access the market in which they have a comparative advantage (i.e., Floating or Fixed) and to convert their obligations from Floating to Fixed or vice-versa as the case may be while retaining the benefit of the comparative advantage. ICICI entered the Interest Rate and Currency Swaps in order to convert its floating rate liabilities under RCP into fixed rate ones. Tender Panel Mechanism 7. It was decided to carry out these swaps using a Tender Panel Mechanism. (a) Invitation to Banks. A diverse group of banks with strengths in various currencies was invited on behalf of ICICI to participate in the Tender Panel. To the extent possible it was sought to - 54 - APPENDIX III Page 4 of 4 ensure that the Tender Panel members were, (i) not merely participants who operated as brokers in the svaps market, and (IL) banks who wished to work with Indian entities. (b) Swap Documentation. The market practice is to execute documents after the actual Swaps are transactedi however, ICICI was very keen to sign documents in advance of the transaction to ensure that the protection of the document was available Imediately after the Swap is transacted. Normal Swap documentation comprises a Master Agreement (published by the International Swap Dealers Association, Inc., New York - IDA) known as the interest Rate and Currency Exchange Agreement (IRCBA). This Agreement contains all the basic provisions governing Termination, Default, Jurisdiction, Tax Representations, etc. In the case of the ICICI swap program this document was signed with each Tender Panel Member in advance of the actual swap transaction. At the time of each Swap Transaction a Confirmation Agreement was executed to cover the details such as interest rate, Payment Dates, Termination Date, Payment modalities, and the nature of the Swap Transaction in question. All the other terms of the Swap Transaction remain as per the ISDA Master Document signed between each Tender Panel Member and ICICI. In addition to the above documents the Uncommitted Interest and Currency Swap Tender Facility and Tender Panel Agreement (the OFacility Agreement") was executed between ICICI, the Tender Agent, the Paying Agent and the Tender Panel Members. (c) Procedures. Once the terms of the piannA. swap are finalised by ICICI, notice is given to the Tender Agent. The Agent then reviews the notice and invites selected Tender Panel Members to bid for the swap(s) - only the Tender Panel Members who are believed to have strengths in the currencies involved are invited to bid since the other Tender Panel members would merely seek to broker the swaps leading to an increase in swap rates. Bids are received from the invited Tender Panel Members at the premises of the Tender Agent and the lowest bid is selected by ICICI. In order to ensure that Tender Panel Members feel confident that the bidding process is a fair one, as often as possible one person from ICICI is present at the premises of the Tender Agent at the time of bidding. In any case, continuous contact is maintained between ICICI and the Tender Agent on the day on which bids are to be received and all decisions are taken by ICICI. Benefits 8. The Tender Panel Mechanism allowed ICICI to develop relationships with a large number of banks. Given the large number of participants in these markets the competition between them is fierce. The Tender Panel Mechanism, by letting Banks know that they are competing against some of the best market participants, exploits to the fullest extent the spirit of competition that exists. APPENDIX IV Page 1 of 6 RWo Office 165, Backbay Reclamabon The industrial Credit & ves t Corporation of India Limited S0mbAI0020 LALITA D. GUPTE geyn25s Deputy GeneralMager CraM CREDCORP Bomba Telex S302ICIC IN Fax 2046582 RES/ Cq 2, May 17, 1990 Mr. Alexander Novicki Division Chief Policy-Based Lending, Industry, Public Utilities & Urban Sectors The World Bank 1818 H Street, N.W. Washington D.C. 20433 U.S.A. Dear Mr. Novicki: We refer to your letter dated March 23, 1990 regarding the Draft Project Performance Audit Report (PPAR) for the IBRD Thirteenth and Fourteenth Lines of Credit. We enclose our comments on the above and trust this meets with your requirements. We are also faxing the same by way of advance information. With kind regards, Yours sincerely, Enclosure: Lalita D. Gupte APPENDIX IV Page 2 of 6 - 56 - 1. Page (iii) : Items "Appraisal (Ln 2057)" and "Supervision (Ln 2057)" do not apply to the Thirteenth Loan. 2. Page (viii) : Para 5 - In the report it has been stated that actual ZRRs were calculated for 27 projects, with 19 of these having ex-post ERRs ranging from 14.7% to 86% and the remaining 7 having ex-post ERRs below 10%. Since 19 and 7 add up to 26, there seems to be a descrepancy of one project. Para 6 - Bank loans disbursed and outstanding comprised about 12% of ICICI's foreign currency borrowings outstanding as on March 1989, and ot 8.8%. 3. Page (ix) : Para (v) - in the last line, there is a mention of para 7.30 although section 7 ends with para 7.26. Para (vi) - This is not strictly true 'since each institution can finance projects independently outside the consortium. In fact, this strategy is being consciously adopted by ICICI. 4. Page x : Para (vi) - We do not agree with the hypothesis that consortuim financing would lead to greater governmental influence. 5. Page 10 : Para 3.08 - replace ".... through the management of an Export Marketing Fund....." with "....through the management of, among other instruments, an Export Marketing Fund....". 6. Page 13 : Para 3.15 - replace "Some 400 companies, both private and public....." with "Spme 200 companies, both private and public, out of which about 40 are active,.....". 7. Page 16 : Para 5.02 - the thirteenth loan was fully committed during 1980 and 1981 and B during 1981-82. 8. Page 17 : Para 5.03 - the percentages of 14% and 21.7% relate to total foreign currency utilisation by new subprojects and not only out of the thirteenth 'and fourteenth loans respectively. 9. Pagels a. Para 5.05 : i. proportion of assistance relating to fabricated metal products and machinery manufacture was 17% for the thirteenth loan and not 28%. APPENDIX IV Page 3 of 6 - 57 - ii. the shares of the five industries for the thirteenth loan were 73% and not 83%. b. Para 5.06 : i. data was available on 113 projects under the thirteenth loan and not 173. ii. the proportion of projects having cost overruns under the thirteenth loan was 41% (i.e. 46/113) and = 37%. 10. Page 21 : Para 6.03 - There are Dine groups responsible for appraisal in addition to the three branches at Calcutta, Delhi and Madras. 11. Page 25 : Para 6.10 - the training program under the second export project would be commencing only by June 1990. 12. Page 36 : Para E - i. In line 3 1980 should be replaced by 1979. , ii. In line 5 1981-84 should be replaced by 1980-84. iii. In line 6 1985-89 should be replaced by 1985-88. 13. Appendix 1 : a. Para 1 - It has been stated that some large companies now raise about 20% of their new funding in the market. We would like to add that some companies raise even 100% of their new funding from the market. b. Para 2 - i. We clarify that private investors do not own any amounts of government debt. ii. In addition to RBI building up a treasury bill market, there has also been a development of the Commercial Paper market. c. Para 3 - i. We clarify that the Total resources raised from the market through equity, preference shares, and debentures in 1986-87, 1987-88 and 1988-89 were Rs. 40.88 billion, Rs. 38.88 billion and Rs. 35 billion respectively. Note that these figures represent reources raised from the public and does not include financial institutions. ii. We clarify that the interest rate on convertible debentures has been fixed at 14% for non MRTP/FERA companies and 12.5% for MRTP/FERA companies. APPENDIX IV Page 4 of 6 -58- 14. Annex Table 3 : The total commitment figure for Direct Subscription for the year 1984 should be Rs. 32.2 million and &21 Rs. 32.3 million. 15. Annex Table 12 : For rupee gross yield for 1988-89, the figure is 13.21 and B=A 12.31. 16. Annex Table 20 : See enclosure for corrections. 17. Annex Table 21 : See enclosure for corrections and note that the title should be "Actual And Projected Income Statements". 18. Annex Table 22 : For rupee interest spread for 1991-92, the figure should be 12.4 instead of 12.0. APPENDIX IV 59 - Page 5 of 6 Comments on Annex Table 20 There are no corrections in the figures relating to Actuals from 1984 to 1988-89. The corrections relating to the Projected figures are reproduced below: (Rs. million) Projected 1989-90 1990-91 1991-92 1992-93 1993-94 1. Cash and Bank Balances 2095 2100 2100 2070 2070 2. Current Assets 5765 6130 6700 6880 7590 3. Total Assets 58325 76430 97780 122140 149600 4. Share Capital and Reserves 3795 4660 5600 6690 8050 5. Total-Equity 4715 5690 6750 7950 9540 6. Total Liabili- ties and NW 58325 76430 97780 122140 149600 APPENDIX IV Page 6 of 6 - 60 - Comments on Annex Table 21 (Rs. million) I. Actuals 19?84 Income Interest on Loans 1510 Interest on Debentures 41 Total Income 1671 Exnenses Interest & CC on Borrowings 1155 Salaries & Personnel Expenses 36 Depreciation 19 Profit Befor Tax 427 Profit after Tax 285 Reserves 230 II. Projected Projected 1989-90 1990-91 1991-92 1992-93 1993-94 1. Others 155 110 150 220 - 270 2. Total Expenses 4905 6660 9060 11910 15040 3. Profit before Tax 1055 1230 1360 1600 1930 4. Profit after Tax 885 1030 1140 1340 1610 5. Reserves 730 860 940 1120 1360 - 61 - Annex Table 1 Page 1 of 2 THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED ECONOMIC PERFORMANCE OF SUB-PROJECTS FINANCED UNDER IBRD LINES OF CREDIT THIRTEENTH LINE 1980181 1988 Expected Actual Economic Economic Name of Company Product Rate of Return Rate of Return Bhoruka Aluminum Aluminum Products 43.00 28.00 Nicco Orissa Electrical Electrical Meters 28.00 19.00 Crompton Greaves Electrical Electrical Meters 40.00 36.00 Kirloakar Cummins Engines Diesel Engines 36.00 39.00 Raymond Woolen Cement Cement 34.00 34.00 Micro Pack Electronics 22.00 18.00 FOURTEENTH LINE 1980/81 1988/89 Expected Actual Economic Economic Name of the Company Product Rate of Return Rate of Return (2) (2) The Raymond Woollen Mills Ltd. Cement 55.0 86.0 Laksbmi Electrical Control Contactors & 22.0 23.0 Systems Ltd. Control Panels Murugappa Morganite Ceramic Ceramic Fibre 26.0 34.9 Fibres Ltd. Elgi Equipments Ltd. Screw Compressor 56.0 82.9 TVS Suzuki Ltd. Motor Cycles 46.0 39.7 - 62 - Annex Table 1 Page 2 of 2 ECONOMIC PERFORNANCE OF SUB-PROJECTS FINANCED UNDER IRD LINES OF CREDIT FOURTEENTH LINE 1980181 1988189 Name of the Company Product Expected Actual (Z) (2) Lotus Roofings Pvt. Ltd. RMP Roofings 48.0 31.6 Parasrampuria Synthetics Ltd. Polyester Yarn 32.0 7.2 CIMKCO Ltd. Cement Machinery 60.0 -145.6 Finolex Cables Ltd. XLPE Cables 68.0 -73.1 S.S. Miranda Ltd. Tool Site 35.0 -5.1 Sundaram Fasteners Ltd. Sintered Metal 38.0 15.4 Components Stovec Industries Ltd. ultilayer Printed 41.0 14.7 Circuit Boards Universal Carb & Containers Ltd. Oval Tin Containers 80.0 54.0 Sundaram Clayton Ltd. Signalling Relays 43.0 71.3 Axles India Ltd. Axle Housings 51.0 -5.6 Sundaram Fasteners Ltd. Engineering 19 21 Aurofood Pvt. Ltd. Food 32 18 Bimetal Bearings Ltd. Bearings 36 7 Sundaram Clayton Ltd. Electronics 43 68 Modi Xerox Ltd. Electronics 31 3 Laksbmi Machine Works Ltd. Machinery 60 62 el ell ii iii~~~W~ ii **'* II .11 III I I *@ Ø I I II I ~ jØ j I I I I I I I Øl I I I I I I I Ill I I I I I I I 1,1 I ~ jj I ~ I ~ ii *w .o@@@ NI NI ~@eS.4ø@ q ell i ~l ~l ~ *.4O@~r-'s r.t..*c4.* i ii 0 ~ ii ii ~ ~ ii ~ ii ~ ii i ~ ~i Lj ~ ii @@~.4U lIS ii @.*.~@!.¶I¶¶ ~ II *0U.4t. ~ ii III ijilill i ii ihh III II ililili ~ ii *1 i I i ~ I i I - 64 - AHNEX TABLE 3 TEE INDUSTRIAL CREDIT AND INVBSTMENT CORPORATION OF INDIA LIMITED SUMMARY OF OPERATIONS DETAILS OF UNDERWITING AND DIRECT SUBSCRIPTION (Re. million) UNDERWRITING DIRECT SUBSCRIPTION Deben- Deben- Shares tures Total Shares tures Total A. Approvals 1982 147.2 40.7 187.9 11.3 29.2 40.5 1983 207.7 11.9 219.6 26.6 65.0 91.6 1984 363.5 7.2 370.7 25.3 37.5 62.8 1985 319.8 7.3 327.1 17.5 64.8 82.3 1986 451.4 117.3 568.7 24.8 123.9 148.7 1987-88 650.1 27.0 677.1 127.1 63.5 190.6 1988-89 589.1 50.0 639.1 214.9 236.1 451.0 (Apr-Aug) 89 465.4 46.0 511.4 120.5 256.4 376.9 As on 3131189 3571.1 576.3 4147.4 772.3 823.2 1595.5 B. Comnitments 1982 91.9 26.5 118.4 9.6 37.8 47.4 1983 o + U . *22.5 V37,4, 16.9 70.0 86.9 1984 129.6 - 129.6 8.7 23.5 32:3 1985 224.3 7.5 231.8 14.2 57.8 72.0 1986 273.0 32.3 305.3 23.8 108.1 131.9 1987-88 118.4 10.0 128.4 9.4 46.7 56.1 1988-89 97.6 - 97.6 47.1 22.5 69.6 (Apr-Aug)89 111.0 50.0 161.0 25.7 46.0 71.7 As on 3/31189 2319.7 452.1 2771.8 596.3 707.6 1303.9 C. Disbursements 1982 33.1 12.0 45.1 11.6 47.9 59.5 1983 61.3 10.7 72.0 14.3 65.3 79.6 1984 43.4 1.3 44.7 23.9 27.5 51.4 1985 38.0 - 38.0 16.1 60.9 77.0 1986 48.0 32.0 80.0 25.0 107.0 132.0 1987-88 210.3 4.0 214.3 55.9 78.8 134.7 1988-89 86.5 14.5 101.0 137.0 127.9 264.9 (Apr-Aug)89 43.5 49.9 93.4 41.5 103.2 144.7 As on 3131189 892.2 U4.1 1139.3 585.5 687.2 1272.7 - 65 - ANNEX TABLE 4 THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED SUMMARY OF OPERATIONS DTLS OF GUARANTEE OPERATIONS %As on March 31, 1989) (REs. million) Foreign Rupee Currency Total Approvals 643.5 1393.6 2037.1 Commitments 482.2 1099.0 1581.2 Disbursements 6.6 51.8 58.4 - 66 - ANNEX TABLE 5 THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED Merchant Banking 1980 - 1989 LOAN ISSUE MERGERS, YEAR SYNDICATION MANAGENENT ETC. TOTAL NO. OF RS. NO. OF RS. NO. OF NO. OF RS. PROPOSALS BN. PROPOSALS BN. PROPOSALS PROPOSALS BN. 1980 12 .63 6 .21 18 .84 1981 15 1.50 9 .96 24 2.46 1982 24 1.55 15 .77 2 41 2.32 1983 26 1.80 22 1.16 2 50 2.96 1984 19 2.33 32 2.72 4 55 5.05 1985 17 6.33 32 4.75 3 52 11.08 1986 25 2.99 46 15.83 3 74 18.82 1987-88* 34 3.63 71 18.02 2 107 21.65 1988-89 60 6.15 54 14.18 3 117 20.33 1989-90** 29 2.29 37 22.71 66 25.00 261 29.2 324 81.31 19 604 110.51 Number of Proposals Handled 1980-89 604 Total Amount Raised 1980-89 RS 110.51 billion * This is a 15-month period. ** These figures pertain to the period April - October 1989. -67- AflEX TAJLE 6 i I I i i II si i 0 i i 0; 'i i i ji å ~; i i li æ; i i ji 0; i 5; ~ I il I 4 I'I 8 ti i i' I 'i li 1~ i- 馴·－ ．•“嗚•“•觔，鳥州口甲鬨劇叮二目•唱•戶魚鬨蠶． 上。‘oot。二。二，一。二“.：。•．，一。二：·，。二。二。二，二。二。一。二，·，。二。，二， 蔔－一－－一－一，一－------－一－一 鳥O 言馴，.r個田開個·芻，．闕既，參．t6,,，認戲‘．勰‘·織總‘‘喝，,，頗繪‘·個露‘網細，中·。‘．•“購，．購‘．乙編•．鷥•‘•劍臼，．儲…州跑劇．啊• •．••．個論•當．必•．劇認寥0．必奮．馴闖寫t．綱必．馴蔔言•．6 9．•叩t.tt必．絮驢•．柞必．騙爍•．勰奮‘購馴t．啊必‘個口Ct中‘仲•••靈J自網細．馴 ..．……忽 ．••••．••．••••團．•．••口■．•••口．•劍．.．•••••口•口．．口．•■自國••■■■，•．．•．•．■細•■■•■••，．•■•■■口目•••口■中••■••••．口．■•■■•叫．■國•口■■••目．目•．．•••••••••口．．•■口•■•■•••••．•．目目口•■口■■•．國口•■口••■••■••．.．■••．•目•• 劍辭驚內劍卜劇論奮馴卜必觔言馴論奮劊論零劍論奮個論奮網論奮馴論絮引畸電＿- 網卹 一－－一一一•一•－一一一一•一－一．-－•一■－－•－－•－•一■一一■一一一 細神閱 《牌驪遼肆露闢’哺 調口開口寫口網r閑戶常間鬨甲下購 個口開斤啊廖『實閑口開啊開『頂頸讓開r Tm »MMM mm AM MMM o~m OF ZWIA umm AnalysN of Acalsta~ R*Ikt4m1 te sla* *t prel~ (%. Mis l sen) i~ Im looi"" Avo. Avo. Avo. Avo. als* of proj~ Ne. Appmvalc App~ l He. Approvels Approvel M*. App~als Approvel He. A"rovols Approvel up to 0 a" 1618.4 oog 207 108.9 0 247 2070.8 0.4 297 2777.7 9.7 51-1m 62 748.8 12.1 07 1192.7 13.7 187 1797.6 18.1 al* IM.2 14.1 wi-im 29 1100.10 17.4 26 519.8 20 st ect.e 16.7 al IMB.2 21.5 lol-~ 13 318.1 24.2 13 810.6 23.0 20 485.5 22.8 is 470.8 26.4 201-1111110 22 1107.1 2M is ^ e 40.8 44 1819.5 Wo 67 ~7.2 40.3 Abevo SM 19 917,6 BA 21 2746,4 130,8 Iz 1975,8 1141,2 12 4940. T~ 1 M 4505,5 ILI Me 7w,2 MA &M 9700,* MA En lam,& Od ’馴’-”一一”&& 祆訪柄面勵柄論爾頭爾織蘇才症液柄斤斤論祆粲啊論祆祈沫論馴斤斤面鈇論于面i祆論誡論柄論弱編祆斤柄面面，劉．& ，嚼『酒購『討『初由祈辟『啊口可妒討r跚需『討r很田P寫祈細屆r才r馴田鄙唱審煙口『藝寫唱開r藝，唱露計翁『個界．矚．“覃••以 名．彎O唱闐口藝•．,．個個•，0．幼t，中‘朧一•－一。－一•。•－一••••．緣‘“嚇 必．t勵瀋馴n留．t當．申開－一6.e t．•開6.t•．0婉0．審0．偽藝．to‘鈴•‘t 0．臼t.t 0．臼t.,．審必．審響．仰磚向！。魚網“口 •．•0．口鬨口0．申t，申口留．，必一戲蠶0一9•．紹申•．曾『馴細t&6 0．幼仰藝一。留．馴寫中．•，．絮鄴申．•馴以挪L，•t．以絮二，6．劇誠鳥••國州唱馴”自團“矗 t．必f.n開申．•申．奮口審．6•．馴勵蓄必．•乙‘奮以6．當t，閱啊霎．必L．纏口6.9 0．個口O犢•．」言t．•必．神審二當藝．鰓寥t憤t．中也唱．“目皂個物徑‘l’勺••口 t．之藝．卹開審‘•囉．個開t’•言．』臼寡．曾審．購申e．•，，個總必．奮•．口言會．6露．馴跑t．•t．憫日t．鰓t．個申露．償合．憫田二擁必．審駱，勾••煙甲網闔 •．審各．馴論寥，.1必．個開•．t 0．啊絮9’偉9’個編絮一t藝．鰓當．寫雲．點軍•．t申．闢•．留會．心認必唱必‘歸t．邸1．留二審寫劊翻膩網悶呼細J•馴網開 藝審．6,．綢叫勵二，”細開奮召‘tt6‘攔田•t．•，．購9 0．佻9，心禹•．當！．口•藝．必9·蓄紹•．必b．個日中·曲t,d挪9．•二也開，·”，·制件零l啊馴。州唱 黛．·．．·一。·。，·喊，二，·勸rtt，·勵二tt…，·。，·－二，t。二t·‘t，二。，·．一，·鱗，·，：·關－ 1.&tt,’戲購o”戲．”劇•．’戲0．訓”絮t&.t’朧，&”霹’喲．&”•’榭，&&t”勵6&.0&.&&’購．&&.’編o’二’個”.1•州“。J叫閱 必．勵認．，闖騰寡．tt t．個閱軍藝．當露，瀾自L．留t．電觔t．•自．網給t．令籐．勵奮『審個．齜露．L當．審細e.t參化騰•．露籐．論心．e•，劇坤•“．•！囉個馴州 申‘乙名．•口•名．•，一個論寥申．必e闢口t．心t一個名擊．中•．馴口t.6令．勰妝申•．申申‘口綱6．必露．個口認．拿『閱言0•6 L．飼紹，．必令．審崎．1。州網0．戶唱 !．莽•．山煙蠶『t t．•露雲．審．仲言．藝，．個奮L．必．牌留．t,．以參，t 9．州奮t.t 6．•寥．t露．購令．囉．藝露．•O一鋼坤JO叩妒闔一 必．會t．個開細t.t!．個口•．偉O一劇哈9&t t．個奮華．申e．絮細認奉犢寥．編寫必‘•t．辟寫•．露B．師奮必．鳥參．奮切藝．••．口言奮．•『馴鱸J闢馴 ,‘俳•‘騙開勵必．韋•‘劍閱寥認．併邵．煙纏粤釁二0．細誠0．俳•．d口口t．籐『，，妒t’儀•‘馴細口．邵露．個口中‘群0．劉坤t．群囉．群，t．訂辟．飼濤寫‘為！物劇騙 參．t•．飼認言露1馴奮勰辟．辟合．』d寫L．挪0．期添審．寥必．勰申唱曾．飾電•．！申．以•．t露．0口，．•．tt必．t．口必．中．網奮啊“甲細d胛州 守．響會，劍畸奮『你藝．個細，.t審．弱蓄必．寥，．必奮奮．t申．論t．霎0．絮併屆憤審．馴寫令唱9一口言0．遞申．綢田t．亂露．開t憤二闕中j目閑 二露……為． 馴妒關內劍卜馴購奮馴卜顱論奮劇論奮劊論廈個論寥個論言網論奮州論實個論絮個J細皎必畸•甲吃 開彎妒卹 黝州閱 仲驪I各辦’吋 目咸間戶戶叩q同同挪叮『不n膩圓 他山鬨n〕觀開斤露瀆口頂個口細『顫目工目開〕叮1開團酒鬥網醒田間可 cif 2 im b CM b 77.9 2 m.7 a M.8 b 18.1 9 Iff.s a MI a M.2 2 ^ 1 a em.4 0 - 0 49.8 a 60.6 1 49.8 0 147.4 1 94.7 1 4».* 0 17.8 1 0 2.8 0 48.8 0 11.9 0 99.8 0 Må ~.0 b U.8 4 w3 9 Ms 8 171.4 4 sal.@ 1 40.6 8 70.0 b 619.1 a M.7 4 ^ 2 6 ~ auJ I M.0 6 M4 4 74.7 a 178.1 4 =.4 b in.o a =.4 a 94.9 a MJ a =4.8 4 gm.4 Uunr p# 7 10.6 8 tio.* 4 M.8 a M.2 b M9.4 9 MI ta ~.0 la IMJ n ~.8 la ~.7 12 7~.9 ma -8 Nu J ma -a Nu -1 lan-a A mj j wg.a -4 4~ A ~8 .3 gmj i ~j 1~.8 la MA m M4 a ~4 29 MI 0 1~7 25 IMA a am.i a ~.7 25 ~.8 90 l~.9 29 OMJ a 87.9 1 0 1.0 0 19.9 1 49.4 1 29.2 1 0.1 0 0 87.7 1 81.7 0 Mö 0 =.9 0 MS 8 MJ b U9.2 4 71.8 a 81.9 a 44.8 1 P.0 1 119.9 1 2».7 2 225.9 1 U0.4 2 QMA 8 ~ Bua 0 0 0 0 0 0 0 8.0 0 0 0 a 0 87.8 0 ~ ud 0 0 0 0 0 9 8.8 0 0 0 0 0.8 0 AM 0 orlom MJ a Wo 1 79.9 a 10.7 a 48.4 a MA a 92.4 a 94.8 1 =.4 9 UD4 4 IMJ 9 2=.4 a GikOn 0 0 0 0 0 0 9.0 0 0 0 9 0 19 0 TrIvoffi 0 9 1.7 0 0 0 0 0 0 0 0 1.7 0 W.2 0 6~1 2 JU J ma -2 _m a R" -t uu .2 om I Nu a ma a ~ a mu i mu -4 ^ 4 14 ~4 10 MWA 32 M.8 8 MJ 12 W4 12 M-8 7 40.9 8 14.1 6 IM.0 4 ~.4 8 M4.1 » nst noustaA c.iDT MO UImTiN CMIPA1mI 0P fierA 1M7 ~oflafa D0e~elgln et Plannelf Amlaen. (l. NUi1.f) Osring As a6 and A at 197 to of li~Rulca nd 0f 1979 18 1901 19*2 1ff 1904 196 190 107-88 i- 1988-86 190.-8 g g g g g £ s w m s sja~fts 1064.8 18 816.8 18 81.4 10 MJ0.8 20 67.8 17 0M.8 14 04.6 12 1467.4 17 1811.7 19 8118.1 20 90.6 18 117M.2 18 MSUrnöher if . Ta ..a ~l a .2b.8 fl .mj s I mja& fl ~ 1 =.9a MU I.5 O aI mo Ma 10a . a f7i6.0 44 1~68.8 41 108.8 84 188.4 40 142.7 88 1476.4 88 1000.0 02 800.8 8 m 02.0 84 8~17.9 87 210~.8 88 30~.9 ge Ao^ Prded, 97.8 8 109.0 4 810.1 10 209.8 7 =0.0 a 744.9 la MJ0.8 10 467.0 1 1720.8 la 1148.8 7 8494.4 0 6412 6 Kornetska 900.6 7 170. 7 =.7 6 a .8 t 2.4.1 6 26.8 8 21.0 a 410.8 8 771.S 7 779.0 8 84a0.2 6 4618 6 Kw~*et 20.8 2 68.1 a 4.8 2 48.2 1 98.2 1 75.1 2 188.2 2 88.9 1 148.2 1 77.0 0 M.4 1 966 1 Tati~lkdw 2m - . 8.QI . nu -2 nu8 2 6 ~ ail = 2 ^84 2 m 5 .JZ& . 7M8.M a. s . . s2 s.4-7.4.2 29.* fl i.8 fl åI E 28Z4 fl teE. fl Jd18. fl Zå. fl 220. if a2314 DL 1E fl iBL. fl 1285 f 2MA~i 1419-. 17 ja3.4 3.09 1=8 l14. ~te 46ma AICE 7åpriteh 8~8.8 a 90.1 8 186.9 8 1e0.4 b 69.8 2 187.6 4 106.4 2 180.0 2 20s.7 2 4=s.5 8 1649.9 a 200.^8 8 T~#a T.0 JUL a .a a .* a US m å a .a a . a u!! a aa.: m .=-9 i B!!4 1 . m * Ia~.uds U.. 1n 14. nd 8arsm.Ms N 1- THE DI7IAL CREDT MI INVESTMEN CORPORMTON Of DMA U.IM CONSMB7UM ~ ~ (Rø. al I lIon) 1984 109s 198 1987-81 10989 CICZ 976.W8 17.28 189.99 29.74 2819.8 29.14 8725.40 24.87 82.1N 29.48 ICCI Only se 147G.J0 26.2 1f9.u0 26.27 3f24.4 88.1 4158.96 80.44 O190.21 30.11 XVCZ*anlne »her! It 1e non-led MU720 SO.gg 296 4,LA 4841.10 4LJ2 OM,26 49.19 Ulfe.O 46,da M933.1 1 0.006 72O.6 10.1 1f7l4.69 1§0.0 18 59 1M.0 2MUl.1 IM.6 m)N of XCICI snotons made under eensortIum arrenge~et to tot a ZCZ Senetløne 73.00 74.73 78.89 69.50 89.89 b) 9 of ICIC semtløns &s led insltlIn to tosa *CIC senOltons on a consortum bhai 23.8 89.79 89.87 88.83 42.11 X Iraudes Løen, 2nvetm~ø. and 9usren~es. __In ~Itløn atddolon to Loone, Invest~tnas and Oureneen.. - 74 - MUEet TABLE. 12 THE I USRIAL CRIT AmS INEMM0T CW£ ATi~ OF SA 1.70 MU-M *roas ild < 10.26 10.62 11.16 11.73 12.8 12.90 18.41 13.48 12.81 Lems: Cos(S) 7.00 6.92 7.68 7.48 7.8W 8.19 8.80 9.46 9.92 Gro~s Spread (5) 3.17 8.70 3.48 4.26 4.8 4.72 6.11 4.00 8.29 FOREIOM CLRCY Gro«a Tld (1) 10.62 11.43 12.45 12.01 18.02 12.24 12.29 11.80 11.28 Le«*: Cost (n) 8.66 9.11 9.81 9.92 *.60 8.8 8.79 7.29 7.81 Oroas Spread (i) 2.06 2.8 2.84 8.09 3.52 3.71 8.49 4.01 8.62 TOTAL Gro~s YIld (1) 10.50 11.01 11.68 11.84 12.71 12.68 12.98 12.N8 12.56 1ess: Co.t (1) 7.64 7.87 8.40 7.96 8.40 0.80 8.47 8.62 9.08 Oroas Spread ( ) 2.86 8.88 8.29 8.89 4.31 4.86 4.61 4.08 8.62 Ltss: Risk (1) 1.19 0.87 0.91 1.44 1.78 1.64 1.96 1.95 1.79 Ne6 Spread (I) 1.67 2.47 2.37 2.28 2.8 2.72 2.64 2.08 1.78 Adel.. cosI (5) 0.49 0.48 0.40 0.89 0.87 0.84 0.84 0.80 0.M Cos of fumd include lasse expes~s. Detinitiom ued for portfolio are consisten with lhasa uead for IMR. Risk is defind s gross risk befora write-beke. im~ DIlfL a# 4B Nimir ~T l DnA LCN~ ~ LIia..UIa. D~Ishlmen ampetn c.wpa.em Bae6ana k bta6meanmt (R. måIloft> Owrin8 8motn 90181 - 1668 1988 1984 1988 1986 1987-88 1988.89 Am.umu 1 3un 1 Amuni 9 Amn-, - tamal 1 Amunl Amun8 1 t 1 A 1 M 684.8 64.7 7M0.2 60.0 446.8 40.1 6M9.8 4.1 807.1 84.1 11.8 6.9 O.1 .8 .4 .0 - - m - - - - - - - - - - - 41.0 2.4 878.4 12.8 27.0 18.2 18.7 94.4 m - Cmn6 - - - - - - - - - - 14.8 .9 470.8 18.8 101.4 4.9 487.1 9.8 y-ra - - - - - - - - - - - - - - - - 88.6 18.8 1<#t 68.1 6.4 108.0 8.8 49.2 4.4 86.7 4.2 124.8 8.4 147.9 8.7 144.2 4.8 68.2 4.0 28.2 .4 AN - - - - . - - - - - - - 167.4 8.8 722.0 85.0 788.1 14.8 Other 202.2 0.9 G8.6 81.8 61.7 85.4 668.4 47.6 887.8 87.8 1879. 81.2 1188.2 60.5 81.9 42.8 1970.8 88 vi 7et.* 1011.8 100.0 186.8 100.0 1112.2 100.0 180.4 100.0 1489.1 100.0 199.9 100.0 288.6 100.0 2000.9 100.0 8888.8 100.0 242.6 44.1 01.9 89.1 8.8 80.4 80.2 46.2 48.8 48.1 40.9 8.7 174.8 9.7 8.4 .1 - - S - Espoeb - - - - - - - - - - - - 8E.b 8.1 190.6 7.6 M4.7 16.8 mm - C- - - - - - - - - - 178.8 7.0. 888 20.8 -rA - - - . - - - - - - - - - - - - - - IV 48.4 7.9 88.7 9.7 71. .8 48.8 4.8 48.4 4.0 88.8 6.2 198.6 10.8 171.9 6.8 49.1 2.8 - - - - -- - - -- - .- - .8 .1 478. 27.s hra 8. 48.0 278.1 81.2 447.2 42.8 841.6 49.4 61.4 80.8 781.8 8.1 1887.9 78.8 1740.7 69.8 866.0 82.8 T~ea# §Li zmå Z jm. jeLR jlo . a j jouj JMU IM, 2 jefA. jLZ 2 1. .1 511.& j~.* jimI jA» ~ - 76 - AWsEX TA81. 14 TiE ~IUSTRIAL CREDIT AmD iVESTiT CWRPÆRATI£ OF IDIA UITED (ICICla Col 1oe1n Prfomam before Resehedulin (% iri billions) 1ear1 168 1688 l@ IDE - RE umou6 overdue a beinalesg thm yer 0.24 0.26 0.27 0.81 0.87 0.6 0.88 1.18 As6 fatll g due during h year 1.16 1.49 1.72 2.86 8.00 8.78 6.00 8.20 Amu Col le~td 1.01 1.28 1.49 1.96 2.48 8.10 .08 4.88 C~RAECTIM RATIO (l) 72.7 78.1 74.9 78.4 78.0 728 74.4 8.4 Collee6isn Prformance oft*r RehedulIag (Re in billionm) Yer %1.l 1" 1_g 8 16g4 1~ 18 1 l Anene Overdu si beginnag of the yMar 0.24 0.26 0.27 0.81 0.87 0.6 0.88 1.18 #am~et falling du duriag the yer 1.18 1.49 1.72 2.86 8.00 8.78 6.00 6.20 Amu Gol leted dulg th, Year 1.01 1.28 1.49 1.96 2.46 8.10 5.06 4.8 Am~es6 Roseheduled 0.12 0.20 0.19 0.88 0.88 0.85 0.82 0.72 COLLECTIM RATIO 79.6 82.6 82.8 84.8 81.8 78.7 81.8 77.2 &~tCE ICICI. -77 - m ISUmRIAL CREDIT Am IVEsiuun CPMATIMO IssA uuiT (Ix‡n Colleebten Perormnm bef~ ReoledaatIs: PrInløs (Re la blill on) Yea M 1*4 E 1 AUZ:I= : (15sathe.) Am~en6 Reeheduled during he veer 0.0 0.17 O.17 0.10 0.0 0.8 Arretre sY esr End 0.16 0,20 0.81 0.44 0.68 0.70 Lesns Outsladng 12.12 16.20 1.62 28.00 80.38 88.1M AtRs RATIO (1) 2.O 2.4 L.8 2. 8.1 2.8 Arers of PrInalpal After Reshediltna (Is 61II.ns) Vest~ ~ ~ (R 1 b8ill 1 r 1UR f Armre. s6 Year End 0.16 0.10 0.81 0.44 0.68 0.70 Les Ousadlag 12.52 16.26 18.62 28.88 80.86 8.8 ARæM l RATM (5) 1.8 1.8 1.7 1.0 .1 1.9 THE D~U7RIAL CREIT A1 IVES7UBET CMPRATIM OF I0I1A .LITED Tred l Armrer (R*. In all Ilon) Outletndlog ln O~ebandlng PrIielpml and Inter~s6 Prinolpel In Resp.c6 of Compenles Tmo.t.Ln N,o in respoL In arrere Arrargse of la rreare ce of Tear Dbealur. Co. ln of ohe Coi. Tobal Lonu/Debe. T~I Lae . gutetandla Argre In Arear. PrInelpel Inu b T~I Outendfnu ~uIUedina 1964 18264.600 241 170.744 197.840 170.746 88.088 1.00 11.700 18 1807.628 278 2177.44 802.861 81.80 67.249 1.000 11.700 198 2887.148 260 2499.264 441.64 88.127 028.821 1.00 10.500 8/80 (16 ~Uhs) 80857.588 212. 202.707 06.857 497.228 112.88 2.100 9.00 8/89 88829.022 181.. 294.291 701.800 m 80.826 1270.982 1.800 7.700 * Exfludng 112 oseI wherein tegel .colon was -ontlad/ln110e1~d. Tötel eta~dIng amu.nt (net prvlleuc) le repee of ~hese case. amounted to R9. 418.271 elillen. e Excludg 125 caes whein legal e~1 was coneeled/etaloited. TolI aetlendng a~oan6 (neh pr.v1elen) la repuh6 of lhse cse asounted e.to R. 497.088 allen. - 79 -AÅNNX TABLEA 17 a ' * 8 g a 8 8'8 - a 88 # a i 8 8*' 1 1 , ...11 fl 1 8] 1 i i 1 4 je ] } li Ha 1 •1 ]j Il i l1!1 i. 4sse sasi t - 80 - THEi ISUS1RIAL CIMDT AIO DWIElT CpPRATICli IP DOI4 LIlED Arresae se 6 et la Arrest. Outeending I .t Total Perlod la uspeo6 et Lan/eb . In ~le Prinelgel Ifterest t g6p CmaIes In Arrear Outstai=n 0 to 0.714 1.463 2.1M8 lglegblø NgIlgIble 8 te. 0.000 1.06 2506 0.1 -do- to 12 .88 18.980 20.796 0.7 -do- 1 to 24 145.off 144.406 Mo9.~os 9.s 0.9 Mere ~ha 24 ~o.70 Lr .os II L I =0 M~os . ANEX TABLE 19 THE IDUSTRIUAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED Industry-Wise Classification of Arrears (Re. in lacs) Outstanding Loan/Debentures Arrears as on as on March 31, 1989* March 31, 1989 No. of no. oof Z of Industry Cos. Amount Coo. Amount Total 5 to 3 (1) (2) (3) (4) (5) (6) (7) Sugar 144 9353 34 2113 16.6 22.6 Paper & Pulp Products 106 14494 14 1654 13.0 11.4 Textile 364 35913 39 2157 17.0 6.0 Cement 89 37634 13 2169 17.1 5.8 Basic etal 204 32011 17 1259 9.9 3.9 Metal Products 60 8574 5 241 1.9 2.8 Machinery 182 21758 5 359 2.8 1.6 Chemicals 364 72385 20 993 7.8 1.4 Electrical Equipment 182 27337 7 334 2.6 1.2 Transport Euqipment 113 17119 8 413 3.3 2.4 Pharmaceutical 42 4096 2 257 2.0 6.3 Others 178 51804 17 760 6.0 1.5 2028 332478* 181 12709 100.0 3.8 * Excluding amount in respect of Lines of Credit and Interest outstanding. -}&&!!&!&}“琴“l 斗螂馴‘〕；、 TRE INMMUL CREDIT MD DMTMW CORPORATION OF MOXA LIMM- Mtual and ProjogtM Incoum ffitommta <R*. 100) Actua l a Projectod 1984 1985 lom iffl-GO 1~89 1~96 1^91 1991-92 1992-93 JOU-94 Intar~ on koäng 1819 182* 2304 3849 3691 4749 8919 9429 1~ 13879 Inta~ on D~turog 41 48 m 77 41 u M 286 486 816 Capita$ Galna 7 49 Ile 126 136 146 130 129 W im 0 1 v I d~d 24 31 42 a 88 a log 120 136 log L**** In 19 44 84 239 *ag sig 929 im 1829 itu morchant. nanking Zncomo 14 17 23 n as 49 u 69 79 a 0~ zoo~ _u _In _la -m -m m 1166 386 Total ina~ an im m 164 in Intar~ db CC on Borrowinga 1166 1444 1938 sol am 4490 om GIN 1~ 13416 salarl« & Porgonnol Exponace se 39 48 64 69 u 100 lag 179 220 Depr«latlon 19 34 lic 177 187 276 436 630 om 1149 ~ ra 43 lag 170 al@ Tota I Exponcon 2071 3417 Profit Befara Tax 427 ffl 729 927 987 1~ 1219 1349 1819 1~ Tax 146 167 lic 165 IN 170 206 to 280 320 Adde Ra#med of Tax 4 a 24 9 2 Profit After Tax m 409 m m zu 876 im nu im 2= Dividend* 68 77 ge 187 152 IN ile 200 226 250 Rogorvoo 236 382 649 806 837 726 849 m 1130 1379 Tho Incomm from loana ar* shown nöt of wrlt»ffa and provision* for tho y*års 1984 to 19~ . -84- ANNER TABLE 2 THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION O INDIA LIMITED SPREADS 1989-90 1990-91 1991-92 1992-93 1992-94 Interest Spread Rupee 11.6 12.0 12.4 12.7 12.9 Foreign Currency loans 10.1 9.8 9.6 9.0 8.9 Total 11.2 11.4 11.6 11.7 11.8 Cost Rupee 10.2 10.9 11.4 11.8 12.1 Foreign Currency loans 7.8 7.8 7.7 7.7 7.7 Total 9.5 10.1 10.5 10.8 11.0 sread Rupee 1.3 1.1 1.0 0.9 0.8 Foreign Currency loans 2.4 2.0 1.7 1.4 1.1 Total 1.7 1.3 1.1 1.0 0.9 mIN DIUM7RIAL CREDXT AT0 å NVESTMBNT CORPORATION OF mINIA .IM7ED Stemamet of Oaeraoi Reatol <1984 to 198of»/9 Ac*uel Projeted 1984 198N 198M 1987-68 1908-89 1989-0 1~99-91 1991-92 192-«l 1993-94 .bi Iesty 9.8 10.4 8.6 8.6 *.7 8.8 10.0 18.9 11.6 12.0 Debi Service 1.6 1.6 1.7 1.6 1.4 1.6 1.8 1.4 1.4 1.4 PBT/N.6 Wormh (5) U8.7 3c.0 26.6 28.2 22.7 21.4 21.2 20.0 20.3 29.9 PAT/N.i Worh () 23.8 28.4 20.9 18.1 18.6 17.4 17.4 10.6 10.8 17.3 PBT/Tetal Ag~ (5) 2.8 2.7 2.8 2.9 2.9 1.0 1.7 1.6 1.4 1.4 PAT"qtöl A«~ (5) 1.8 1.9 1.8 1.0 1.4 1.6 1.4 1.2 1.2 1.1 Yield on L.en (5) 11.2 11.1 11.1 10.7 10.0 11.2 11.4 11.6 11.7 11.8 Cosi on the Abov.: (5) 8.8.6 8.9 9.6 10.1 10.6 16.8 16.9 Spre d en Le«nes (I) 2.9 2.8 2.8 2.1 1.7 1.7 1.8 1.1 1.0 0.9 PROJECT COMPLETION REPORT INDIA FOURTEENTS INDUSTRIAL CREDIT AND INVESTMENT PROJECT (LOAN 2051-IN) April 28, 1989 I Industry and Finance Division Asia Country Department IV - 89 - PROJECT COMPLETION REPORT INDIA FOURTEENTH INDUSTRIAL CREDIT AND INVESTMENT PROJECT (LOAN 2051-IN) I. BACKGROUND 1. The Bank has been closely associated with the Industrial Credit and Investment Corporation of India (ICICI) since its founding in 1955. This is the Fourteenth Bank loan and the last loan extended exclusively to ICICI in the form of an open ended line of credit. With this loan, total Bank assistance to ICICI reached US$1,015 million. Since then, the cooperation between the Bank and ICICI has continued with more specialized loans to ICICI such as US$160 million from the Industrial Export (Engineering Products) Project (Loan No. 2630-IN) approved in October 1985, US$35 million from the Cement Industry Project (Loan 2661-IN) approved in March 1986 and US$105 million from the Industrial Finance and Technical Assistance Project (Loan 2928-IN) approved in March 1988. EMnally, the Bank is presently considering loans involving ICICI under a Second Export Development Project, a Technology Development Project, and an Electronics Project. 2. This project was appraised in April 1981, but no appraisal report was issued. Instead, an expanded President's Report, along with the Appraisal Report of the Thirteenth Industrial Credit and Investment Project (Ln. 1843-IN), issued in April 1980, were used as a basis for presentation of this project to the Board. A loan in the amount of $150 million was approved for this project in October 1981. 11. THE PROJECT 3. Project Objectives. The main objectives of the project were to: enhance the progress made under the Bank's past operations by continuing to use ICICI as an effective channel to finance high priority private sector industrial investments in India; reduce ICICI's reliance on the Bank's resources by assisting it to diversify its sources of foreign exchange through blending of Bank and commercial funds in its operations; and encourage ICICI to expand its program of studies to address problems of industrial inefficiency, and industrial energy utilization and constraints on exports of manufactured goods. 4. Project Description. The projects to be financed under the loan to ICICI were to cover various industrial sectors and to enhance India's industrial capacity through expansion, modernization and diversification of existing industrial enterprises as well as the establishment of new industrial units. The project also sought to expand ICICI's role as a policy advisor to the Government through the studies described in the preceding paragraph. - 90 - III. THE ENVIRONNEN? 5. The Industrial Sector.11 During the time since this loan was made, the Indian economy has been undergoing gradual change. Since the early 1980s and increasingly in the last four years, GO has Implemented a gradual program of reform. The major elements of the reform process has been a movement from Government control to a greater reliance on market forces, growing competition and increasing openness to the world economy. 6. As the Government becomes less Involved in determining industrial capacity for the Indian market through the licensing system, the responsibility for selecting industrial projects falls more on the financial system, especially the development finance institutions (DFIs), thus creating a need for them to Improve appraisal and risk assessment capabilities. Increased competition is also causing a shake-out of less efficient firms with potentially adverse implications for the portfolios of financial institutions, requiring improved project supervision and stricter portfolio management. Finally, it has become increasingly apparent that industries in key subsectors are in.need of restructuring in order to bring industrial production costs and product quality closer to international standards. 7. The industrial policy reforms implemented since FY85 can broadly be divided into the following four areas: (i) liberalization of the domestic regulatory system through (a) delicensing investments up to US$4 million (increased recently to US$11 million) in developed areas, and up to US$37 million In backward areas, and a significant reduction in industry groups requiring license; (b) granting firms more flexibility to adjust their output mix and capacity; (c) easing restrictions on technology imports and allowing greater import of capital goods by moving capital goods into Open General License (OGL); (d) reducing the number of products reserved for small industries; and (e) easing monopoly regulations by increasing the threshold level of investment and the product areas by firms classified as annopolistic; (11) measures to improve the tax system including (a) reduction and simplification of income and corporate taxes; (b) implementation of a modified value added tax to eliminate the adverse effects of indirect taxes and facilitate deduction in indirect taxes for exports; and (c) rationalization of tax incentives for small scale industriess / For more details, see: INDIAS An Industrialized 2conomy in Transition. Report No. 6633-IN, May 6, 1987. - 91 - (iii) attempts to deal more constructively with the problems of sick Industries. The Sick Industrial Companies (Special Provision) Act, 1985, established procedures for identifying and resolving the worst cases of financial difficulties. The Act established the Board for Industrial and Financial Reconstruction (BIFR), with power to order and speed closures, mergers, and other changes. The present obligation of a company with a completely eroded not worth is to report to BIFR and to the subsequently appointed operating agency to coordinate with all parties involved and to quickly recommend a rehabilitation or closure if necessary. Efforts are under way to expand BIFR's mandate to become involved at earlier stages before the financial situation of an enterprise become too difficult to salvage; and (iv) adoption of a flexible and realistic exchange risk policy conducive to export growth. Since 1985 the real effective exchange rate has depreciated more than 30 percent, and the Government introduced and streamlined duty exemption schemes for Imports needed for export production, which resulted In virtually all Imports being imported by exporters without restrictions and payment of duty. 8. These policy reforms coupled with an expansionary macroeconomic policy resulted in acceleration of industrial growth to an average of 9 percent during the last three years (WY85-FY88) compared to only 5 percent over the preceding five years. More importantly, this growth was partly due to more efficient use of resources as reflected in increasing labor productivity and capital-output ratios for manufacturing during the 1980s over their 1970s level. In addition to domestic output, exports also responded positively to these policy reforms, particularly in late 1980s following the depreciation of the rupee in 1986. Manufactured exports grew in real terms at 13 percent in PT87 and 25 percent In FY88 compared to less than 3 percent p.a. in early 1980s. 9. The Financial Sector.2/ India's financial sector has operated as an integral part of the fiscal and planning process of a regulated economy for many years. Resource mobilization has been Impressive, with the national savings rate climbing to 242 of GDP, a very high rate for a country of India's income level. Maintenance of positive real rates and the extensive branch network of the commercial banking system are generally credited for the high savings rate. Overall growth and financialisation of savings have helped compensate for growing central government deficit which is now 9Z of GDP. 10. However, there is considerable evidence to suggest that the effectiveness of the financial systes in terms of resource allocation has been much less impressive. The Government has controlled a very large proportion of financial savings both through the preemption of bank 1 For more details sees INDIA: Credit and Capital Markets Study. Report No. 6661-IN, February 27, 1987; and INDIAs Financial Sector and Bank Lending Review, October 14, 1988. - 92 - resources to finance the fiscal deficit and mandated credit programs to support priority sectors. After granting credit to government at various interest rates and funding priority sectors, commercial banks are left with 302 of the resources which they have mobilized to allocate freely to private sector clients. Interest rates are fixed and thus leaving little scope for financial institutions to differentiate for relative risk. Also, the Interest rate structure contains significant anomalies including subsidized rates for agriculture and other priority programs, an inversion between short and long term rates and very high interest rates and very high interest rates for industrial working capital. 11. Financial institutions in India are almost all publicly owned and have been quite stable relative to the experience in many developing countries. The commercial banks dominate the financial system and to an important degree have acted as channels for funding government objectives rather than as fully commercial organizations and this tendency is reflected in their low profitability, low capitalization and significant portfolio problems. The three DPI. (ICICI, IDBI and IFCI) have influenced industrial investment by specializing in long term finance of the corporate sector. Since the early 1980s, and particularly since 1985, these institutions have been forced to evaluate their loans more carefully as consequence of the growing competition emanating from the gradual deregulation of the economy. They have responded to that challenge and have also started to offer ar increasing array of financial services ranging from merchant banking to leasing and from credit rating to specific technology financing. 12. The cost of funds to these institutions has bsn rising as they have had less access to concessional government funding, t lending rates have not been adjusted causing interest margins, parttcularly those of ICICI, to shrink, affecting future profitability. The narrowing margins together with low though improving collection rates are not consistent with the longer term financial viability of these institutions. Both the equity and debenture markets have grown rapidly providing an important resource base for stronger corporations. but a number of studies have suggested that institutional strengthening of the rules and procedures governing the equity market are essential to its longer term stability. IV. INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) 13. ICICI, established in 1955, has grown to assume a major role in India's financial system, accounting for 452 of institutional foreign exchange financing for industry. Over the last few years, ICICI has diversified its activities, and provided a broad range of financial services Including working capital finance, mergers and acquisitions, export finance, supplier credits, underwriting, guarantees and leasing. In addition, ICICI is playing an active role in assisting the government in formulating industrial policies, especially those related to the private sector. ICICI also has diversified its resource base and is now an established borrower in international financial markets. From 1981 through 1987, ICICI raised the - 93 - equivalent of about US$700 million from the international financial markets. As of March 31, 1987, ICICI0s total assets were Re 36 billion and its total equity was Ra 3.2 billion. 14. Ownership. Ownership of ICICI is dominated by public sector corporations, including the Life Insurance Corporation, the Unit Trust of India and a number of nationalized commercial banks. Of ICICI's issued share capital of Rs 800.5 million, public institutions hold 80.8%, foreign shareholders (mainly commercial banks) hold 9.3% and the remaining 9.92 is held by more than 7,000 private Indian investors. 15. Organization. ICICI is well-managed and operates effectively under a competent and experienced Board. The fifteen members of the Board represent GOI (2 members), public financial institutions (1), foreign shareholders (1), professional and business (8), and include three full-time executives of ICICIs the Chairman and two Deputy Managing Directors. The Board meete regularly to set out ICIC1's overall financial and operational policies and to decide on individual project proposals resulting in a single enterprise exposure over Re 35 million. Mr. N. Vaghul, an experienced banker, became Chairman and Managing Director in September 1985. Under him the Corporation continues to benefit from the able leadership that has characterized it for many years. 16. Organizationally, ICICI is divided into various groups headed by senior executives under the overall supervision uf the two Deputy Managing Directors. Mr. B. V. Bhargava supervises the Project Finance group which is responsible for appraising new projects and monitoring the loan portfolio. This group is the largest in terms of professional staff as well as volume of business. The Operations Coordination & Policy group coordinates the project finance activity of the branches and fulfills the Management Information System (MIS) requirements. The Administration and Services Group is responsible for the Secretarial, Administrative and human resources development activities. Mr. N. J. Jhaveri supervises the Financial Services group which includes Merchant Banking, Leasing and Venture Capital activities. The Finance group is responsible for all accounting and billing functions, foreign exchange operations, and the Corporation's investment portfolio. Mr. Jhaveri also supervises the Corporate Planning & Policy and Resource Mobilization activities, Rehabilitation and Corporate Legal Advisory functions as well as Technology Development activity. The Technology Adviser and the Internal Auditor interact directly with the Chairman. 17. Operating Policies and Procedures. Prior to 1977, ICICI had no formal policy statement, but relied on its Memorandum of Association, together with Goverueat guidelines and the periodic resolutions of its Board, to provide a satisfactory operating policy framework. That year, ICICI's Board adopted a Statement of Financial and Operational Strategy in which six broad areas were specified for priority attention: export industries; power and transport; agriculture related enterprises; industries basic to industrial growth; mass consumption goods; and balancing and modernization projects. With the Bank approval of this Fourteenth Loan in - 94 - October 1981, ICICI updated this Statement principally to reflect its intention to diversify its foreign exchange resources. Subsequently, under the Industrial Export Project, (Loan 2629/2630 IN - approved in October 1985), ICICI placed expanded emphasis on export-oriented projects, with a particular focus on engineering products. ICICI's current Corporate Policy Statement, updated during appraisal of the Industrial Finance and Technical Assistance Project (Loan 2928 IN, approved in March 1988), continues ICICI's earlier basic lending policies, but gives new importance to supporting sunrise industries, fostering technology development and protecting the environment. It also places added emphasis on the modernization of existing industries. Internally, the build-up of capital reserves, the adequacy of provisions for doubtful accounts, and inimization of the foreign exchange risk on its operations are now more clearly defined. 18. Appraisal and Supervision Standardes ICICI's appraisals continue to be of a high standard and incorporate a thorough treatment of technical, financial, market and economic aspects. The economic and financial rate of return norms used by ICICI are usually 12 percent and 15 percent respectively. For projects requiring a loan from ICICI exceeding Re 25 million, a Domestic Resource Cost (DCR) and Economic Rate of Return calculations are normally undertaken. For appraisals of export-oriented projects, ICICI staff are still in neid of training to increase their understanding of current practices and trends in the international environment. This issue is to be addressed under the proposed Export Development Pcoject. ICICI's follow-up procedures and project supervision standards are also satisfactory. Clients submit detailed quarterly progress reports to ICICI for review and follow-up. Projects are visited at least once a year and a satisfactory system of reporting and management review exists. ICICI also reserves the right to appoint a director on its clients' board and has done to selectively to intensify the supervision of certain projects. 19. On-lending Terms. ICICI's standard rate of interest for subloans from euro-currency sources have borne a spread of 1.5% over the borrowing costs. Interest rates on domestic currency loans also range from 11.51 to 141 with a 1 p.a. surcharge on interest levied on companies whose shares are not listed on a stock exchange. ICICI charges a 12 p.a. commitment fee on foreign currency loans, and a commitment fee ranging between 0.251 and a 1% p.a. on domestic currency loans. ICICI's standard terms provide for maximum loan maturities of up to 15 years, including up to 3 years grace, which conform to those offered by the other all India term-lending institutions. ICICI's sub-borrowers (including those under this project) bore the exchange risk on foreign currency loans. The Government has recently established a Foreign Exchange Risk Assistance Scheme (ERAS) which protects both sub-borrowers and the development finance institutions from the destabilizing effects of volatile exchange rate and interest rate fluctuations. 20. Recent Performance. A summary of ICICI's operations for the last six years (1982-1988) is shown in Table 1 of Annex 1, and the sub-sectoral distribution of its assistance is reflected in Table 2.1 of Annex II. As of - 95 - September 30, 1988, ICICI had approved cumulative financing since its founding totalling Ra 71 billion for some 5,663 projects (Table 2.1 of Annex 2j. Disbursements also Increased rapid rising from US$2.9 billion in 1982 to US$9.8 billion in 1987, reflecting a 142 average annual growth during 1982-87. The sub-sectoral distribution of assistance reflects ICICI1s concentration on non-traditional and technologically more advanced industries. The chemical subsector accounted for about 261 of the total, followed by the metal products (11.91), textile (10.51), cement (8.81), electrical equipment (8.4%), and machinery (7.12). ICICI's clients are predominantly medium to large-sized private enterprises. In 1988, ICICI's average assistance per project was about Ra 12.6 million (US$840,000). However, only 452 of the firms financed had net fixed assets of less than Ra 100 million (US$7.8 million). 21. ICICI has emphasized the modernization and upgrading of clients' plant and equipment to improve overall industrial efficiency and improve competitiveness. These efforts involve advising clients at the appraisal stage on technology choice. ICICI also provides technical assistance, through its merchant banking and rehabilitation divisions, to industries which need financial restructuring. The geographical distribution of assisted projects is somewhat skewed toward the more industrialized states in Western India; however. ICICI is making progress in diversifying its portfolio geographically. 22. ICICI carries out an annual review of the financial performance of companies in its portfolio. Of the sample of 417 companies analyzed for the year 1985-86, the average return on equity after tax was 15.32, and return on capital employed was about 15.7% which is an improvement over the return of 14.91 obtained in 1984-85. Most companies financed by ICICI have a sound capital base with an average debttequity ratio of 0.68. The #conomic impact of ICICI financed projects has also been satisfactory. The simple average ex-ante economic rate of return for 80 projects approved in 1986 was 342. These investments are expected to create about 38,000 new jobs at an average investment cost per job of about US$19,400; this is reasonable in view of the concentration of balancing and modernization. Furthermore, a significant proportion of ICICI's clients export at least part of their output, contributing 201 to India's manufactured exports. 23. Other Developmental Activities. ICICI undertakes a broad range of complementary activities and services aimed at enhancing its overall developmental impact. These activities includes industrial subsector and policy studies; identification and promotion of new projects; and training and advisory support for other domestic and foreign financial institutions. Most of these activities were initiated following the joint Bank/ICICI study of ICICI's development impact in 1973. The Technology Development and Information company of India Limited (TDICI) has been established to assist existing industry in adopting advanced technology ventures. Venture capital operations started in 1986. In addition, a credit rating agency has been promoted and ICICI is planning to establish an information services agency. - 96 - 24. Financial Results and Position. ICICI's financial results for the 1981-1988 period are reflected in Annex 1, Tables 1.2-1.9. ICICI's total assets passed the Rs 20.0 billion mark for the first time in 1985 and increased further to Re 36.4 billion at the end of 1988. Assets were financed by rupee borrowings (54Z), foreign currency borrowings (332), other liabilities (42) and net worth (91). The rapid growth in assets correspond to the surge in ICICI's business since 1981. This was due to an improved investment climate and ICICI's concerted efforts to diversify and promote new business. Net profits after tax as a percentage of average net worth during the 1982-1986 period averaged 201 compared with 162 in 1980. The improvement in net profit was due to higher volume of operations and lower effective tax rate on profits. The interest rate spread increased from 2.52 in 1980 to 3.22 in 1983 and declined to 2.81 in 1986 due to the rapid increase in ICICI's borrowing from commercial markets at higher costs and increased interest rates on GOI-guaranteed bond issues. Administrative expenses measured as percentage of average total assets declined from 0.61 in 1981 to 0.4Z in 1987. Due to the increase in profit, ICICI's debt:equity ratio as defined in the latest Bank loan agreement, declined from 10.5:1 in 1981 to 9.8:1 by the end of 1984, and to 9.5:1 by the end of 1986. The debt service coverage ratio also remained favorable at 1.7. 25. These results have been supported by the general high quality of ICICI's portfolio. Principal in arrears at the end of 1987, at RS 620 million, is about 2.22 of total loans outstanding (2.81 before rescheduling). However, the effect of the interest rate squeeze had led to a deterioration in ICICI's spreads, which in turn made ICICI's business at the margin barely profitable. Also, there is an emerging unfavorable trend in collection performance. The arrears ratio indicated above has actually climbed steadily in recent years. The collection ratio before rescheduling has dropped from 75% in 1983 to 72? in 1986 (details are in Annex 1, Tables 1.4 and 1.5). Industries in the cotton and synthetic textiles, cement, paper, chemicals and sugar subsectors account for 681 of portfolio in arrears. ICICI identifies adverse market developments, prolonged labor trouble, inadequacies in management and low capacity utilization as the principal causes of companies falling back in their payments. Rapid corrective measures to prevent further deterioration in these companies have not always been possible because of difficulties in agreeing with other creditors and the enterprises' management of actions necessary. As of the end of 1986, 24Z of accounts in arrears were behind payments for more than 12 months and an additional 281 were behind for more than 24 months. These figures represent a hard core of difficult accounts and are receiving ICICI's intensive attention, particularly in view of more difficult competitive conditions for Indian industrial enterprises. 26. To deal with the difficult situation described above while achieving its stated objectives, ICICI adopted a four-pronged strategy in the context of the Industrial Finance and Technical Assistance Projects (Loan No. 2928-IN). The strategy aims at ensuring high portfolio quality; diversifying the resource base; preserving a sound financial structure; and maintaining adequate levels of profitability. These four objectives are necessarily overlapping and complementary. - 97 - 27. To ensure high portfolio quality ICICI is applying stricter appraisal criteria to new projects, and tightening its collection procedures, partly by classifying accounts by risk categories and by decentralizing collection receipt procedures. It is also enforcing rehabilitation and restructuring measures by approaching other creditors andlor the BIFR to avoid further sub-loan deterioration. Moreover, ICICI is applying stricter stricter legal recovery of unviable projects. These measures have been incorporated into separate Collection Strategy Statement that ICICI's Board approved in December 1987. 28. To diversity its resource base, ICICI is maintaining its active borrowing role in the international capital markets, availing of opportunities to reduce costs and minimize foreign exchange risks for its clients by making full use of future, options, swaps and optimal mix of floating and fixed rate loans. ICICI has already acquired significant expertise in this area and has successfully raised large volumes of comercial foreign exchange resources at low costs and hedged risks. 29. To preserve a sound financial position, in addition to the emphasis on high portfolio quality, adequate operational margins and diversified borrowings, ICICI is adopting stricter policies on provisions for loan losses, and will aim for continued reinvestment of earnings and programming of periodic equity issues. 30. To maintain adequate levels of profitability, ICICI is increasing its operations in product lines that clearly have higher margins such as leasing and local equipment financing. To reduce the stress on profitability from reduced margins on borrowed funds, ICICI is expanding activities such as issue management, merger and acquisition counseling, letter of credit business and portfolio management. This is to be complemented by efforts at controlling administrative costs through the automation of its systems and procedures, and more focused and intensive training. 31. To achieve the required automation of its system and to intensify its training, ICICI prepared a program during the appraisal of the Industrial Finance and Technical Assistance Project to cover these two areas. This program will be jointly funded by the Project's TA component and ICICI. V. PROJECT IMPLEMENTATION 32. Objectives. The project's success in achieving its objectives during the implementation period was generally mixed. ICICI completed and published all the studies contemplated under the project. ICICI was also able to complement the Bank resources with several couercial and non- commercial loans which enabled greater diversification of ICICI's sources of foreign exchange. These included obtaining loans equivalent to US$150 million from currency markets during 1981-82, and signing three agreements - 98 - totaling MK65 million during 1982-84 to augment its resources. However, the relatively high fixed interest rate on the Bank loan to ICICI compared to other sources of finance from international capital markets proved highly costly for both ICICI and its sub-borrowers. As a result, ICICI decided in June 1987 to pre-pay the loan and to re-finance it with cheaper alternative sources of external financing. The relatively high cost of the loan was also partly responsible for the relatively poor financial performance of many sub-borrowers. 33. Loan Commitment and Disbursements. Demand for sub-loans began to mount soon after the Bank loan was declared effective in December 1981. As a result, nearly two-third (US$108 million) of the loan was committed during 1982-83, and by 1984 the loan was fully committed. Disbursement of the loan proceeded at a slower pace, but remained very high compared to the level projected by the Appraisal Report. For example, actual level of disbursements during FY82 through FY64 exceeded appraisal estimates. Nevertheless, the loan was fully prepaid on July 15, 1987. As a result, the loan was closed on schedule on December 31, 1988. 34. Assistance by Type of Projects. The loan assisted 275 projects, some of which were new while others were for expansion, modernization, replacement or diversification of products of existing projects. The following table provides the details of these sub-projects: Table A: ASSISTANCE BY TYPE OF PROJECT No. of I of Loan Type of Project Project _ Amount New ProjectalCompanies 62 22.5 21.7 Diversification 28 10.3 7.9 Expansion 62 22.5 26.3 Modernization 66 24.0 26.8 Balancing EquiplReplacement 57 20.7 17.3 Total 275 100.0 100.0 New projectsicompanies represented about 23 percent of the projects assisted by the loan and they received about 22 percent of the amount of the loan. The bulk of the projects (about 67 percent) were for expansion, moderization and balancingireplacement of existing projects. 35. Assistance by Size of Loan. Details of the assistance by size of loan are provided in Table B belows -99 - Table BS ASSISTANCE BY SIZE OF LOAN Amount of Loan No. of Amount (US$ In million) Projects (US$ In million) Less than 0.250 87 13.393 0.251 to 0.500 86 31.656 0.501 to 0.750 45 27.073 0.751 to 1.000 24 20.200 1.001 to 2.000 24 31.274 2.001 to 4.000 8 19.333 4.001 to 6.000 1 4.963 275 147.892 36. The average size of loan per project under this loan is about US$538,000 compared to about US$791,000 extended under the Thirteenth Loan to ICICI. Although only 50 percent higher in amount than the previous loan, this loan financed 275 projects compared to 121 financed under the previous loan (i.e. 127 percent more). 37. Location of Assistance. Details of the location of assisted projects are provided in Table C as followes Table C: LOCATION OF ASSISTANCE Location of Project No. of Projects I of Total Backward Areas 88 32 Other Areas 187 68 Total 275 100 As noted, 88 projects (32 percent of total) receiving about 35 percent of the loan proceeds were located in industrially underdeveloped (backward) areas. This compares slightly unfavorably with the Thirteenth Loan under which 36 percent of the total number of projects receiving 40 percent of the loan amount were located in underdeveloped areas. However, despite some progress in expanding the geographical coverage, ICICI's lending remained concentrated in the industrialized states in Western India. - 100 - 38. Assistance by Subsector. Details are reflected in Table D belows Table D: ASSISTANCE BY SUBSECTOR (Re in million) Foreign Underwriting Currency Rupee and Direct Industry Loans Loans Subscription Total I Mining 62.972 -- -- 62.972 1.0 Food Manufacturing 52.693 -- -- 52.693 0.9 Cement 623.089 221.797 54.626 899.512 14.8 Textiles 477.707 39.488 8.809 526.004 8.7 Paper & Paper Products 84.544 27.000 1.071 112.615 1.9 Chemicals & Petroleum Products 947.167 224.415 46.141 1217.723 20.0 Rubber & Rubber Products 30.390 42.500 6.400 79.290 1.3 Watches 19.838 10.750 2.250 32.838 0.5 'Basic Metal Products 264.138 115.202 22.910 402.250 6.6 Fabricated Metal Products & Machinery Mfg. 969.561 78.635 51.137 1099.333 18.1 Electrical Machinery 399.508 65.350 29.758 494.616 8.1 Automobile & Ancillaries 612.060 68.220 34.226 714.506 11.7 Printing 74.353 -- 0.150 74.503 1.2 Wood Products 34.353 19.100 5.900 59.353 1.0 Glass, Clay & Other Non-metallic Products 103.293 19.810 4.366 127.469 2.1 Miscellaneous 102.268 14.575 8.411 125.554 2.1 Total 4858.234 946.842 276.155 6081.231 100.0 39. It is clear that only five groups of industries received the bulk of assistance under this loan. They are chemicals and petroleum products (20 percent of total), fabricated metal products and machinery (18 percent), cement (15 percent), automobile and ancillaries (12 percent), and textile (8.6 percent). Their total assistance amounted to Rs 4,457 million (i.e. 73 percent) of the total assistance. It is worth noting that these groups were also the largest recipients of the Thirteenth Loan (83 percent). 40. Judged against national industrial priorities and guidelines issued by the Government (e.g. export promotion, technology updating, and backward area development), 51 percent of the assistance (Rs 3,086 million) was extended to "high priority industries*, followed by 37 percent (Rs 2,240 million) to lower priority industries. This is slightly worse than the pattern existed under the Thirteenth Loan which extended 55 percent of its proceeds to high priority industries and 26 percent to lower priority industries. - 101 41. Schedule of Completion. Based on information available on 242 projects (out of the 275 projects), the following table shows the time taken for completion of these projects as measured against their original implementation schedules* Table Ds TIME OVERRUN Extent of Delay No. of Proects Ahead of 0-6 6-12 Over 12 Type of Project Schedule No Delay Months Months Months Total New 5 9 10 13 15 52 Diversification 1 9 6 1 8 25 Expansion 5 20 1 4 9 3 Modernisation 0 30 15 8 7 60 Other Projects 1 28 15 6 2 52 12 96 61 32 41 242 The table shows that 108 projects (45 percent of the total) were completed on schedule or ahead of schedule; and 41 projects (17 percent) were completed with a delay over 12 months. The remaining 93 projects (38 percent) were completed with a delay of up to 12 months. Nearly the same pattern was evident under the Thirteenth Loan. Main reasons for the delays were changes in the scope of the project, delays in obtaining Government clearance, problems with procurement of goods, and delays in tying up other sources of financing. 42. Cost Overruns. Data on the 242 projects analysed for completion schedule were also used to determine their estimated costs vis-a-vis actual costs. Their results are shown in this table: Table E: COST OVERRUN COSTS No. of Projects Saving No Overrun Overrun Type of Prolect in Costs in Costs in Ccsts Total New 7 11 34 52 Diversification 3 15 7 25 Expansion 11 19 23 53 Modernisation 5 31 24 60 Other Projects 9 29 14 52 35 105 102 242 - 102 - 43. Out of the 242 projects, 102 projects (42 percent of total) developed cost over-runs, while 105 (44 percent) were completed within their original budget, and 35 (14 percent) had savings. The projects which suffered from cost over-run are mostly new projects followed by those in the modernisation and expansion categories. The above percentages were nearly the same under the Thirteenth Loan, where 41 percent of projects completed had cost over-runs, 47 percent were within their budget, and 12 percent had savings. Most cost over-runs under that loan also took place in new and diversification projects. 44. Major reasons for the cost over-runs under this loan were the changes in the scope of the project, increases in pre-operative expanses and cost of civil works. as well as currency fluctuation and price escalation. The changes in scope of the projects were introduced to increase the competitive position of these industries in the face of mounting inflationary pressure and competition resulting from the liberal industrial policies introduced by the Government. Under the Thirteenth Loan, cost over-runs were largely due to increases in excise and customs duties, price increases in steel and cement and lack of detailed engineering designs during sub-project appraisals. 45. Financial Performance. As data provided on the projects assisted are not complete, particularly in the case of financial and economic performance, it is difficult to provide a clear picture on the overall performance of the project. It is possible that some of the projects with presently low financial rates of return are caused by the implementation delays mentioned above and will Improve over time. The Bank has already requested ICICI to provide more information on the performance of the assisted projects, and will continue its close coordination with ICICI in monitoring ICICI's sub-borrowers. 46. Available data on 88 assisted companies indicate that 21 of them have not yet reached a normal operation year (when assets are ready for full production). Of the remaining 67 companies, 42 companies earned profits as high as estimated and 25 companies suffered losses in the projected first year of normal operation. Moreover, 16 of these companies had actual capacity utilisation below 50 percent. In all, 56 companies (642 of the 88 companies) had not yet earned the minimum return on investment of 12 percent projected at the time of their appraisal. This performance is worse than that reported under the Thirteenth Loan, where 55 percent of the companies earned below the projected 12 percent return on investment. These projects are still in the early stage of operations and the rates of return of many are likely to improve over time. 47. Economic Performance. Annex 3 provides data on the economic rate of return (ERR) of 7 projects assisted under the loan. Five out of the projects recorded actual BRRs ranging from 18 percent to 68 percent, which are highly satisfactory, but two recorded 1Rs of 3 percent and 7 percent, respectively. Nevertheless, the sample of companies for which RR was carried out is too small to be of much use, and, therefore. ICICI has been requested to expand the sample to a reasonable size as per the loan - 103 - agreement with the Bank. Under the thirteenth Lon, ICICI carried out BRR analysis on six projects which resulted in BRRe ranging from 18 percent to 39 percent, which are highly satisfactory. Again, this sample ia too small to be used either for a meaningful comparison between the two loans or for reaching useful conclusions. ICICI was also asked to expand its sample under the Thirteenth loan, but no response has yet been received. 48. Concerning their contribution to exports, data on 18 companies provided showed only one company (6 percent of the total reported) exported 100 percent of its output, 11 companies (61 percent) exported between 0.3 percent and 9.0 percent, and the remaining 6 companies (33 percent) exported between 10 percent to 19 percent. These results are not encouraging, but they are better than those reported under the Thirteenth Loan, which showed insignificant contribution to exports by the projects assisted. 49. Available data on employment showed that 78 projects generated 17,174 jobs at an average cost per worker estimated at Rs 663,192 or US$45,737.31 This average cost is substantially higher than that of the US$37,900 incurred under the Thirteenth loan and the US$32,000 reported under earlier Bank two loans to ICICI. 50. Subloan Repayments. Out of the 275 subloans extended under this loan to ICICI, 10 subloans were 'in arrears as of June 30, 1988. In addition, 64 subloans (including the 10 presently in arrears)--i.e. 23 percent of total subloans--were rescheduled in view of the difficulties they were facing. More importantly, even after their rescheduling, 5 companies were unable to meet their debt obligations to ICICI when they fell due. As a result, ICICI initiated legal actions against these companies. The companies facing financial difficulties are scattered over various industrial subsectors. 51. Major problems faced by these companies were the relatively high cost of borrowing under the Bank loan, recession, particularly in the textile market, cost over-runs caused by technical problems or delays in the acquisition of machinery and land. Other problems reported were technical problems, severe market competition, inadequate funds, and power shortages. 52. It is worth mentioning that companies facing financial difficulties are closely monitored by ICICI from time to time. Following its assessment of the financial situation of the companies concerned, ICICI, in consultation with other participating financial institutions, formulates remedies for rehabilitation of the project concerned and extends additional assistance and relief if required. The latter includes debt rescheduling, waiver of interest, etc. It is only after exhausting all these remedial measures that ICICI resorts to legal actions to recoup its funds. 53. Companies where debt were rescheduled under this loan represented 23 percent of the total, compared to 36 percent that received debt rescheduling under the Thirteenth loan to ICICI. Also, following remedial 31 US$1.00 - Rs 14.5. - 104 - measures undertaken by ICICI, some of these companies have taken steps to improve their performance and others are projected to follow suit. However, it will be sometime before the overall financial picture of these companies can be ascertained. In the meantime, the Bank and ICICI should continue their close coordination in monitoring the performance of ICICI's sub- borrowers. 54. Studies. ICICI completed all the studies contemplated under the Project. This includes a study on export, and a three-phase study on energy utilization -- Phase I on cement and paper industries; Phase II on power intensive industries and Phase III on energy conservation equipment and instrumentation for monitoring energy efficiency. A workshop was held on each of the above studies where experts presented papers on the subject concerned. VI. CONCLUSIONS AND RECOMMENDATIONS 55. Proiect Performance. The success of the project in achieving its objectives during the implementation was mixed. All studies contemplated under the project were completed on time and ICICI was able to raise considerable resources from commercial and non-commercial sources to diversify its resources. Also, commitment under the loan proceeded ahead of schedule and disbursement exceeded appraisal estimates during the first three years of the project leading to a timely closing of the loan. The project assisted 275 projects in various industrial subsectors, including setting up new industrial units in backward areas, and the modernization and expansion of existing industrial units (paras. 32-40). 56. The financial performance of project sub-loans at the time ICICI's PCR was written was below what had been estimated in project appraisal reports and a substantial portion of the sub-loans had to be rescheduled. Part of this problem was undoubtedly a timing question. Projects frequently take longer to implement in India than originally estimated and this leads to low profits and financial returns in the early years. However, another important factor was undoubtedly the increased competition caused by domestic deregulation. The more competitive environment is creating a need for more careful appraisal and supervision of projects financed by ICICI (paras. 45-46). 57. While the loan was successful in transferring resources to ICICI, the relatively high fixed interest rate it charged ICICI proved highly costly for both ICICI and its sub-borrowers. As a result, ICICI decided In June 1987 to pre-pay the loan and to re-finance it with cheaper alternative sources of external financing. The relatively high cost of the loan was also partly responsible for the relatively poor financial performance of many sub-borrowers. To improve their financial situation, sub-borrowers decided to pre-pay their sub-loans and to refinance them with cheaper alternative sources of funds. This experience demonstrates the dangers of fixed interest rate lending in times of relatively volatile international interest rate adjustments (paras. 33, 42-46). - 105 - 58. ICICL ICICI's financial performance for the period 1981-88 was very impressive with total assets growing at 21.0 percent per annum, its loans and investment portfolio increasing four-fold, its net profit rising by over three times, and return on equity averaging 25 percent per annum. However, ICICI's favorable performance may be difficult to sustain over the coming years due to the narrower spreads and the deterioration in portfolio caused by the new environment in India (paras. 24-25). 59. ICICI's management is well aware of the new environment and has already adopted a strategy in the context of the Industrial Finance and Technical Assistance Project to adapt to the changing situation in India and to preserve its profitable position over the coming years. It has also become highly sophisticated in its foreign funding operations and has benefited from India's and its own favorable credit rating to lower its cost on foreign funding. Despite these efforts, the new environment has presented ICICI with new challenges and more complex problems. These are related to foreign resource mobilization and managements the need for more flexibility in establishing domestic lending rates given greater reliance on commercial sources of finance, more complex portfolio management problems, and the need for improved information on borrowers and projects; and better project appraisal technique to assess technology, risk and economic returns. These issues are being addressed in ICICI's new strategy and in the technical assistance component of the Bank Industrial Finance and Technical Assistance Project (Loan No. 2928-IN). ICICI also recently requested the Bank for technical assistance in the area of liability management (paras. 26-31). 60. Bank's Role. The Bank has been closely associated with ICICI since its inception in 1955. It has assisted ICICI in financing projects and in carrying out pol.icy oriented sector work. This loan, which was the last loan exclusively extended by the Bank to ICICI in the form of an open ended line of credit, brought the Bank's total lending to ICICI to US$1,015 million. Under this loan, the Bank was successful in encouraging ICICI to increase its borrowing from the financial market, thus diversifying ICICI's sources of foreign funds and reducing its dependence on the Bank. Apart from this, however, the Bank played a negligible role in influencing ICICI's operation procedures and policies under this loan. The Bank's supervision of the loan was generally light as utilization of the loan and overall performance was perceived to be proceeding exceedingly well. Also, Bank approval of sub-projects proceeded smoothly with the exception of a few cases where the Bank sought clarifications on assumptions used in ICICI's appraisal reports. The Bank's contribution to the project was thus fairly minor given the fact that ICICI was judged during the disbursement period to be handling its affairs very well. 61. Lessons Learned. This loan, along with the previous thirteen loans to ICICI, were successful in transferring well diversified resources to ICICI. These loans, however, did not seriously address the policy environment within which ICICI's lending took place (paras. 32 and 54). Given the nature of the existing policy regime, it is hardly surprising that the sub-projects financed under these loans tended to be largely for import substitution and quite capital intensive. - 106 - 62. The gradual liberalisation of the economy which took place in the 1980s, and the increased competitiveness have led to more difficult financial problems for the sub-borrowers and the financial institutions, and, have created institutional challenges for the development finance institutions in India. This situation has called for a new phase of institution building which is being addressed in the context of the Industrial Finance and Technical Assistance Project (paras. 26-31). 63. Schemes Involving fixed interest rates and borrowers' assumption of foreign exchange risks worked well during periods of stable currencies and interest rates. These schemes, however, have led to adverse effects on the sub-borrowers when both currency and interest rates became volatile (paras. 32 and 50-53). 64. Based on this realization, the Government has developed a foreign exchange risk administration scheme (ERAS), which is designed to protect both sub-borrowers and the development finance Institution against the destabilizing effects of these factors (para. 19). PrJaC CDNPL£rm R~PR INDUSTRIAL CREDIT AND INW8HEN? ROJECT TabLe.lÉl T81 IØDUSTRIAL CEDMT AND IUVBSTET CO~PATUM OP M8DIA LTD. Sumr of Onerations 1982-88 April- Sept. Sanotts Viscal tear Endira 1982 1983 1984 1985 1986 1987 1988 ---------------------- as atlitan -------------------------- RUpe 1,816 1,909 2,381 2,971 , 920 7,952 5.266 Lines o Credit 296 337 550 871 1,360 2,234 1.361 Foretsn Curre~y 915 1,254 1,447 1,700 3,570 2,455 3,350 Bquity lnvestments 40 92 63 82 150 191 130 Leaing - 121 196 281 994 1,456 1,013 Guarantees 166 260 236 183 230 275 72 S~IDeb. Inavstoents 188 220 370 325 561 677 363 Venture Capital -- -- -- -- -- 48 2 IplaL L.UL LA.A LZil AJ1 10.785 La.8JM 11,557 Rupe• 1,697 1,775 2.117 2,218 2,840 5,120 2,315 Lines of Credit 102 293 315 544 Bla 980 477 Fore4» Curreney 1.018 1,096 1,204 1,345 1,791 2,210 631 quity Investmentø 60 80 51 77 132 135 66 S~dfDeb. luvesta~nto 45 72 45 38 80 214 62 Leasin - 32 119 159 370 795 461 Guarantse - - 3 5 7 19 3 Venture Capital - - - - - 30 2 % 2aJI la.IB * La.0Ug g å LUggx mOsTa nL aT aUD IEnaumt rw0Jc? Table.2 T B INDUSTRIM, GRDIT D Ic~ m lum CC0 0U0f av IDIA LTD. (M0=0> (Atua and ftojected 1~an. She~@) (Rs billines) Placat Yars End Nark 31 m Jti z2ii U20 12m I2Ia lSj 123A 12 122m mm21 -------------------Atua---------------------- -------Projectd---- Interat on Loans and Debentures 0.82 1.12 1.30 1.54 1.96 2.51 3.62 4.05 4.77 5.62 Fe* and cmmssion 0.01 0.04 0.05 0.07 0.14 0.27 0.30 0.61 0.85 1.14 Othe ncome ~I .001 L2&1 bu,91 0,40 La2 L2 LII TOTAL roCOIe 0.84 1.17 1.36 1.62 2.11 2.93 4.33 4.91 5.88 7.05 xaterest 0.54 0.80 0.90 1.16 1.44 1.82 3.08 3.40 4.16 5.03 ProviAionfurite Offt aq 0.01 0.01 0.03 0.00 0.00 0.15 0.00 0.17 0.20 0.23 Salaries and personnel 0.02 0.02 0.03 0.03 0.04 0.05 0.11 0.10 0.12 0.14 Dpeltation 0.01 0.01 0.02 0.02 0.02 0.11 0.18 0.36 0.50 0.66 Other 09 L92 0.04 LM UUE 01 LQ7 lt 10J~ 9.17 TOTAL ExP5em 0.60 0.86 1.02 1.26 1.57 2.20 3.41 4.17 5.13 6.25 Profit Betor* Tax 0.24 0.31 0.34 0.36 0.34 0.73 0.92 0.74 0.73 0.80 Ta 0.07 0.12 0.13 0.15 0.16 0.12 0.15 0.11 0.11 0.12 Profit After Tan £b 0.24 0.31 0.21 0.28 0.38 0.61 0.77 0.43 0.64 0.68 Dlviden~ ".A. 0.04 0.04 0.06 0.08 0.09 0.16 0.15 0.17 0.19 Reserve~ .A. 0.15 0.17 0.22 0.30 0.52 0.61 0.45 0.47 0.49 mglat ROS 26.61 22.51 21.21 23.21 24.81 29.01 27.1z 16.71 14.8 13.99 ROA 2.01 1.8% 1.6Z 1.81 1.91 2.49 2.42 1.51 1.31 1.21 a Inrtereat income for 1984.1985 Le mt of proviskos and writc-off*. U The 1984 figure Inmludes trite back of Ra70 1wLon fro= doub~ful debt röservo. Flseal lear End i Decembe 31 up to 1986 and March 31 from 1988 on~a. March 1988 ftLsrs are for 15 amth. Table 1.3: The Industrial Credit and Investment CororatIon of Indla Låmited ;ICICD (Actual and Projected Salane Sheeta) (Ra blill~on) Fiscal Tear End March 31 nu imla ABS ISM Illa ISlA ISM ABS Ii 122N 'm iim --------------------Actua1--------------------------- ------Projected------- Cash and ank Salan=e* 0.99 0.89 0.38 0.42 1.47 1.51 0.75 1.50 1.50 1.50 Other Assets and Advanoe 0.64 0.92 0.80 1.03 1.27 1.53 3.18 2.80 3.40 4.00 Current Assets 1.63 1.81 1.18 1.47 2.74 3.04 3.93 4.30 4.90 5.50 Loana <~rpees) 4.28 5.78 7.70 9.40 11.40 14.12 19.00 23.80 28.01 33.00 Loens (fx) 3.00 $.70 4.60 5.50 6.83 9.27 11.00 13.10 14.71 16.46 Investmenta 0.64 0.75 0.80 1.00 1.20 1.30 1.64 1.82 2.00 2.30 Bet Fled Assets 0- L0 § ."-A .jg .24 ..L0É .SL§ ..2L& ..70, .4..t TOTAL AB8ETS 9.58 12.08 14.33 17.57 22.41 28.13 36.43 45.12 52.32 60.66 Liabllities and et Eorth Ourrent Liabillties 0.41 0.60 0.76 0.98 1.09 1.23 0.98 Rupee Debt 5.50 6.90 8.41 10.12 13.02 15.27 20.00 26.80 31.79 38.03 ore18n Currency Debt 2.93 3.15 4.08 5.14 6.56 9.16 13.22 10.87 12.00 14.00 Net Long Term Debt 8.43 10.05 12.49 15.26 19.58 24.43 33.22 37.67 43.79 52.03 Shure Capital 0.27 0.27 0.27 0.41 0.49 0.67 0.80 0.88 1.00 1.10 RMarve 0,47 .6 081 0 .j2 1. 1.80 .-4. LU JJ I44 Total EquIty 0.74 0.89 1.08 1.33 1.74 2.47 3.21 4.05 4.61 5.16 TOTAL LIABILITIES 9.58 12.08 14.33 17.57 22.41 28.13 36.43 41.72 48.40 57.19 AND NETO1RTR Debt:Equty (times) 10.50 9.60 10.30 9.80 10.40 9.50 9.50 9.42 9.62 10.17 1& Debt: Equlty an deflned in World Sank oan Agreement fom 1988. Flacal Tear End ta December 31 up to 1988 and March 31 from 1988 omards. March 1988 flSures are for 15 month. gougg: ICICI. - 110 - table 1.4: The Indstgial Credit. nd Investaent Cormoration of . lcnda LMted (ICICD Collection Poromaao~ sefer. Rose~sAmtin (Ra bUllmns Igå U2 I2U1 U2. lUI 1M5 M7/19M* A t Oerdu~ at sognin 0.27 0.27 0.31 0.37 0.56 0.83 of the Tear Am~unt Falling Du 1.53 1.72 2.36 3.00 3.73 6.00 Durng the Ytar Amount Collected 1.32 1.49 1.96 2.46 3.10 5.08 During the ear COLLECTION RATIO: .73.3x 74.99 73.41 73.09 71.39 74.41 Collection Prorao e After Res*haulm (Ra billions) ISm 12§ 1221 121 WI 1251 198711 8* Aount Overdu at äegssmn 0.27 0.27 0.31 0.37 0.56 0.83 of the Tea ko~t Fa11g Due 1.53 1.72 2.36 3.00 3.73 6.00 Durla the Year mount Collected 1.32 1.49 1.96 2.46 3.10 5.08 Duria& the Tear Amount &*sohedued 0.20 0.19 0.35 0.35 0.35 0.62 During the Year COL.ECTION RATIO: 82.51 82.81 84.5 81.51 78.71 81.82 v ästeen anths. IS~*zg ICICI. - 111 - Table 1.5 The Industrial Credit anu Invetmnmt Corporation of fdi. L LCd tICICI) Arreags of Princtpal a0ore 2-ant*~ ng (Ra bilions) x=21 im ii 323i U20 12im imZm0* ANmt R*aChedule During the ar 0.10 0.09 0.17 0.17 0.19 0.30 Arars A Tear and 0.13 0.16 0.20 0.31 0.44 0.63 Loans OUtstanding 9.60 12.52 13.26 18.65 23.88 30.36 ARRARS RATIOt 2.41 2.09 2.42 2.63 2.6 3.11 Arroara Of PrInctpal Atter ResehedulIg (Rs billton) xuuK 120 121± arni 12n1 u20t rn0 ArIears At Year £nd 0.13 0.16 0.20 0.31 0.44 0.63 Loan Outs*~a nt 9.60 12.52 15.26 18.65 23.88 30.36 ARå~RS PATIOI 1.4 1.38. 1.38 1.7% 1.82 2.18 * piten mtha. §gg1 ICIcI. - 112 - Table 1.6: The Industrial Cedit and Investuent Cornoration of Indla Lmited CICICI) Average Spread. yoreian Currenc loans .Wn. 1§ Average ytald on foreig 11.96% 12.842 12.24% 12.50% 11.25X curreny Iana Average cost of fund8 8.792 9.362 8.452 8.482 7.202 Gross Spread 3.172 3.481 3.792 4.02X 4.052 Risk 0.59% 0.952 1.411 1.32% 1.60% a~miatratlvg E~penS 0.403 0.392 0.363 0.30X 0.302 (1 of aseta) get Spread 2.182 2.142 2.02% 2.402 2.152 Ru Loan Ave~ae yteld on rup. loana 12.70% 13.302 13.30% 13.53% 13.212 Averase cost of funds 7.552 7.80 8.192 8.25% 9.302 oroas Spread 5.152 5.502 5.11% 5.28% 3.912 Risk 1.872 1.782 1.652 1.802 2.012 Ad~iistrative Expenses 0.402 0.392 0.362 0.302 0.302 (2 of assets) get Spread 2.881 3.332 3.10% 3.18% 1.602 - 113 - Table 1.7: The Inlustrial Credit and Invament Co~moration of Indla Lmited (fCICZ) Marginal Spreads Foran Currena Loan_ im 21 . im aginal yteld over ltbor 2.00 2.002 2.00Z 1.502 Gross Spread 2.002 2.001 2.002 1.50% fusk 0.592 0.95 1.412 1.322 Mnistrative Expenses 0.402 0.39x 0.36% 0.302 (2 of asseta) Nt Spread 1.012 0.66 0.239 -0.12 Ru~@ Lo~n Kargnal ytald on rupec loane 13.30X 13.35% 13.362 13.422 Narinal cost of lunds 8.73 9.002 9.752 11.002 Gross Spread 4.552 4.353 3.619 2.422 alok 1.872 1.78% 1.652 1.802 pMalstrative Expenses 0.402 0.39X 0.362 0.302 (t of assets) get Spread 2.28X 2.182 1.602 0.322 5~ME*R' ICIcr. -114 - Table_1.8: THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED PROJECTED AVERAGE SPREADS 1988-82 1929-90 1920-91 12912 Foreisn Currency Loans Average Yield on Foreign Currency Loans 11.96% 12.48% 12.24% 12.50% Average Cost of Funds 8.79% 9.36% 8.45% 8.48% Gross Spread 4.10% 3.90% 3.80% 3.70% Risk 1.70% 1.70% 1.70% 1.70% Administrative Expenses .30% .30% .30% .30% (% of assets) Net Spread 2.40% 2.20% 2.10% 2.00% Ruee Loan Average Yield on Rupee Loans 13,50% 13.80% 14.10% 14.20% Average Cost of Funds 9.70% 10.10* 10.50% 10.80% Gross Spread 3.80% 3.70% 3.60% 3.40% Risk 2.10% 2.10t 2.10% 2.10% Administrative Expenses (% of assets) .30% .30% .30% .30% Net Spread 1.40% 1.30% 1.20% 1.00% - 115 - Table 1.9 The Inustrial Czadit ad Investmnt Cor~oration of India Limitad MCICI)C Resourow Poaltion as at December 31. 1988 (Rs billlons) Share C~ptal 801 Reser»* 2,408 Loans 3,326 Depos9ts and Other -W Total Resouraes 36,546 Loam Portfollo 29.334 Invesemanta 1,640 ddvan Pay~aht for Credtor 670 Other Asat.- L14 Cath Avallable for Dlaburaem2t Uadisbur*ed Cmltana af LJL gI Imludeas US$116.72 m1Ion in foreign 0urrncy Loans. Rs 100 - U86.84. - 116 -ANN 2 PROJECTCOPE ONR OR FOURTEENTH INDUSTRIAL CREDIT AND INVSTMENT PROJECT (LAN 2051-IN) THE INDUSTRIAL CREDIT AND INVESTENT CORPORATION OF INDIA LTD. Table 2.1: INDUSTRY-WIDE DISTRIBUTION OF PROJECT ASSISTANCE (Rs 8il1ion) 1987-88 1988 As of Septme 30, 1986 (Jani-Mar (Apc-Sep) 1988 o. of Appro- % to po. of Appro- Z to no. of ppro- X to mo. of Appro- a to Proj. vala Total Proj. vals Total Proj. vals Total Proj. vala Total Suar 15 147.5 1.8 22 190.2 1.7 14 223.7 2.6 225 1644.3 2.3 Pod Produta 15 227.0 2.7 27 377.6 3.3 11 271.8 3.0 137 1337.3 1.9 Textiles 66 782.0 9.3 112 1176.2 10.2 67 411.3 4.5 887 7481.1 10.5 Paper & Paper Products 12 130.1 1.5 21 443.0 3.8 7 84.1 .9 252 2811.9 3.9 Rubber Produota 9 180.6 2.1 2 40.2 .4 6 422.5 4.6 99 1262.5 1.8 saai T~ttrial Chemtlealg 25 770.1 9.1 32 859.0 7.4 15 705.4 7.7 386 5636.5 7.9 Fertillsera Pettoldes 11 509.0 6.0 10 686.2 5.9 6 1712.6 18.7 121 4588.7 6.4 Other Chmentla 39 741.4 8.8 46 1604.0 13.9 37 1176.3 12.8 536 8071.6 11.3 Cnt 15 951.8 11.3 13 971.4 8.4 17 881.3 9.6 204 6301.9 8.8 Basl Nctal Industries 28 682.4 8.1 38 1299.0 11.3 31 706.6 7.7 485 6051.5 8.5 Natal Produata 10 250.0 3.0 3 .185.0 1.6 7 80.2 .9 201 2402.3 3.4 Nachnery (exoep Ilectricals) 35 442.2 5.2 38 607.1 5.3 30 582.6 6.4 585 5059.9 7.1 Electrical qupmet 30 731.7 8.7 57 1062.8 9.2 23 378.2 4.1 505 4904.0 6.9 Transport Equpmnt 17 419.6 5.0 27 518.7 4.5 11 255.3 2.8 296 4195.0 5.9 21etrietty Cenaratlon t Dtaributron 4 325.3 3.9 • - - - - - 40 1052.8 1.5 Shippin 1 10.0 .1 1 96.0 .8 - - - 18 743.1 1.0 NIsellaneous 59 1132.7 13.4 74 1434.5 12.3 37 1288.7 13.9 686 7774.9 10.9 T0TAL 391 8433.4 100.0 323 11550.7 100.0 301 9180.6 100.0 5663 71319.3 100.0 - 117 - PROJECT COMPLETION REPORT FOURTEENTH. INDUSTRIAL CRED11 A INVESTMENT PROJECT (LOAN 2051-IN) Table 3.1: THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. Economic Rates of Return of Selected Companies Economic Rate of Return (ERR) Loan No. Nme..of ComanX Eected Agt%g 8058 Sundaram Fasteners Ltd. 19 21 8076 Aurofood Pvt. Ltd. 32 18 B088 Bimetal BearinSs Ltd. 36 7 8210 Sundaram Clayton Ltd. 43 68 8232 Nodi Xerox Ltd. 31 3 8275 Lakshmi Machine Works Ltd. 60 62 ATIACHMENT I -119- N. J.JHAVERI a0 mXeWN OCP/ 68005 Febrary .:;i. Mr. Michael A. Gou:4 Chief: Industriol Finance 2ivn. Asia - V World Sank Washington DC 20433 V. S.A. Dear Mr. -Gould This is with reference to your request for Priject Completion Report of IRD 14th line '2051 - INi to ICzC. We have now compiled the necessary information and enclose a copy of the Completion Report for your use. Trust this will meet your requirements. We regret the delay in submitting this report. With kind regards, Yours sincerely. Ech N. 'J. Jhaveri - 121 - TBI ZNDUSRA CREDIT AND INV2STMENT CORPORATION OF INDIA LIMITxD COMPL1TION RXPORT 036 IBRD FOURTZENTH LINE OF CREDIT (2051-IN) -*------------------**-***-*----*------- A loan of US$ 150 million (Fourteenth Line of Credit - 2051 IN) carrying interest at 10.60% per annum was sanctioned by the World Bank (Bank) to ICICI in 1981 for augmenting its foreign currency resources required for its operations. The loan agreement was signed on October 8, 1981 and the loan came into operation with effect from December 3, 1981. The original terminal date for completing withdrawals was March 31, 1988; however, the date was preponed to May 31,1987 to facilitate prepayment of the loan by ICICI. The total amount disbursed under this line was USS 147.892 million and the balance amount of USS 2.108 million was cancelled/ transferred to other lines available with ICICI. With a view to reducing the interest burden of ICICI as also its clients to whom sub-loans were onlent out of this line of credit, ICICZ prepaid the entire outstanding loan on July 15, 1987 out of proceeds of commercial loan raised at a much lower rate of Interest. - 122 - Though the asiatance under the Fourteenth loa was originally sanctioned to 289 projects comprising a .A' projects and 287 '9' projects, the actual number of projects utilising the assistance (atter exclusion of 14 '8' projects for which assistance was cancelled or transferred to other lines) amounted to 275. 1I. PROJC IDETIICAIO A. Obi2Ctives_andA 3Nectations Negotiations for Fourteenth Loan to ICICZ were held in Washington D.C., in August 1981. The delegations. representing the Government of India (GO). the ICICI and the Bank reached an agreement on the Loan Agreement. The delegation discussed and reached understandings on the following points: 1. Diversiflation of trsign gxchane RenUeeA: The ICICI representatives confirmed that ICICI would raise a total of US$ 150 million equivalent in foreign currency from commercial, export credit and other sources , excluding RSW capital aid. ICICI representatives also informed that ICICI had entered into discussions with various merchant and commercial banks and export credit agencies and expected to complete arrangements by December 31, 1981 for borrowings of about US$ 75 million equivalent -123 ad the timing. amounts and sources of the remaining borrOwing programme would be determined by ICICE in the light of market conditions and Government policies. However, it was confirmed by ICICI representatives that these funds would be raised in such a way as to commit them, as far as practicable, in parallel with the commitment of the Bank's proposed loan. 2. The Indian delegation - while accepting a ratio of 1:1 between the amount of this loan and ICICI's expected borrowings from sources other than XtW capital aid - explained that this should not be construed as a precedent for future loans to ICICI. for which GO! and the ICICI expect to be able to negotiate a more favourable mix. The Bank's delegation responded that each loan or credit was negotiated on its own merits based on the situation prevailing at the time. 3. 81adine of Dank and Gommeial Ufnds: The ICICI repreatatives confirmed that. where appropriate . ICICI would continue to bleand Bank and other shorter term foreign currency funds. It was understood that the procedures for blending, established at the negotiations for the Thirteenth Loan (modified to accommodate export credits) would be adopted. ICIC1 confirmed that. as in the'Thirtseth Loan, In the aggregate at least 10 of the 124 - proposed foarteenth Los would be disbursed within two years of afectiveness and 25t repaid within seven yeers. The bank's delegation stated that this would be acceptable. 4. Share Cagital- and the Debt aUity Ratio: The XCICI representatives confirmed ICIC1's intention to issue by December 31. 1981. Rs. 135 million in subordinated convertible debentures. These debentures would be subordinated to all existing and future debt and would be non-redeemable other than by full conversion into ordinary shares by the Corporation. The Bank representatives confirmed that IRD would, for the purpose of calculating ICICI's debt:equity ratio, treat these debentures like *consolidated capital' and exclude them tram "debt' from the time of their issue. The 2CZC1 representatives pointed out that XCICI would be able to maintain a debt:equity ratio within the agreed limit of 11s through 1982. but that, thereafter, a relaxation in the limit would be desirable. The Sank representatives pointed out that, as In the past, ISRD would be prepared to review its position whenever necessary. S. n : ICXCIs procedures for scrutinizing sub- borrowers' procurement practices were discussed. For items to be financed from the proceeds of the Bank loan. international prudent shopping is to be used, as in the - 125 - past. For Individual contracts of US8S 5 million or more to be financed from the loan. ICICI would make special efforts to make sure that sub-borrowers have obtaine4 the widest possible range 4t quotations, including - if applicable - quotations from new sources of supply. The representatives of ICICI explaine that ICICI's appraisals always analyze the sub-borrowers' proposed procurement procedures with the objective of ensuring that required supplies are being obtained in an optimal way. The bank's delegation confirmed that this procedure was acceptable for the proposed Fourteenth Loan. 6. Industrial Studies: The ICICI representatives presented outline descriptions of the three major industrial studies (namely (a) Study on Exports (b) Study on Energy Utilisation in Industry and (c) Study on Electrical Equipment Industry) that ICICI intended to undertake during the course of the next five years and confirmed that they would continue to discuss with the Bank the progress of these studies. 7. Statement of Financial_and nerational StrataM: ICICI's representatives submitted a Statement of Financial and Operational Strategy which had been approved by ICICI's Board. After discussion and the inclusion of minor modifications, as per authority given to the ICICI delegation by ICICI's Board, the Bank's delegation confirmed that the Statement was satisfactory. -126- r 8. Proect Cnaletion Re_ort The 1DRD confirmed that the report referred to in the Draft Loan Agreement need not incorporate a full ex-post evaluation of all subprojects financed out of the Loan. As in the past. ICICI would consult with the bank regarding the choice of a suitable sample out of the subprojects in operation for full ex- post analysis. 9. ICICI's tree Limit: For the purpose of determining whether a proposed subloan or investment, out of which an Investment Project is to be financed. is below or above the free limit of US$ 8 million, the amount of such subloan or investment shall be aggregated with "any other amounts financed or proposed to be financed by the borrover out of proceeds of the loan or prior loans for the same project or for any project directly or materially related thereto*. In this connection, the IDRD team and ICICI representatives reached the following understanding with regard to the broad criteria to be used for determining whether a project under reference to IBRD for prior approval (hereafter called project under reference) is materially related to an earlier proiet(s) in terms of Section 2.02 (b) of the Loan Agreement: (a) the project under reference will be substantially under the same corporate structure as the earlier project(s); and - 127 - (bl the success or failure of the project under reference will have a direct effect on that of the earlier project(s) and (c) the project under reference relates to the expansion. replacement, improvement of facilities financed under the earlier project(s) or to the production of similar or complementary items or items forming part of a vertically integrated production process; and (d) the date of sanction of the subloan for the project under reference is within 3 years of completion of the last of the earlier project(s): further (e) in cases where the Bank has already approved a subloan for an investment project and ICICZ proposes to make a further subloan for the same investment project to cover minor cost overruns or equipment changes, the Bank's prior review and approval of the further aubloans would not be requireed it the amount of the further subloan is less than S 500,000 equivalent." 10. Data when Zxenditures are Made: The IBRD team confirmed that, for the purpose of Loan Agreement, the date on which expenditure would be deemed to have been made would be the date on which payment is made to the -128- supplier for goods and services required for an Investment Project. In the case of letters of credit for payment on a post-shipment bests, I9RD would interpret the date of expenditure to be the date on which payment is actually made to the supplier and not the date of opening of the letter of credit. As per the understanding at the time of negotiations for the loan, ICICI took the following steps to implement or comply with the same ; 1. Diversification of foreian exchange resources: As indicated* at the time of negotiations, ICICI concluded borrowing of over USS 150 million equivalent during the ensuing 2 year period. Of. this a Floating Rate Note issue of USS 30 million was made in November 1981. In addition. ICICI raised a tri currency Buro Loan of SF 30 million. DM 30 million and Yen 3 billion in October 1981. Further, ICICI arranged for an export line for Pounds 5 million in March 1982. Zn addition. ICICI raised US$ 12 million in September 1982 to prepay the outstanding loan raised in 1978 and thus reduced the interest rate from "Libor + 14" to "Sibor + 3/8%". ICICZ also raised a Bure Currency loan of USS 30 million and Dn 45 million In February 1983. As regards the Export Credits, ICICI signed a Swiss Frame Credit for SF 10 million in September 1983. - 129 - Apart from commercial borrowings. ICICI signed three agreements of D 25 million, DN 20 million and D 20 million in 1982 and 1964 to augment the resources for meeting its increasing needs. ICICI thus raised tunds as agreed to fulfil its commitments. 2. No comments are required on this. 3. Blendine of Sank and Commercial Funds: Apart from the traditional source of funds from International Institutions. ICICI raised funds from commercial sources. With the funds .available from both the sources, ICICI did provide funds for some projects, whose requirements were sizeable. from both the sources and thus resorted to blending of Bank funds and commercial funds. Whenever funds were provided from both the sources, repayment of commercial borrowings had shorter maturity period than IBRD sub-loans. It my be added that an amount of US$ 54.702 million (37% of the total loan amount) was disbursed within a period of two years from the effective date of December 3. 1981 as against the agreed 10% of the total loan amount. As for the repayments of loan is concerned, the entire loan was prepaid on July 15, 1987 as against a stipulation of repayment of 25% of the loan in seven years. - 130 - 4. Share Capital and Debt Baity Ratio: As per the schedule. 1CICz Issued fully convertible debentures of Rs. 135 million In 1981/82. These were subordinated to all existing and future debt. Since then the debentures have been fully converted into equity shares (Rs. 90 million in 1985. and Rs. 45 million in 1986). For the purpose of arriving at debt equity ratio, as agreed between the Bank and ICICI, the convertible debentures were treated as part of consolidated capital and deducted from debt. With this, as per the estimates, the debt/equity ratio of ICZCI remained within the overall limit of 11:1 (1982 : 9.6:1. 1983 : 10.3.1, 1984 : 9.8:1, 1985 10.4:1). S. Prourent=: As indicated at the time of negotiations. ICICl'a appraisals always analyse the sub-borrowers' proposed procurement procedures with the objective of ensuring that the imported equipment is obtained in an optimal way. As for the high cost projects requiring import of equipment involving substantial foreign exchange, ICICI and the other All-India Financial Institutions adopt a somewhat sixilar system like, International Competitive Bidding (ICB), with special importance attached to relevant factors such as product-mix, delivery schedule, cost of operations and upto-date technology. -131- 0. Industrial Studiess As suggested by the bank. ZCICZ carried out studies on Exports, Energy Utilisation and Electrical Equipment Industries a (a) study on exports was completed and published. (b) Study on Energy Utilisation was carried out in three phases, namely : hag : Covering the cement and paper industries thAs g , : Covering power-4atensive industries. namely, caustic soda. soda ash. aluminium, mini steel and ferro alloys. h88 MII : Energy conservation equipment and instrumentation for monitoring energy efficiency. The studies on all the phases have been completed. On each study a background paper was prepared ad a workshop wherein experts presented papers, was held. for each phase. the background paper, papers presented by experts and proceedings of the workshop have been printed and widely circulated. (c) Study on Electrical Equipment Industry z 1 detailed study of Electrical equipment industry was carried out by ICICI as agreed upon with the Bank. Various aspects of the industries were studied. The study was broken in the following sub-categories of the industries like: -3132- i) Power Generation Capacity i Power generation actuals, expected and additional capacities to be installed In the light of five year plan upto 1994-95 were studied alongwith the expenditure. 11) Transmission and Distribution: The study was conducted regarding power transformer, power cables, their current installed capacity, growth rates in organised and small scale sectors, expected capacities to be installed till 1992 alongwith the,technology and problems faced by the industry III) Switchgear and controlgear Blectric Motors : As outlined above, study was made in these product lines also. 7. Statemnt of ina"ial and Oneratipnal Stratar:Aa Indicated In the Statement of Financial and Operational Strategy of ECICI* submitted to the Bank, XCICI's strategy is Influenced by Government's national development plans, financial resources allocated to different sectors by Government, and an active Institutional intra-structure available at the State level. ICICV!s operating strategy, besides being complimentary to national priorities, consists in channelising funds to key sectors where supply gaps are anticipated. Briefly, the strategy covers the following : - 133 - a) Inanaatrial .Rriorities* industries which would receive special attention from ICICI, may be broadly enumerated as under (1) Export oriented industries; (11) Infra-structure Industries such as cemeat,fertiliters and transport as well as ancillaries connected with them: (iii) Efficient import substitution industries in which India has comparative cost advantage e.g. skill- intensive light engineering industries and capital goods industries; (iv) Investment in modernisation eand technological up- gradation which results in improved efficiency in terms of cost and quality; and (v) Investment related to conservation and pollution control. b) National Soca-Aeconomic Obi vjes Apart from subserving the objective of efficient allocation of resources as judged from economic indicators, ICICI would give weightage to national socioeconomic objectives, via. (1) backward area development; and (Ii) encouragement to new entrepreneurs. - 134 - JCXCZ has been observing these guidelines while exteading financial assistance to projects. XCICZ assistance to priority sectors increased from Re. 2710.6 million in 1980-81 (86.84 of the total assitance sanctioned In that year) to Re. 3963.0 million in 1983- 84 (96.4%) and to Re. 8187.2 million In 1986-87 (93%). 8. Proiet Coasletion Renort: No Comments are required. 9. ICICI'a Free limit: There are two projects (project At and A2) which were A category projects, i.e. beyond the free limit of US$ 6 million: other projects were within the free limit. 10. Data When Expenditures are made: No comments are required The period 1981-82 to 198-87. during which the 14th Line of Credit was utilised by ICICI, covered four years of the country's sixth five year plan (1981-82 to 1984-85) and the first two years (1985-86 to 1986-87) of the seventh plan (1985-86 to 1989-90). The economy achieved the annual growth of 5.2 per cent for the period 1981-82 to 1984-85: however, the growth of the economy slowed down during the first two years of the seventh plan. The economy grew at 4.9 per cent in 1985-86 and at 4.1 per cent in 1986-87. Overall, during the period the annal average was slightly below 5 per cent. However, there were wide annual variations. The highest growth rate of 7.7 per cent was achieved in 1983-84 and the lowest of 2.6 per cent in 1982-83, the previous year. - 135 - The average annual growth rate in agricultural production between 1981-82 and 1986-87 was 3.7 per cent. However, as a result of uneven rainfall conditions. agricultural production exhibited sharp annual fluctuations. In 198I-82 the rate of growth in agriculture was 5.6 per cent. In the following year, 1982-83, agricultural production suffered from unfavourable weather conditions and insufficient rainfall with the result that agricultural production declined by 3.3 per cent. The exceptionally good monsoon in the next year, 1983-84. took the growth rate far above the long term trend to 13.7 per cent; however, in 1984-85. agricultural production increased only marginally by 1.2 per cent. During the first two years of seventh five year plan, agricultural production increased by 4.6 per cent in 1965-86 but declined by 5.6 per cent in 1986-87t ii)I Between 1981-82 and 1986-87 Industrial production rose at an average annual rate of about 7.6 per cent. The index of industrial production (1980-81 * 100) rose by 9.3 per cent in 1981-62 on top of the growth of 4.0 per cent in 1980-81. This turn around was mainly due to the substantial improvement in the availability of power and coal. Substantial recovery in agricultural production leading to improved availability of agricultural Inputs also provided impetus to industrial 0 -136 production. In 1982-83 drought affecting agricultural performance cast its shadow on industrial production and the growth rate decelerated to 3.2 per cent. The textile strike which started in January 1982 also had its adverse impact. Industrial growth accelerated in the next year. 1983-84. to 6.7 per cent: this momentum was maintained in 1984-85 when the growth rate reached 8.6 per cent. The industrial growth rate accelerated further in the first two Years of the seventh plan; it was 8.7 per cent in 1985-86 which improved to 9.1 per cent in 1986-87. iii)- = In value terms, exports rose from Rs. 78 billion in 1981-82 to Ra. 126 billion In 1986-87, that is by about 12 per cent per annum. Rxports rose by 16,3 per cent in 1981-82. There was an increase in exports of 12.8 per cent and 11.0 per cent in 1982-83 and 1983-84 respectively. In 1984-85, the terminal year of the sixth plan, exports increased by 20.2 per cent to.reach Rs. 117 billion. During the first two years of the seventh plan, the performance was mixed. In 1985-86 export growth was negative at 7.2 per cent but in the next year 1986-87 exports increased by 15 per cent. - 137 - A. overall onerations of the loan A table giving the details of sanctions, commitments and disbursement is presented below : takA 1 SanctIons, Comitments =I Disbursements (USS in million) Year Sanctions Commitments Disbursements 1961 57.176 - - 1962 32.052 59.354 16.395 1983 61.282 49.090 38.302, 1984 29.846 28.912 44.950 1985 (4.235) 14.023 35.720 1986 (10.272) 0.354 12.317 19876 (17.957) (3.841) 0.203 147.892 147.892 147.892 ea as.. note: Parentheses indicate negative figures * The last disbursement was made on May 5, 1987 and the loan was treated as closed in view of prepayment on July 15, 1987. It will be observed from Table I that the entire amount of the 14th Line of Credit was sanctioned by 1984 and was almost entirely committed by 1985. The major part of the disbursement was completed by 1986. Terminal date for completing withdrawals for the balance amount was March 31, 198. however, because of prepayment of loan on July 15, 1987, the last disbursement was made by the bank in day 1987. - 138 - VIP~XP 2 inn 13fOM 0n 4uly t5, 1987. ICICI prepaid the outstanding opount of the Beak Loan (S 120 million) by availing of a short-term facility from State lank of India. since the substitute borrowing package was likely to take some time to raise. The prepayment was considered necessary on account of the high oeffctive cost of the loan. particularly with regard to the following aspects : (1) "igh Interest QU&: The 14th Line of Credit from the lank was the last of the fixed rate loans received by ECICI from the Bank and carried an interest rate of 10.6% p.a. Since 1983, the Bank has commenced lending at a variable lending rate (variable lending rate at the time of prepayment was 7.67%). It was felt that considering the interest rates prevailing in the commercial markets, it would be possible to raise similar loans at much cheaper rates. (1i) Xac t CuraMX PiUs ftLtu: The 14th Loan happened to be the first one under the Currency tooling System of the Bank. The disproportionate weights of currencies in the pool could not even out the exchange impact for every borrower. The falling dollar then had a weight of about 10% while the escalating currencies together accounted for about 90% of the composition of the pool. This led to substantial exchange escalation for an Indian borrower. - 139 - (iWi)EarEad .SM.E _aciiq&z: The Reserve Bank of India permits clients of financial institutions the facility of booking foreign currency liability (forward cover) upto one year ahead of the due date. To enable booking of a forward cover, the currency and the amount of the liability should be known at the time of taking the cover. However, under the Currency Pooling System, the Bank called for repayments of principal and payment of interest in a currency of their choice (vehicle currency) only 2 months before each due date, thus making it impossible for the clients to take advantage of forward cover. As it was not possible for the Bank under its policy to reduce the rate of interest or fix the vehicle currency twelve months in advance, the loan was prepaid on July 15, 1987 in consultation with Goverament of India and the Sank. At the time of prepayment, the qptstanding amount was equal to a about 8 120 million (232 subloans). As already mentioned, the prepayment was initially effected by availing of short term facility from State Bank of India and was later replaced by a substitute borrowing. The substitute borrowing comprised of US S (45%), SF (23%). Ten (21%) and DH (11%) at a weighted average fixed rate of 7.69% p.e. Thus the refinancing programse has enabled a saving of about 3% in interest for ICICI's clients. ~I ~q II- ~g ~5 ~ 4> ~ 8~ ~ .0 ~I. - '4 I * MI I U EI fl fl - - * 4> 2 -: .g4 - '4 ~ Iii *0* M -~ o ~ffI 0 ~I 3 3 8 8 '4 il! II .44 * c,i '4 '.4 g og -.4 I I j~,II~ u REI 'i '-I ~S4 fl .44 i iqt'i ~ - ~ 1W ~I fl -. ~ 4. -;q- 41 001 38 *~ I ta B~ I~I il - ~o~s ~ * us-m ~ 0 4,'4* I l li '1* 'gu og at i i I" '4 * ~ g i~IIi I Iii - 141 - It would be observed from the above Table zi that out of the 275 projects assisted under the 14th Line of Credit. 42 were new projects set up by new companies. 28 projects were diversification projects and 62 were expansion projects by existing companies; there were 66 projects sanctioned for the purpose of modernisation of the units and remaining 57 projects were equipment loans by way of replacement. balancing equipment, etc. in terms of quantum of foreign currency assistance provided, the new companies accounted for 21.7% of the total foreign currency assistance, diversification and expansion accounted for 7.9% and 26.3% respectively and modernisation and equipment finance accounted for 26.8% and 17.3% respectively of the total foreign currency assistance. In addition to foreign currency loan assistance, ICICI also provided rupee assistance to some of the projects covered under this line of credit in the form of rupee loan and underwriting and/or direct subscription of shares/ debentures to meet a part of the rupee requirement of the cost of project. Such assistance was of the order of Rs.1222.997 million comprising of rupee loan of Rs. 946.842 million and underwriting/direct subscription of shares/debentures amounting to Is. 276.155 million. It might be observed from the Table-II above that 21.7% of the total foreign currency assistance has been sanctioned to 62 new companies which received 42.5% of the total rupee assistance. The rupee assistance extended was of larger proportion than the foreign currency assistance because the -142- r rupee regVIreseats for the new projects are also taken care of by ICICZ sad other financial Institutions. The situation is rather different in case of expansion and diversification project as can be seen from the table, 34.2% of total foreign currency assistance has been extended to 90 expansion/diversification projects whereas 22.0% of rupee assistance has only been extended to those projects. This is because the existing units can finance the rupee requirements for these projects mainly through internal generation. Total foreign currency assistance for modernisation programmes sanctioned to the projects assisted out of 14th line was the largest as compared to other purposes and formed 26.8 of total foreign currency sanction. This is in keeping with the policy of ICICI to help finance modernisation schemes. b) Size of Assistance : Table III below gives details of sisewise assistance extended to different projects. TABLE - III Assislance sanctioned hl al gL XM8 undSe I=E lhZh =lia Amount of loan No. of Amount (US$ In million) Projects (USS in million) Less than 0.250 87 13.393 0.251 to 0.500 86 31.656 0.501 to 0.750 45 27.073 0.751 to 1.000 24 20.200 1.001 to 2.000 24 31.274 2.001 to 4.000 8 19.333 4.001 to 6.000 1 4.943 Above 6,000 * * 275 147.892 * The two projects via. At and A2 were sanctioned assistance of S 2.201 million and S 2.640 million out of this loan but they were still treated as 'A' projects i.e. above free limit of 6.000 million by virtue of the definition. -143- The average size of the project financed out of 14th line of credit works out to be US$ 0.538 million against US$ 0.791 million sanctioned out of 13th line of credit Indicating that comparatively larger number of sub-borrowers were financed through 14th line of credit (275 against 121 under 13th line) than those out of 13th line of credit. Zt might be noted that 87 projects (32% of the total projects) received assistance less than S 0.250 million. As many as 242 projects (88% of the total) received assistance less thean 8 1.000 million which is far below the free limit of assistance for this line of credit (i.e. S 6 million). c) Indnutry-wise classification gL assistance - Table-IV below gives industry-wise assistance sanctioned to projects under 14th line of credit : ,:,，弘；，。，訕斗，，斗祈一；，鉤，, 〕1 11【‘I,!!i！【‘!,!}&I&―。． }!，〕一！‘一！&i&i&!&&.! 11-&-1二‘&&&,&&&&&&&-‘蔔！,.!l-！、 !―藝―蘇遲：屆，毒擊讓氯蘿藝若載蘿雪二―。，i曆毫”· 蠶·鳥憤 ,&―汗旦界迂 ―劃1汗奉籐讓叢露這霆“權‘一‘讓”―會蒙弄“ ―劊！,,&&&！藝“:‘婪藝‘&-& 145 it would be observed from the above table that out of total foreign currency loan assistance of Re. 4859.234 million sanctioned to projects out of 14th line of credit (and assistance to the $am* Project$ out Of Other lines of credit) major share of assistance wos.oxtonded to fabricated metal products and machinery (Re. 969-561 million), chemicals Including man-made fibres (Re. 947-167 million). cement (Re. 623.089 million) and automobile and ancillaries (Re. 612-060 million). foreign currency assistance to these four industry groups together amounted to Re. 3151.877 million which forms 64.9% of'totol foreign currency assistance. Industry-visa analysis of 13th line of credit when compared with the 14th line of credit shows that percentage of foreign currency assitance out of 14th 2"* of credit has decreased in case of industries such as paper a paper products, chemicals and petrochemicals & basic metal products and has increased In case of cement, textile, and fabricated metal products and machinery. Assistance to automobile and electrical equipment industry, however, was move or less at the Game level. d) Backwagd Arga Qevelooment - Details of assistance sanctioned for the projects set up out of the 14th Line of Credit In industrially backward areas and other areas are given in the Table V below -146- TAIL - V 4Mlaum utat 1 titc9 acutie WA Lt UM a UaL (fs. In atilon) Ita" assistance go. of currrt Direet Total 4 to Projocts assistamce n Uterritine Subsctiation RuM total total W Wkwvd A"es 4 1682.511 60.789 15.16 14.612 831.5417 2S13.4S8 s1.3 Otwr Arm 17 3175.923 281.053 ".982 65.415 391.650 367.373 U5.7 75 4858.U3 946.8q 196.128 8O.027 222.997 6081.231 100.0 ft auusts efatirOff so iftelum aststate for UN Sm orotect sanctioned ~ser other Lifas of Credit. It may be observed from the above Table V that out of 275 projects financed out of this Line of Credit, 88 projects were located In industrially backward areas. Total assistance sanctioned to these 88 projects amounted to Rs. 2513.858 million and formed 41.3% of the total assistance. It might be aeationsd that total assistance sanctioned to projects A backward areas under 13th Line of Credit was Re. 711.224 illion Mich formed 42.9% of the total ossistance sanctioned for the projects financed under 13th Line of Credit. Thus, the thrust In development of backward area, while financing the projects has been continuing. -147- e Prioritw Santers: As Indicated earlier in the report, tcCI channelises its industrial assistance as per the strategy formulated In the light of the government guidelines issued from time to time and In line with the national Industrial priorities. such as promotion of export oriented industries, development of infra- structure industries. modernisation and technology upgradation, backward area development. encouragement to new entrepreneurs etc. Table VI below gives utilisation of 14th Line of Credit as per priorities laid down by the Government. ?AL * VI Piority-wis Distribtion Assisulane sanctioned USJU I= MB Total amount No. of sanctioned (iast. Projects rupee aswIstance) % (R ain million) A. tigh Priority Industries 107 3085.923 50.8 D. Other Priorities 119 2239.644 36.8 C. Miscellaneous 49 755.664 12.4 275 6081.231 100.0 --- ---****- **- it may be seen that out of the 275 projects assisted under 14th line of credit. 226 projects we* sanctioned to projects having industrial priorities as per the government guidelines. Total assistance sanctioned to these 226 projects anauted to Re. 5325.567 million which formed 87.64 of the total assistance sanctioned for these 275 projects. -148- iaexare 1t gives data regarding estimated and actual cost and estimated and actual schedule of completion of projects and the cost and time overrun in respect of projects financed under the 14th line of credit. A. Schedule of comDetion of Droiect. Out of 275 projects assisted under the 14th line of credit, data regarding time taken for completion of projects and the final cost in respect of 242 cases has been analysed. Table VIZ below shows the extent of time overrun in respect of various, types of projects assisted under this line of credit Table - VII Tie overrun Ruaber of Projects Extent of delay ---------------------------------- Ahead of 0 to 6 8 to 12 over 12 Type of Project Schedule no Delay Saths soaths auths Total NOW 5 9 10 13 15 52 Diversitication 1 9 6 1 8 25 Expasuis 5 20 15 4 9 53 Noderisatien 0 30 15 8 7 60 Other Projects 1 28. 15 6 2 52 12 96 61 32 41 242 -e -------e -----*-* -me ------ -149- Zt might be seen that out of the 242 projects. 12 projects were completed slightly before schedule. 98 were completed on schedule. 61 projects were completed with a delay of upto 6 months, 32 projects were completed with a delay of 6 to 12 months and 41 projects were completed with a delay of over 12 months. Some of the reasons for projects getting delayed were changes in the scope of projects and tinalisetion of equipments, delay in getting government clearances, delay in tying up means of financing. long delivery schedules, liquidity constraints and Improper planning and execution, etc. The data in respect of these 242 projects relating to estimated and actual cost of completion of the project is analysed and given in the table V11z below s TAB - VIZ1 Saving No overrun Overrun Type of Project in costs in costs In costs Total a------ ------------- -------- New 7 11 34 52 Diversification 3 15 7 25 Expansion 11 19 23 3 Kodernisation 5 31 24 40 Other Projects 9 29 14 52 35 105 102 242 - 150- Out of the 342 projects. 102 projects had overrun in their project costs, 35 projects had savings (including 4 projects where scope of the project was reduced subsequently) while in the case of 105 projects, actual cost was equal to the estimated cost. The actual cost of 242 projects amounted to Re.- 19266.43 million against the estimated cost of Rs.17052.52 million, showing an overrun of 13.0b. A comparison of estimated and actual cost of 102 projects, which had overrun, indicates that the overrun was 25.1% with estimated cost of Ra. 10165.52 million and actual cost of As. 12721.95 million. The projects which faced overrun in new, diversification and expansion category, their percentage of overrun was 31.5%, 14.7% and 21.6% respectively,whereas projects which faced overrun in modernisation and other equipment loan category had 19.2% and 13.9% overrun respectively. An analysis of cost overrun revealed that the escalation in the final cost was mainly because of additions and changes made in the plant and equipments because of changed scope of the project, increase in pre- operative expenses,increase in cost of civil construction, currency and price escalations, etc. Because of the liberal Industrial policies and high competitiveness on one side and inflationary pressures on the other side, - 151 many uaits had to make necessary changes In the scope of the project in order to make it more competitive and viable. The changes resulted many times in odditions of equipments or capacities to the original project envisaged at the time of sanction. These projects, thus faced overrun as compared to their estimated costs. The component of interest burden in pro-operative cost escalation was higher than the others. Cost escalation in case of building and site development was high because of high appreciation rate of land and cost of construction. Appreciation of major currencies like ON, SF and Ten against rupee during last few years affected most of the projects adversely. Annex III gives data on the financial performance in respect of 88 companies. Out of these 88 cases, in case of 21 companies the year of normal operations has not yet reached. Of the remaining 67 cases. actual sales in the normal year were more In 39 companies than the estimated sales while the actual sales were less in 28 companies as compared to their estimated sales. Likewise, 42 companies earned profits as estimated while 25 companies suffered losses to the projected normal year. - 152 It may be added In this connection, that several companies have not maintained separate date on the financial performance of projects and hence the same are not available. As a result in some of these cases, the date have beengiven for the company as a whole rather than for the specific project. YL BCONMIC *ERORK&K Anneaure ZV-A provides data regarding economic rate of return In respect of 7 cases. Annexure XV-B and XV-C provide available data regarding export performance and investment per job created for projects financed under this line of credit. Of the 275 projects assisted under 14th Line, 10 projects were in arrears on June 30, 1988 and in respect of 64 projects (including 5 companies which are'presently in arrears) revision in repayment schedule was granted earlier in view of the difficulties faced by them. The companies in arrears were Punjab Anand Batteries Ltd, Dandeli Steel & Ferro Alloys Ltd., Ahmedabad Mtg. & Calico Printing Co. Ltd., Bells Controls Ltd., Machinery Mfrs. Corporation Ltd., Kunal Machinery Mfra. Ltd.. United Pharma Ltd., Wardhaman Automotive Blectricals Ltd., Shree Chamundi Mopeds Ltd. and Nirlon - 153 - Synthetic fibres & Chemicals Ltd. A brief account of the problems faced by these companies and the present status is given in the paragraphs that follow : Punjab Anand Batteries Ltd is engaged in the manufacture of dry cells and button cells. Its operations have been affected due to recession in dry cell market, stiff competition from unauthorised imports in the button cells markets and disturbed political situation in Punjab. Proposal for takeover of the unit by one of the leading companies in the country is presently under consideration. Dandeli Steel & Ferro Alloys Pvt Ltd. has a plant for production of high carbon terro manganese, low carbon ferro alloys and mild steel. Company's operations are affected due to .pa power shortage. To overcome the problem of power, institutions have extended additional assistance for installing Do sets and have also extended other reliefs to the company. Ahmedabad Mfg. & Calico Printing Co., a composite textile mill, suffered losses on account of recessionary conditions in textile industry and a devastating tire in its polyester fibre plant. The company has since undertaken rehabilitation/nursing programme of its units with the help of financial institutions. * 154 - Bells Controls Ltd., manufacturing a wide range of pneumatic an electronic process control Instruments, suttered a set-back to its operations due to high Incidence of Input cost of its imported components and competitive market. The company has now proposed to undertake a scheme tor manufacture of PCX based on digital system in order to compete to the market. Machinery Manufacturers Corporation Ltd., which is engaged in the manufacture of textile machinery, cards and draw frames, suffered a set back In its operatioas due to recessionary trend in textile Industry which In turn resulted in its low capacity utilisation. Since there is no chance of improvement In the operations of the company and its merger with Mahindra & Mahindra has not come through, the board for Industrial and Financial Reconstruction (827), has ordered winding up of the company. Consequently, institutional loans are being recalled and legal steps are being Initiated. Aunal Machinery Mfrs. Ltd., which has a plant for manufacturing drafting systems and jockey pulleys, faced time and cost overrun. Its operations have been adversely affected because of industrial recession in the textile Industry. With the improvement in the market conditions recently, its operations are looking up. - 155 - United Pharse. which has a plant for the manufacture of empty hard gelatins capsules, faced Initially time and cost overrun. In view of substantial defaults and doubtful viability of the unit, institutions have agreed for one time settlement of the institutional dues. Wardhaman Automotive Electricals Ltd.. engaged in the manufacture of auto-electricals, has faced initially time and cost overrun on account of change in plant site and a change in management of the company. Later, company's operations have suffered due to high cost of Imported raw materials and working capital constraints. Company has drawn up a scheme for phased indigenisation of its imported components to improve its operations. Shree Chaundi Mopeds Ltd. has set up a plant for the manufacture of 50 cc. mopeds. Apart from problems of time and cost overrun, the company faced difficulties in product acceptance. It suffered losses in its operations. Its plant has been closed due to paucity of funds. Virlon Synthetic Fibres and Chemicals Ltd. has plants for manufacture of nylon filament yarn, polyester filament yarn and nylon tyre cord yarn. Its operations were adversely affected due to competitive market conditions for all its products. It had to operate its * v 156- plant at a low capacity due to paucity of working capital funds. It, therefore, suffered heavy losse**. The institutions have worked out a scheme for rehabilitation, comprising additional assistance and various reliefs and the scheae is presently being implemented. Apart from the 10 cases detailed above. ICICI has initiated legal action against five companies via. Oriental . Power Cables Ltd., Bidco Studs, Haryana Capacitors. Pharma Fill and Chuckchem Materials, for recovery of its dues. As Indicated earlier, XCICI has granted revision in repayment schedule In respect of 64 cases. Of these, 5 companies defaulted even after reschedulement and were in arrears as on June 30, 1988; comments with regard to these companies have been given in earlier paragraphs. A brief account of the remaining 59 cases is given below: Indo Swiss Time Ltd, a company which has facilitie for the manufacture of Jewel lever type mechanical watches, has suffered in its operations due to stagnant market. The company has recently diversified Inte manufacture of time delay fuses for artillary shells in order to improve its operations. Hysore Kirloskar Ltd, manufacturing castings, bearings and machine tools, has faced problem of demand - 157 - recession and appreciation in exchange rates of the foreign currency loan. The company has proposed to prepay Institutional loans proportionately out of the sale proceeds of their surplus assets. The operations of Kunal Sagineering Company Ltd., which has facilities for manufacture of spindles and spindle inserts of textile rings, have been affected due to the recessionary trend prevailing in the textile industry. The current working of the company has shown signs of improvement and has got substantial orders from its collaborators. As a result of depression in the machine tools industry, operations of Precision Fasteners Ltd.. which manufactures high tensile fasteners, resulted in losses. Nowever,with the improved market conditions and setting up of captive wire drawing facility which has helped improving the quality of fasteners,the company's operations have since improved. Operations of Shriram Needle Bearings Ltd., manufacturing needle roller bearings, are affected due to technical problems and high cost of imported components. in order to improve its overall profitability, company has undertaken a rehabilitation-cum-indigenisation/expansion scheme. - 158 - siher Caustic & Chemicals Ltd. has set up a plant for the manufacture of caustic sods. liquid chlorine and hydrochloric acid. Apart from time and cost overrun, it encountered initially teething problem which resulted in cash losses. The company's rehabilitation proposal envisaging installation of captive power Plant and some critical balancing equipment to increase overall capacity is under consideration. Karnataka Ball Bearings Corporation Ltd., which has set up a new plant for manufacturing ball bearings and taper roller bearings, faced time and cost overrun. The company's operations were affected due to sluggish market conditions, increase in cost of imported raw materials and weaknesses in management at top level. ith a view to improving its operations and reduce operating costs, the company has recently worked out a revival scheme in consultation with institutions/banks. Tractel Tirfor India, engaged in the manufacture and fabrication of a variety of material handling equipment, faced time and cost overrun and difficulty in stabilisinag its production. The company's operations have since improved. Chougule & Company Ltd. has been engaged in mining, beneficlation and pelletisation of iron ore and exports - 159 - mainly to Japan. Due to recession in the industry in general all over the world. its operations resulted in losses. In case of Punjab Concast Steel Ltd., manufacturing steel ingots, operations were affected due to recessionary market conditions for mild steel products. The company has changed its product mix and has taken up production of spring steel and alloy steels which is expected to result in higher contribution and help to improve its operations. Norris Electronics Ltd., manufacturing ferrites of different types, has suffered a set back in its operations due to lower sales realisation of territeS due to competitive conditions in the market as a result of emergence of other units simultaneously and increase in input costs. The company now proposes to expand the capacity of power territes, an import substitute. A& Packaging Systems (earlier known as AR Expresso System), which has a plant for the manufacture of laminated packaging systems, faced time and cost overrun. The company was operating at a low capacity as it took time for acceptance of its product by customers. A merger proposal of the company with WIXCO Limited, a strong company, is presently under consideration. - 160 - Metal box India Ltd., engaged in the manufacture of containers, diversified its activities by setting up a plant for manufacturing bearings. The project was completed after a long delay and cost overrun. Since Bearing Division incurred huge losses, company sold the same to TISCO. Even after that, the company's operations deteriorated further on account of shift in the demand pattern in the package industry and high input cost compared to other manufacturers. In order to set right the deficiencies at various level and to operate it on a viable footing, the company had worked out a modernisation-cum- rehabilitation scheme and voluntary retirement scheme. Automotive Axles Ltd., engaged in the manufacture of rear axles assemblies and foundation brakes, faced time and cost overrun. The company's operations are affected due to recessionary trend in automobile industry and escalation In exchange rate. With the improvement in market conditions in the recent past, its operations have shown iaprovement. Indag Rubber Ltd., engaged in the manufacture of pro-cured tread rubber as synthetic tread, faced initially problems particularly on the market front but has now come out of the same. Its operations are now improving. - 161 - Patel Alloy steel, engaged in the manufacture of carbon alloy steel castings. has suffered in its operations due to power shortage. recession in foundry industry and labour problems. Company is now implementing a rehabilitation scheme to improve its operations after a change in management. Shreetron India Ltd. (earlier known as Uptron Shreetronics Ltd) has facilities for the manufacture of General Purpose Metal Film Resistors (GHFR). Its operations are affected due to market constraints, low capacity utilisation and inadequate management. Recently* the management of the company has been changed. The new management has drawn up a rehabilitation scheme which envisages increase in capacity utilisation by an increased marketing effort and strengthening of the management set- up. Manorajyas Publications, engaged in the business of printing and publishing a weekly in the Malayalam language, faced marketing problems and increase in the cost of raw material (newsprint). It is undertaking outside printing jobs to utilise its excess capacity and also increased its advertisement income by installation of the new Web Offset Printing Press. -162- Wendt India, engaged in the manufacture of diamond tools wheels and drilling bits, has suffered due to inadequacies In management and difficulties In obtaining adequate working capital. The company is earning marginal profits but does not honour its commitments. Orissa Industries, engaged in the manufacture of refractories, sanitarywares and stone-glazed pipes, faced time and cost overrun in the expansion-cum-diversification scheme of its plants, due to various reasons. The company's proposal of rehabilitation scheme is under consideration of the institutions and State Government. Bimetallic Steel & Alloys Ltd. has set up a plant to manufacture bimetallic steel strips. The company has faced time and cost overrun on account of changes in the promotional agreement and consequent change in the location of the project. Further, operations of the company are affected due to competitive market. Usha Telehoist, which has plants for manufacturing hydraulic pumps and valves, hydraulic tipping gears and cylinders, castings and forgings, suffered major set-back due to machinery breakdown, labour trouble and unfavourable exchange fluctuations in the raw material price. in order to strengthen its financial position, the company has resorted to the long term sources of finance - 163 - by way of raising of share capital and term loans. Further, it also proposes to implement its ongoing modernisation- cum-balancing scheme. The company has turned the corner and started making profits. Mangalore Chemicals & Fertilisers Ltd. has set up a plant for manufacturing DAP. Company was facing technical and power shortage problems which it has overcome. Its operations have since improved. Asiatic Oxygen Limited, has plants for the manufacture of oxygen, nitrogen and dissolved acetylene besides manufacturing facilities for welding electrodes and dissolved acetylene and oxygen plants. The company is presently setting up a plant for manufacture of oxygen, nitrogen and argon at North Arcot District of Tamil Nadu. The project faced time and cost overrun. Its operations have been affected because of technical problems, labour unrest and competitive market conditions. Him Ispat Ltd, has set up a plant for the manufacture of cold rolled stainless steel strips and mild steel strips. The implementation of the project was delayed which in turn increased the cost of the project. The company's operations were affected initially because it could not stabilise its production due to technical problem. Currently, the operations of the company have improved and it is operating profitably. - 164 - Viderbha Veneer Zndustries Ltd., engaged in the manufacture of plywoods and veneers, suffered a set-back in its operations due to increase in customs duty on Imported commercial veneer and high royalty imposed on timber by Go& Forest Department. XPRO India, which has facilities for the manufacture of extruded plastic sheets'and films, suffered a set-back in its operations since company could not produce marketable quality films due to technical problems. The company has since merged with CIMCO Ltd, a financially sound company in the same group. Sharpedge Ltd, engaged in the manufacture of blades, faced time and cost overrun in the implementation of its project. Further, company's capacity utilisation remained low due to severe market competition and thereby affecting its liquidity position. Company expects to improve its operation by giving thrust in the market by increased marketing efforts through advertisement. Light Metal Industries, engaged in the manufacture of aluminium rolled products faced time and cost overrun on account of technical problem and change in the scope of project. The company's proposal of rehabilitation-cu- balancing scheme is under consideration of the financial institutions. -165- Shri DiOvijey Cement Company Ltd., engaged to the manufacture of cement and asbestos cement products, faced time and cost overrun in the Implementation of modernisation scheme of its cement plant. Further# the company's operations are affected due to difficult market conditions. Operations of Bagalkot Udog. engaged in the manufacture of cement, have been affected due to severe power cut and difficult market conditions. The company has installed D sets to overcome power shortage. As a result. its operations have improved considerably. Marmada Cement Company Ltd., which has plants for manufacturing grey portland cement, faced time and cost overrun and also various technical problems during the initial stage of operations. Moreover, cement industry as a whole is facing depressed market conditions. Teamaco Ltd.. a multipurpose unit, has diversified its activities by setting up a cement plant in Andhra Pradesh. The company faced time and cost overrun on account of delay in acquisition of land and unsatisfactory project management. The company could not stabilise its production due to various mechanical failures and lack of proper technical personnel and severe power problems. In order to overcome power shortage, the company has proposed - 166 - to set up D0 Sets and has also already taken steps to rectify technical defects. The company has also taken up a modernisation scheme for its textile division. Stumpp Schuele Somappa, engaged in the manufacture of different types of springs and capacitors, suffered a set back in its operations due to labour problem and dissensions among the family members and delay in tying up working capital assistance and consequent liquidity constraints. In order to ease the liquidity constraints, the company proposes to sell the administrative block and redundant equipment in its electronic division. Currently, company's operations have improved with successful implementation of voluntary retirement scheme and cost effective measures adopted mainly in regard to administrative expenses. Ghatge Patil Industries Ltd., engaged in the manufature of castings, faced difficulties due to recessionary conditions, in automobile industry. With the improvement in the automobile industry, the company has improved its operations. Dytron India Ltd., engaged in the manufacture of Industrial and Decorative Laminates, faced time and cost overrun. The company could not operate its plant on a continuous basis because of various factors. 167 - Deco Bagineering Company Ltd. has a machine tool building division and foundry and rolling mill. The implementation of the diversification scheme was considerably delayed. The company's operations are affected severely due to competitive market, disturbed condition in Punjab and under utilisation of machinery Imported under diversification scheme. A rehabili- tation package is under finalisation, which involves merger of the company with Mukend Zron & Steel Ltd. Haryana Petrochemicals has a plant for the manufacture of polyester filament yarn. The operations of the company were initially affected because of low capacity utilisation. high cost of bought-out chips and unremunerative prices of yarn. Subsequently, the operations of the unit have Improved. Operations of Vickers Systems International Ltd. (earlier known as Vickers Sperry) were affected due to lock-out in the coapany's plant in Bombay during 1985-88. The company's operations have now Improved and it has turned the corner. Permanent Magnets, engaged %n the manufacture of cast magnets and ferrite magnets, faced severe market - competition which resulted In decrease in selling price. As a result, the comany suffered losses. The prices have shown imprvement in the recent past and hence the operations of the company are likely to improve. - 168 - Parsrampurio Synthetics, engaged in the manufacture of polyester filament yarn, faced strained liquidity position due to losses incurred during the initial period after commencement of operations. The company's bankers have provided increased working capital limits and it has now turned the corner. SLN Naneklal Industries Ltd., has plants for manufacturing textile machinery and others. Its operations are affected due to recessionary trend in the textile industry. The company is presently implementing balancing and labour rationalisation schex%s to improve its operations. Kalyani Brakes, engaged in the manufacture of air brakes, faced marketing problem and high input cost of raw material. The company has now shifted its product-mix towards hydraulic brakes (from &ir brakes) with the technical assistance of Nippon Air Brake Company, Japan, for passenger cars. Its products are well accepted in the market and the company has started earning profits. Magnetix (India) has set up a plant for the manufacture of hard territes. The company has faced time and cost overrun and initial teething problems. The company has now stabilised its production. - 169 - Utility Engineers, engaged in refrigeration and air- conditioning work on turnkey basis, has two plants for manufacture of condensors and chillers, fan coil units, room air-conditioners and water cooled package. The company faced time and cost overrun in the implementation of the project for the manufacture of high capacity refrigeration and air-conditioning plants. The company's operations are affected due to lower margins on contracting jobs and low capacity utilisation. The company has proposed to sell some of its surplus assets to ease its liquidity position and also setting up balancfig facilities at the new plant. Kerala Slectric Lamp Wires Ltd., a subsidiary of Crompton Greaves, which has a plant for manufacturing electric lamps, took up a scheme for replacement-cum- expansion of its flourescent tube ligh manufacturing facilities. The company faced time and cost overrun on account of various technical problems. The company has since overcome most of its technical problems and it is now in a position to produce and sell acceptable quality floutescent tube lights in the market. Paramount Centrispun Castings Pvt Ltd.,engaged in the manufacture of centrifugal and static castings, faced time and cost overrun. The company's operations are unsatisfactory due to market problems. The company proposes to change its product-mix and for this purpose it has envisaged installation of certain machinery. - 170 - 1ado0ulf Uplosives, which has set up a plant for the Satufecture of explosives* faced time and cost overrun on account of delay In acquisition of land and change in the scope of project. The company's current operations are satisfactory. Pantape Negnetics. has facilities for manufacture of audio- meagnetic tapes. The company has faced several problems since commissioning its project in 1986 and the plant remained closed mince January 1987. A package of reliets and concessions and takeover of management was approved by institutions recently. With the implementation of the package, its operations are expected to improve. Mangalas Timber Products Limited has set up a pleat for manufacture of medium density fibre board. The project faced time and cost overrun mainly due to insufficient engineering data. non-availability of skilled staff eand delay in supply of Indigenous equipment. Zndian Carbide & Chemicals Ltd., is setting up a pleat for the manufacture of calcium carbide. The Implementation of the project is delayed mainly due to delay in obtaining Government clearance and delay In placement of orders for plant and machinery. The company has recently completed the project and commenced commercial production. - 171 - Indo-Swiss Antishock. engaged in the manufacture of anti- shock assembly sets, faced time and cost overrun. The company has been provided additional finance for the installation of the tool equipment, which would reduce the cost of production and improve the profitability. PHP Auto Industries, which has set up a plant for the manufacture of alternators, ignition coils, distributors, starter and viper motors, faced time and cost overrun on account of delay in obtaining import licence, procurement of additional equipment, not envisaged earlier and delay in supply of machinery by indigenous suppliers. Further, its operations are affected on account of recession in the automobile industry. Jaiprakash Industries Ltd. (earlier known as Jaypee Rea Cement) has set up a plant for manufacturing cement. The company faced initially technical problems as also marketing difficulties due to depressed market for cement. The company's operations have since improved and it is operating profitably. Hurugappa Electronics, has set up a plant for manufacturing audio cassette tapes and assembly of cassettes. The company has faced time and cost overrun. The operations of the company are affected due to teething troubles in stabilising its production and competitive market. The company has proposed to diversify its production and strengthen the marketing divisions. -172- Bharat Strips is setting up a plant for the manufacture of non-ferrous metallic strips. T*e company has completed its project almost in all respects with a time and cost overrun mainly on account of delay in acquisition of land,changes made in source of equipment. exchange fluctuation and increase in the cost of plant and machinery. Since the market condition for non-ferrous strips do not appear satisfactory, the company proposes to diversify its activities and undertake manufacture of cold rolled ferrous steel strips with additional finance from financial institutions. Bharat Glass Tubes is setting up a plant for the manufacture of neutral glass tubes. The implementation of the project has been delayed mainly due to management and organisational inadequacy. The company has commenced commercial production recently. Resman Halverscheidt Forgings Ltd.. engaged in the manufacture of precision ferrous forgings. has faced time and cost overrun. further, the company has also faced initial teething problems. The operations of the company are expected to improve since the company has now established Itself in the market. Hindustan Motors Limited, manufacturers of passenger cars, commercial vehicles and earth moving equipment, undertook a scheme involving modernisation and - 173 - replacement o0 cettain facilities at its auto division, setting up of a new engine and transmission assembly plant for passenger cars and KCV manufacturing unit. The operations of CV unit have now become unviable due to high import content. The company. thereforeo proposes to prune down the cost of the scheme substantially by deterring the installation of SCV unit and by certain cost saving measures like better utilisation of existing facilities. It may be added that ICICI examines the cases in default closely from time to time and considers the measures to help the project come out of the difficulties. After examining the projects. ICICZ. in consultation with the participating financial Institutions. formulates schemes for rehabilitation of the projects and extends necessary reliefs as also additional assistance, wherever necessary. Reliefs extended can be in the form of deferment of interest. revision in repayment schedule or reduction/waiver of interest. ICICI tries to exhaust all the remedial measures for the revival of the projects before deciding to take final action to file a suit against the company for recovery of the dues. - 174 - The sub-loans extended out of the 14th Line of Credit from the bank have enabled to setting up of new capacities in industries like cement, chemicals, steels and alloys, automobile ancillaries electrial equipment, etc. and help moderrise units in industries such as textile, cement, paper and fabricated metal products and machinety, etc. This has helped to accelerate the pace of industrial development of the country. Further, it has given impetus to the development of backward areas by setting up new units. On the whole it can be summarised that despite the fact that some of the assisted units faced varied difficulties either while setting up the units or while under operations, the assistance extended has gone a long way to achieve the *vowed objectives of development of priority sector of industries, development of backward areas in the country, dispersal of industries, modernisation of the units and up-dating of technology. Thus, the loan assistance has helped achieve the social economic objective of the industrial policy pursued by the Government towards industrial development of the country. -175- Lis? of tuo-FPo0JCTS. CeMnITURNT DAit AND 0uvustothT 1530 FOUItitITN LOAS IS 2051 II DAit or Anount PROJiCt tIonel. 03$83u90 40. NARE OF T01 lU8•PRJit¢ ciI? . U fl.) Mtfflu$ *... .. ........... .. . .. ............... at1 s aU&Rif INDIA LTD 01129/82 2.201 A2 TAla V66.& LOCONoTVc Co Lti 05I26182 2.640 t $TA0ARD NILLI C2 LTD 021012 1.036 82 KIRLDSKAR CUiNM LTD 01/15182 0.578 83 IN0 ff1i $ Ting LTD 11/05$81 0.882 4 USNA 1ÅRTIM INDS LTD 02118182 0.417 8 NVIC0 KIRLOSKAR LTD 02119/82 3.003 86 PURJAO ARAN0 8ATtIRtES LTD 02124192 0.265 87 TAA TEA LTD 0212s182 0.372 et ELECOM C68 Cl LTD 08/13181 1.551 e9 KRAL IEIUERIg$ CO LTD 02118182 0.109 ale 1101* ROTEL CO.LTD 03/03182 1.396 811 PRECISION PASTENR$ LTD 03119182 0.519 812 *001901 8 CORPART LTD 03130182 0.632 813 OARKIt ITIlL I fERUn ALLOTS 04/02182 0.164 Py LTD 814 VXL (IgelA) LTD 04108182 0.729 815 RIRAN «£OLE Utalde1 03131I82 0.333 INDU$TRI£$ LTD 816 SIna* CASTIC a CU!IICAL$ LTD 04102182 1.148 817 KARNATARA sALL MARluff 04/16/82 1.598 COPORATION LTD e18 &R0T1A CUIRICAL$ i INDUTRIEs I 1 0.000 LOAN CANCLL1D LTD att AttLit MYLER LTD 04121/82 0.527 mN ANLIS sulA LT 04/18/62 0.390 -176 Ust et $98.PROJUT3, ConIITReNT 0Ar8 O 80 ADIhUIh<I<8TS laRo FOUItRITN L0Am I 2051 I6 PROJECT ¢fMi- 0118URS10 l0. Rang oF TU! sU-PROJCT nIM (Uf S n.) RERARXI 821 ANGALAL $ÅRAOWA1 tettRPISlts 0A013182 0.199 LTD 822 001 ALKALIts b CHE¢ICALS LT0 0A127/82 0.511 123 ANKEDASAD OFS 8 CALICO 0Al29112 0.783 PRINTING ¢O LTD 824 8ARAT M6A$ LTD 0/29182 1.133 825 TRACTEL TIRFOR INIA LTD 0t3082 0.335 826 CHOUGULE 8 CO LTD 05113/82 0.513 SI7 TAa REFRACTORIs LTD 05/182 0.503 128 PUIJAB ¢0NCAST STL LTD 05127I82 0.376 829 PREIR AUTONOBIL25 LTD 05121/82 2.083 830 NORRIS tLCTRfIC LTD 06I02182 0.460 831 LAUsNIt ACHIM[ m0UI LTD 06/¢4/82 0.510 832 it 01A800 ¢NAIN LTD 06/0/82 0.09 833 fELfACE INU$lIts LTD 05/25/82 1.097 834 AU PACEACING 1STEN5 LTD 06105182 0.55 855 ¢11IURT T1ETILt$ a I*OUSTRIES 06/1882 1.073 LTD 836 NTAL 801 INDIA LTo 06/25182 1.129 837 lK SYniNtIits LTD 11i081 1.569 838 NANMDRA i HANINDRA LTD 06123/82 1.723 839 $Sil LTs 07714182 0.126 840 Nall$ 14DIA LT 07/12/82 0.522 881 AUTONTIV£ ALs LTD 06/28182 2.129 842 1810 MATI0NAL Pta$ (101811AT) 07)26182 0.401 ffi LTD - 177 - LiSt 01 tU8-FROICTt. ¢OUUITRNT 0atø Åa0 OII8UStSflis 1880 feUtigNITN LOA§ 18 2051 to DAiM 0f AR0uT ptoutCT COnNIT. 01$801510 ne. M 0F TRE SU8.PRO3tCT Nim (US 8 N.A etnafts 843 IN0At Ruse8# LTO 07115182 0.251 844 PAtL ALLOTS $teL LTD 08106182 ir4egg 245 GRUIMLAL POWt CA5L5 LTD 2t1082.^ .6e1 846 IATA CNINICALS LTD 0118182 0.700 a47 SHRI DIKtSi fiLLS LTD 08130182 0.425 848 ORIENTAL CONTAINERS LTD 09107182 0.188 849 SKRUTON INDIA LTD 08113182 0.522 850 MELLPAN (NINDU$TANI PV LTD 09108182 0.241 851 0000 VAET CONEIs (P) LTD 08/27182 0.145 852 INDIAS NAT08 a INDUSTRIES LTD 091482 0.128 853 RANORAIVAl PR8LITss5 PVT 09/15/82 0.780 LTD 854 2? STIRIN8 K1AN tu01A LTD 09122182 0.94 155 øtLS C0NTR08 Ltt 09/21/82 0.562 856 au50 LEVLAN8 LT 09127182 0.537 857 $UMDARA# CLATTON LTD 06129182 0.882 858 s0n&§&" FASTENMR LTD 10129182 1.170 859 ELECTRIC LAP flANUFACTURIN, co 1110fø82 0.075 (INDIAI LTD 860 IRAKc$ INDIA LTD 1112682 0.144 861 810¢0 STUD S T LTD 12102/82 0.210 862 SMAR$OLE CfINICALS LTD 11/29/82 0.010 863 $RIRAN Fr~1 LTD 12123182 0.326 866 gEtTU CaEIlCAL 8 INDSTNIAL 12121I82 0.086 t0am LTD 865 00a l0nteffl Co LTD 12123182 0.443 - 178 - L1$? o U-PR0JOCTS. ConnlynkTT QATE1 AM0 DI1URsctll 1880 FOURIttoi LeAk 18 2051 I DATU 0F &"BUNT PROMIT CORnRT. 01$8$unt0 n0. 8*1t 0f INg SUs-PROCT HINT fU ( s.) RCHARKS .... ............ ..... .... . ............... 866 -MW01 INDIA LTD 01112183 O:.i9 647 NATIONAL ORGANIC tNINICALS LTD 01124/83 1.013 ete A1 4 TOL6B0 LTD 01/17183 0.705 569 RACURA COATS LTD 02/02183 0.649 870 0RM$A INDUSTRIES LTD 02/04/83 0.204 871 KU KNOSLA C0f?RCSI1 LTD 03111/0 0.772 872 INRIRAN FIBRES LTD 02/25/83 0.207 873 TATA CNElCALl LTD 02/25/83 0.51 874 q4TLIGOI 8 Co LTD 0/04/85 0.421 875 VRIVERSAL ¢A81,S LTD 03/114I3 0.455 876 AUf0oo0 PTI LTD 0/1s/83 0.454 t77 AKIL 1*RCM LTD 031614/83 0.654 878 s00t3 & £0Ce ffAUACTURIN$ 01/13/83 0.640 co LTD M79 BIMTALLIC $TI 8 ALLOTS LTD 03/22/83 0.677 80 K4STutI 8 108$ LTD 04105/83 0.40 s81 va SALBAGCAR 8 80THERS PVT 04/11/83 0.301 LTD 882 S sTTHETICS LTD 04/13/83 2.889 883 Usna TtMNOIST LTD 04/12183 0.224 884 ASAlTic existn i AUTTLEmt co 04118/83 0.356 LTD 88s NATIONAL 0tAN1¢IC CINICALI LTD 04/20183 0.256 g86 NARAT rIT2 1UtEIK VR t LTD 04/22/83 0.369 887 00 CltfI¢ALS I 04/08/8 0.783 V11?IL18tIS LtTD - 179 - LIsi 0? iUI-P@SECis. ¢0UUI?Ti at # 0*156 DSURSINIUTS l80 FutittliN iAm le 2051 in DAI 0f AR0UT PRØM?gi CoNNIT. 01$UR$0 Ne. #Ant 0 INt $U8.PIICT UlKM (US $ .1 RENA*1$ .... ............ ..... ..... ...... . ......... s88 INETAL SIaRI1 LTD 04/2983 0.583 889 AsIATIC 06EN LTD 0/06/83 0.210 890 NACHIET NUFACTURen$ CORP* 03I23183 0.970 LTD AnTlfICTION 8tARIN6 CORPO, LTD 05111183 0.212 692 TATA IRON l STEL Co LTD 06109183 0.782 893 eLECTRIC LARP Nf$ Ca (imotA) 06/22/83 0.267 LTD 894 ATLA$ COPCO LTD 06/16183 0.284 895 SOUTNINN PtTROCNNICAL 0$131I83 0.490 INDU$TRIES CORPØ LTD 596 AUROF899 PvT LID 07113183 0.244 697 Am RANUFACTURIN Co LTD 07I19183 0.030 698 In ISPAT LTD 07/22183 0.259 099 1 t INDUSTRI[$ LTD 07/27/8 0.804 a100 BIØLA IOTI 8 IDS LTD 08/02/83 1.185 glgt VIOA8mA Itv[e INDUMItt LTD 10/20183 0.088 8102 CIfS¢O LTD 08103I83 0.751 s103 KAI*& CAl consny LTD 08/05/83 0.632 104 MARPE06 LTD 08123I83 0.401 1105 uaLLIeLF LTD 08/18/83 0.705 810 LIsni nETAL IN0S LTD 08/20/83 0.441 5107 VESTAL! VITAnInl f0005 Co 09/02/83 0.3s8 LTD tg08 STE¢LCAST SlMVASAR P"T LTD 08/30/83 0.067 6109 m18i gisvi3AT UntfT Co LTD 09/05/83 0.379 - 180 LIST 0P tU8PM$tST. CuITineT #Ali$ all olsøRstøtrs 1880 PUtitaTn LeAn 18 201 IN 0*ff OP AN0usi PROCT CoGmii- 9158UR0 no. OAF! 0 lN u aUi-P§0JCT "ERT OS * R l WAMK$ 1110 tc STUMLAL LTD 08/25183 0.249 8111 INDIA CtTiS LTD 09/0513 0.46 8112 ftLi&øtt INDUSTRIES LTD i 1 0.000 (0AN fRAIftfREDt0 TM OTN LINE e113 AIV?AA0 PG i CatLio 0!!21!3 0.411 PRINTING CO LTD 8334 SAGALOT Mas LYD 1 0.378 8115 ADNA0A CENEnt Co LTD 1 I 0.739 8116 60021 i oycg MPG co LTD I I 0.446 117 OAt (INDIA) LTD 09120183 0.304 elta PHAAA P!L. pvT LTD 09/1,683 0.319 819 LasMI EMtTRICL 01p0TROL 10/07/83 0.076 SISTiN$ LTD 5120 I1INACO LTD 09129183 0.163 8121 SODRt PHILLIPS INDIA LTD 19/07183 0.190 8122 STUMPP SCIMELE 6 S0NAPPA LTD 10103(83 0.086 8125 KMRILLIA CHENICALS LTD 10I10I83 0.126 8124 NUCNE PLATIt LTD 04128183 0.132 8125 GRATME VATIL INDUSTRIES LTD 10/14I83 0.157 8126 MILtAMT STEIL$ LTD io/183 0,225 Glir ,LANSE1 8 Tog0# LIT 1028/83 0.360 8128 hAB0M MØOLLEN NILLI LTD 10/28/83 0.456 8129 KUNAL nACINART flUufACTUIRM 10/20183 0.407 Li# 8130 ASS0CIAiTD cEtta CONPARIES I l 2.223 LTD 8131 KM10x* ELECTRIC co LTD 10/20/83 0.760 . - 181 - LIi SF u M.-0OMT. coulintT 0AM An$ t18Utstøttl$ 1880 F0?Ieifn LOAI 18 201 I DAit of A891U0T PROJECT c0nnIT- DiS8UnSED N0. *Aft or TRE sUs-PRO?CT 8ft1 ( t t W.) nfiAs 8132 UMI ALLOTS I sttis LTD I 0.256 8133 0yt0 INDIA LTD 11108183 0-845 9134 $URA? ¢0108 SPceo 8V 6 NILL$ 11/t1 83 1.159 8 135 JASATII COTT48TNL U ais mw o/Siiss * 0.282 LTD 8136 8ec0 9866 c LTD 11/0883 0.376 8137 M95 SUZUKI LTD u118183 0.861 8138 0RISSA UEtal LID 11124/83 0.426 8139 CRONPTQ¥ 6REAMt LTD 11128183 0.273 810 SUJARAT FILARETS LTD I I 0.273 s11 AFATLAL IDUTIs LTD I I 0.86$ 8142 OAVID 80fm W11AMt1 LTD 12101/83 0.282 8143 HAUVANA PilCAtmI&LS LTD 12/02183 0.413 8144 LUCAS T91 LTD 11/2$/83 0.267 1$ INDIAN RAMC8 6 INISTRIES LTD 12/09/83 0.310 8146 TtwIOUALLA1 CIEIICAL$ LTD 09/12183 0.500 8147 VUAY $YNTUTIC PfiffS LTD 12126/83 0.583 8148 VICERS 55T1RS tIegul L 12/2 83 0.427 LTD 819 ~E1t1 0169I3 A CEEET (0 LTD 12/27l53 1.979 8150 PERUAtE 66EM1 LTD 12129/83 0.301 £151 PARAUMA*PURIf SyTUnTICs LTD 12120/83 0.197 8152 10*1 CEctUTS t§ 12/17/83 0.87 8183 SL RAnIKLAL ff0lm1tff LTD 12I21/83 0.026 1116 0ALVA11 8RAKE1 LTD 01/25/8 0.85 - 182 - LIST of SU*PROJECTS. CONNITIOT DATts AND DISURIERNTS 18N0 yOURTIENIN LOAN to 2051 o OATE Of AROUNT PROJEC? CONRIT* DISBURSED N0. NARE OF THE SU*PROJECT "Et IUS I.) RENARIS BWSS JASA3IT INOUStRItS L. 02103/86 0.116 6116 RURUGAPPA "ORGAMITE CERAMIC 02101/18 0.511 FtSRIS LTD 8157 CONSOLIDATED STEELS 4 ALLOTS 01/30184 0.488 LTD 5158 AGtNiTIN 1 A01* LTD 02/2416 0.330 8159 0003 VALLEY COMBERS PVT LTD 06112/s 0.032 8160 BEST A CAOMPTON tNSINEERINS 02/22186 0.176 LTD 6161 SAJAJ AUTO LTD 02116186 0.380 B162 UNEELS INDIA LTD 02/20184 0.176 6163 KASTURI A SONS LTD 02/27/81 0.599 I6" NRMRIS ELECTRONICS LTD 1 1 0.000 LOAN CANCELLED 8165 KIRLO$KA PNEURATIC CO LTD I / 0.000 LOAN TRANSFERRED TO OTPER LINE $166 SUtST KUN VILLIAMS LTD 02125/8I 0.470 8167 COVfITT abINDIA LTD 02/27/61 0.224 8168 NATIONAL RADIO A ELECTRONICS 02/28184 0.223 LTD 8169 OOSAL P?VT LTD 02110/84 1.435 8170 ASSOCIATED CERENT COMPANIES 0211016 0.380 LTD 8171 KIRLOSKAR PEUMATIC CO LTD 0310S/St 1.051 8172 FINGLE CAILES LTD 03/16186 0.012 8173 1 6 A$ LTD 03121186 0.256 IV KIRLOSKAR OIL ENSIES LTD 06125184 0.299 6175 S S MANA LTD 061/7/6 0.412 8176 UNITED PHAtWA INDIA LID 03130184 0.708 -183 - LIT vP t8u•Pp0jt¢l$. MoC let« WAft$ 440 01S8UhItis le#* P0Utitt#IT LOAN Ia 2031 IS 041 P AOun pfolel Cent?- 01$1u4310 ge. u4ng eP TH9 Ui-PROJECI ftny (0v 8 n.) RP(A99% 8177 ICo PROBUCIS LTD 04/25184 0.041 8178 UTILTI 061290 LTD 84/30184 0.407 8179 11*A.4 f(CTRIC LAOP fOR$ LTD 04125/4 0.849 8180 UATIONAL 0RGAMIC CERICALS LTr 04/2$/84 0.085 #tal VARaOVNI ctaffISPUS CSIxS4 05/14/84 0.251 PI LTo e182 imUTAu CMUSIRUCTIQA C* L1 05125184 0.190 818 fåYRN0 IOOLL94 1ILL$ LTD 0404184 2.162 8184 GRZAMs COTT0OM CO LID 06/27/84 0.1% 8185 alla# CAOUS$ CORPOATIGR t0 05104/84 0.247 8186 1100 ULF EIPLOMMI<i LTD 060884 '.40 8187 Alt0t0 te CgtiI ¢01aits 06/00484 0.283 LTD 8188 PlIM t#US Lie 06/18/84 0.299 8189 RAM80 ~000LLO OILLS LID 06/08184 0.248 890 *AAit CIMT Lit 06114/84 0.896 8191 1aTa tRAICTORIt$ LTD 06118184 0.196 8192 SAMITG NM1A1 (iotal LTD 06/18/84 0.311 8193 $1GA IN m STRItS LTD 06/22/184 0.122 8194 £tie08 <UNA LTD 06/22/84 1.242 m19$ PåmTAPt m8tliTs PvT Lro 06129/84 0.113 81 Mom Ptocuficak$ 07/30/84 0.837 INDI$TRICS c0pe LTD 819 INDIAN CIN810 8 CURIICALI LTD 07/20/84 0.150 8198 OCR t10014 LTD 0.000 /001 T.SGPD ToO I0T ta Lillt 8199 84401 la818 OP 1MIA tio 08/10/84 0.212 - 184 - LIST Of SUI*PROJECTS. COuNitolat OATIS AND DISIIINITS 1510 FOUITHENIN LO0A3 IS 2051 IN DATE of AMOUNT PROJECT COMMIT- DISAURSED N0. MANE Of TnE sUS*PROJECT pEt (US I a.) REMARKS ...... .................. ...... ....*.. *........................... 6200 MARYAA CAPACITORS LI0 1 1 0.000 LCAN CANCELLED 6201 TATA Io40 a STEEL Co LTD 08128184 0.565 820. GUJARAT ALKALItS I CNEMICALS 09105/l4 0.838 8203 8 #000 a CO LTD 09/04/8t 0.186 6204 VANDiANAN AUTOMOTIVE 08131/84 0.513 ELECTRICALS LTD * 8205 UNIVERSAL CANS I CONTAINERS 09105/84 0.107 LTD 8206 ELECTRIC LAMP MFG CO (101A1 09/12184 0.296 LTD 8207 NIPPON HENRO ISPAT LTD 09/10186 0.376 6208 OALLARPUI INDUSTRIES LTD 0612616 1.952 8209 Stt CNAWUNDI MOPEOS LTD 09/10184 0.639 8210 SUNDAAA CLATON LTD 09121184 0.111 8211 HODIPON LTD 10105186 0.644 6212 LOTUS 8001lFNG PVT LTD 1/01184 0.208 213 KESOA INDUSTRIES LTD 09125184 0.347 3216 HARSALAN TIOIER PRODUCTS LTD 10117184 1.051 8215 1FIUNl1 PNARRACEUTICALS LTD 10112184 0.132 6216 REEiNCT CERAMICS LTD 10/19164 0.092 8217 CHUCl MATERIALS PVT LTD 10130184 0.219 8218 ATLANTA TEITILES PVT LTD 1012/84 0.260 8219 SANDOZ TEITILE RILLS LTD 10/12/84 0.260 6228 lAJAJ 1190 LTD 10/10184 1.188 5221 PElce ELECTONICS a 11102/86 0.920 ELECTRICALS LTD '9VO01 0 011 13~10313 M6l 09t19 O/MUg oi1 Afn t i izu UVAV0 i9cM tt'l0 $9/1/10 011 118110 nal§3 1999 091'0 s00o 11 S218150on l inv åd tite 6£9o tetee o Sl311 fu131 ete ti sit4~e 41 LA4 13 Milin gris 9110 911110 011 A1 $31 §tre ?VlO $8tItit0 01 IA4 (1f091IN) 1111131 25 94t'0 SSI/t/10 011 11011 513318 til W*0 l/ili 011 30U111OT $5IIr 0011 ?ttg st9gl §9titl 011 10N1 9231835 33å015 tt tts*o i;,:zi oil :083u lm trin *s0l fi9o10 011 Iffi! §MSINMV irre ett*o te/Sitt 011 1OMOUIS1 li0sAg otte 9t'* 9/9Z/tl 011 9913 0804NTIS jtt 991,' t/ll1 oil SIK3Ndlflo3 1913 $t1t 9t' 901f1 til 1004133 191180 £t11 hI' 90I11 011 03 9943 103313 9199 #11' løl91it 011 N19A0 31119 Itrø 031133113 101 033'0 I I 011 1 1 103 14 111 4111330o3 ml oso' l 1 01 $103 v i901 tUt ost'o 9e/60101 oi1 $10¥1w03 s,U0313 lite .......... .......... ......... ........ ............... ........ ....... $S59N3 * * $ i) I13N 133t0¥d-#05 3ll$40 3ý91 *01 0358sø510 -1103 133108d ign0m8 40 310 1111t01 51 1101 NII331Ufl04 0551 1113M35145510 Oil 63190 I811011#90 '$13ltold-In 40 111- - SØT - - 186 - List 0 su-PROtMCT. cenatoIt 0Ttto As oioUnm ållgis 180 POUItttyn LoAm la 201 in Datt or ANDUMT . Pn03ti COnIt. ISOUR$ED 04. #a 0P Tnt fu8PRICCT HalT 141 8 0.1 NA0g 8246 ÅTLAOTA 192TI11 PVT LTD 02/26/85 0.818 8247 151002 TEXTITL RILLI LTD 02126/85 0.818 82W lavRaASK :jou$tN!s LID 0/1/85 0.41: 8249 ofUlUGAPPA fLECTROICS LTD 02/27185 0.478 8f10. CtUT CORPOTION 0 GUJAhAT 03/08183 4.965 LTD 8211 UfL0 SUTNTIC PIRe$ 1 02128185 0.569 CURICALI LTD 82$2 NINOTA *LUNINIA 02108I85 0.549 C0P0RATION LTD 823 1QUTNIERN PIRtOCKENICAL0 / 1 0.000 Lom CANCLL2D InUUSToIts C0om LTD 82 0SIATIC 0X6N 8 ACCITLEN2 CO 04129185 0.658 LTe 8258 111011L P81101C0 LTD 03/26/85 0.165 82m PU98 1 A0 M AN P LTD 0l15l85 0.405 82 ~LOIPTO 1110CAM LI D I 0.000 Led* C&NceLLED 8239 FacIT Ait LTD 1 M 0.000 LAm CACELL10 8258 floMA PISTC0S LTD 0/2185 0.436 828 RORAMAN I I00STRIfs LTD 03/16/85 0.216 8m1 lut1a1 NAT#0 8 INlnTe1t LTD l 1 0.000 LOAN COUCLLE 1263 8mA&? STegel LTD 02I19/85 1.277 8268 81A08 180m i a STtL N0Rg LTD 03/19/83 0.180 8264 8mAr 81.ul Tult LTD 1 1 0.804 828 CALUAMPOR ImPUTRICI LTD 03/20/85 0.895 8266 fL (INDIAJ LTD 02117183 0.360 8267 utstn 1081A 1 tte011 L1a 03129/85 0.554 - 187 - LIST Of Ug*PROJECTS, COMNITEt DATES AND DiSSUstRETis ............*.*.*..*****.*****.*****.*.****.************ tilD FOU01ttlYN LOAN 18 2051 lN DATE oF AUUNT PROJECT COMMIT* OISSUStD 1O. #ARE of Tt Sul-PROECT WENT (US I f.) SEARS ....... ....*****.*****.* .. **.. .***********.**********.***** 5268 CHATELiC VEMICLES INDIA LTD 03/ti185 0.051 5269 HART VISHNU PACKAGINS PUT LTD 04/2918S 0.144 3270 EMPIRE INDUSTRIES LTD 05107185 0.103 3271 TUNE INVESTMENTS OF INDIA LTD 05/24185 0.234 5272 USMA MARTIN INDUSTRIES LTD 05117185 0.446 8273 %NATAU RAKA11l SPMS a as CO 06/04/85 0.624 LTD $274 9ESAN NALVERSCMIIDT FORGIMS 05107185 0.175 LTD 8273 LAKSNI MACHINE 8OKS LTD 05117/8 0.175 8276 ASSOCIATED FILM IOUSTRIES LTD 0612118 0.144 st77 KIRLQSKAR CURRINS VID 1 1 0.000 LOA CANCELLED 8278 M4AY ENGRNEt1tl LTD 07/12185 0.208 8279 KLOCKNER MINDSOR INDIA LTD 07/25/85 0.162 6280 CENTURY TISTILl A INDUSTRIES 07101/8S 0-294 LTD 5281 PEICo ELECTRONICS t 07/17185 0.171 ELECTRICALS LTD g282 NjNDUSTAX NOTORS LTD 07116/85 0.29 8283 CROfPTON gREAUS LTD 07/17/85 0.174 5286 KMSORAN INDUSTRIES LTD I 1 0.000 LOAN CANCELLED 8285 BARODA RAYON CORPORATION LTD 1 1 1.121 5286 NUKWCHAND JUTE A INDS LTD 0710315 0.610 5ta? ORIENT PAPER I INDUSTRIES LTD 10/1815 0.630 Totl9 167.892 9- t Mn £3830 6t'96 tt 1'0 oli' Klt' t 019imi æ 1~31s1 m30 i 18 t 111 £t't 89'0 003M t#'it 05'it 011 isv,v 091"i 9gI o t8 ,ßt t8 3815 81' 03'9 09'81 09'tit 00'L93 I II1 813313 i S11niW 10W Uig 011 . t £8 te3lW t 1151 5'S £8' 01' 03'£ Of'6 3 e1t,84383 Ioslló 111m0u wwM it 123 Ci 11143es't 0ti 00' 06'6 0QSs G h1 19101 31 E $M 3 t- e8 ln tg 330 30'*1 ' 00' 0og0l "l 3 al øm0u11Z13 tie 011 lOIIv9IdUO3 ze £8 330 9 Z' ' e't O," OISLI OL 8 t miM ii 110~m 911g Iii 1* 98 33in t i2 130 89' 29'£ '9 0 0' 00 00'S1 I 01 131 0 11 <093! Ni1918 U al a~ ti tø 81 t 1 9W' te 81 1 tt 06'0 6'1 00'it 1me 1103 i hh m til S 1 31t m £ ø5m 99'1 9' 09lt 00't 09o9i 3 a1 (MI) 1Im til 411 INd M ]w0 31330 90 09't 9' 89'it #ilt a' 0 011 =04 9 1IS 11 t t$ ø03m te H380 filet 09 0' 06'61 06'61 ø al1 ANmm i mim00 mt A9 9gø0t 2 A10 9"let tT OL'tt De,99 el't 3 1 ~ M nl ligst 0113g t 91 Ou gø 330 %*t gel? 81'6 09'It eflt'9 0 1103 W~lintm 1~0 68 D 33 033 330 tsI Dø,tt 0S 00'01 0091 3 oi 03 v v m le a im¥ 4 3 M8 L4,61 0?'t 0'O0 alil08'91 3 4L1 m3 Vivi a8 3 re nß315 = 191 W 9*t 00'l 0*tt Ogtt 0 011 ilive OMiIlTld 9m z se 9 39 0 n 3u 9't 00' 00e6 00G86 ¥~11 0 Imaa01111310 8 it 13 sdi 6t 330 9 "1 0 N O't U*£§ 0t£ t il11 8815% 00$m ti * :;i uù i ts , r *t't gJ's 0 DS-49 Si'n 3 vi ' 611/ srate i is 0 Tø w38m ?ø 1311 6' 09'6 00' 00111 01111 G*l 03 $1119 CPOWi$ te t ei N3 11 96,Tt f0'l1 00'0 atlot ' 01 00 8 l 03 3Al101m301 #'~u3 9ivi tv 93 s$ 330 33 £9'l 00*ez et*8i 099 0%t 3 11 1011SMig3 mpn im ............................ ........ ....... ......... ....... .................. ...... ~ "1131 i 0113133 I03 133t* 100 m8088380 1803 I503 133101d i330d.ft~ jM 13111111 in " iilom o jo 1 M13 JO6 01 1S03 1330N 1330 i01 I3PMil in 0133 3 v 8101 mIBI 0 13310N 1913V 0319M81o3 wu19JIM ('@orfu a q) 151 1t03 (101 08 1 83im 03m14* $13308is å0 $11110) *i1 VIGNI 4 B011903 Nell~ 3ANM 11083 iISMI M - 189 - THE IKDUITIAL CREDIT 4 INVESTIENT CORPORATION Of lut$ LTD. (DITAILS 0P $UD-PI0-ECTS fINANCID UDER teRD LOA 2051 INI NATUR ESTIfAtED ACTUAL PROlECT 180 1510 LOAs $ EIPECTE ACTUAL T:it Acigt L0 or PR0JECt PROICT COIT A044 1 0F ACTUAL 134N 0 O¢NTN 0F pUN I øUmtE* hM 0f lU8.PR0JECT PROJECT Cosi cos OVERRUN AmoUNT PROJECT cos0 COWPLET10 ¢:*PLE'Im0 CNT41 526 COUGULE i CO MTD c 13.50 13.50 0.00 4.60 14.27 :uuN $2 IvRE 12 c 527 TATA REFRACTØIIS LTD E 27.10 26.00 -1.10 4.60 17.69 ci 92 N0¥ 12 2 PUNJA8 CONCAST STEILS LTD n 30.0 30.40 0.60 3.50 11.44 JuaE !3 A1 54 829 PRIEN E MTMBI0a1s .0 R 2500 300.03 15.00 19.tz t 47 sEC t! :XE 4. 830 "0MlK$ ELECTROMICS LTD I 5.00 5.00 0.00 4.30 86.00 JUNIE 82 JUNi 82 0 Ø31 LAKSftn IACINE MCIK$ LTD e 131.30 131.30 0.00 4.82 3.67 DEC 13 DEC 83 2 532 TI DIANOD CAIN LTD f 27.50 26.00 .1.50 1.00 3.85 Ole 86 DEC 87 12 .33 ELIANCE INDUSTRIES LTD n 530.00 530.00 0.CO 10.10 1.91 DEC 82 DEC 82 0 s34 AR PACKA$ " 51STERS LTE M 34.50 37.00 2.50 t.30 11.62 DEC !2 AL 53 8 835 ¢NTURY TEKTILE$ a I*UTI$ n 55.40 55.40 0.00 10.10 18.23 DE¢ 82 DEC 82 0 LTD 836 4TAL mOX INIA LTD N 157.00 92.00 -65.00 10.50 11.41 SEPT 82 0EC 84 27 837 IX $YØTHTICS LTD g 309.00 520.00 211.00 14.30 2.75 DE¢ 83 MRCI 86 27 838 MM IA MMANINDNA LTD g 757.80 815.00 57.20 14,20 1.99 OCV 86 DEC 84 2 830 SMIL LTD 1 61.00 91.00 27.00 1.10 1.21 APRIL 83 lIAE 8 14 840 MEL$ ImIA LTD g 17.60 17.60 0.00 5.00 28.41 1!: 53 APR:L e3 0 41 AUTONOTIVE a*LE$ LTD N 29C.00 329.90 39.90 19.00 5.7 : 'b .6A i5 15 542 INDIA UATIAL PRS$ (O0MAY) N 10.50 10.50 0.00 3.80 36.19 :¶! 52 :.E 82 I PVT LTD 43 INDAS UER LTD N 77.00 79.20 2.20 2.36 2.98 #Å:4 .63 OW 84 14 44 PATEL ALLOYS $tL LTD 4 16.03 17.3Z 1.30 0.84 4.16 :. . :i !! i 846 TATA iRIICAS LTD R 21.50 24.50 0.00 6.65 27.16 40¥ 13 q0 83 0 847 SmI DgEsø HILL$ LTD 11 38.00 38.00 0.00 3.90 10.29 ø DC 3! DEC 83 0 548 ORIENTAL CONTAIKERS LTD D 14.90 1t.90 0.00 4.36 29.26 W :ét SEo? 83 9 850 UELLMA (ININDUSTAK) PVT LTD n 9.20 9.50 0.30 2.30 2.21 :9E 53 jA 83 t 851 000 VALET Ct~BERS (P) LTD R 2.13 2.13 0.00 1.33 62.64 aae:. 49 9L 83 1 - 190 - T IMSI5RIAL CRE0I 8 INVSTNt C0RPOTJON of IDIA LTD. (ofTAIL$ er sUs.PROJECTS fiNACo UNDER 11R0 LOA* 2051 11 MTURE UTIMATED ACTUAL PROJECT 180 180 LOAS 4 (PECTED ACTUAL TINg 0v tGe PROMECT PROJECT CosT LoAU I 0* ACTUAL mI1TH r g i0mof NV P U ~U8e1 NAM 0f SU8.PROJECT PROJECT COST Cost OVCRRUM AKOUT PR0JECT Cost MPLET0f cQPLtTlt0i sN ..... ...... . .... ....... ......... ....... ........ ...... ............ .......... .......... ....... 852 INOIAN RAYON INUSTRIE$ LTD I 65.00 43.10 -21.30 1.20 2.75 APRIL 84 jug It i 53 ANORAJYAn PUBLICATIONS PVT n 10.20 11.10 0.90 7.51 67.66 OCT 82 nEC 83 14 LTD 854 Z STEERING GEAR INDIA LTD n 36.80 42.60 1.50 4.55 10.68 JUNI 83 AUG 85 26 851 DELL$ CORTROLS LTD 0 75.00 81.80 6.80 5.34 6.3 JUNE 84 DEC 16 30 856 A~805 LEyLAN0 LTD R 24.00 17.80 .4.20 5.17 29.04 JAN I4*83 0 S57 $~0A"i CLAY0N LTD n 34.10 36.10 0.00 8.50 23.55 Ay 83 JAN 84 1 858 $U~D ARM FASTVØER$ LTD 0 92.50 92.$0 0.00 11.78 12.74 SEPT 8 MRCN 84 6 a59 ELECTRIC LAKP M UCIURIN Co R 1.26 1.72 0.4 0.98 56.98 C 82 JUNE 83 6 (I1I1 LTD 60 emøE INDIA LTD uE 6.51 4.23 -2.28 1.41 33.33 APRIL 83 APRIL 83 0 862 VEARIOLE CRICALS LTD n 0.18 0.17 -0.01 0.09 52.96 C 82 NARC 83 5 86 mIRANf IlES LTD 1 215.00 214.30 4.70 3.20 1.49 oC 83 0C? 83 .2 164 mTTUR C xIAL 8 INMUTRIAL 0 29.30 31.30 2.00 0.90 2.88 CCT 83 0v 85 25 Cm"N LTD 865 ROTOR IMUSTRIES CO LTD n 16.60 17.15 0.55 4.31 25.13 ECC 83 D0C 85 0 666 ØEDT foDå LTD N 23.00 23.00 0.00 1.90 8.26 AUG 83 SEPT 83 1 867 NATIONAL 0~ANIC CENICALS LTD N 312.60 303.10 -9.50 9.85 3.25 DEC 84 NV 87 35 868. LAR$N 8 TomUN LTD R 30.00 31.50 1.50 6.80 21.19 JUNE 83 AUG 83 2 869 ~10a ¢As LTD I $8.60 61.00 2.40 6.10 10.00 JuE 83 JUn 84 12 871 8 KNOSLA CORPRESSORS LTD 1 18.10 26.00 7.90 7.50 28.85 JUN 82 OeC 82 6 872 SKRIAAR FI8BES LTD t 215.00 214.30 -0.70 2.00 0.93 DEC 83 CT 83 873 TATA CNE ALS LTD R 30.20 30.20 0.00 5.20 17.22 CCT 84 CCT 84 0 874 8ATL1801 I co LTD I 25.50 28.40 2.90 4.09 14.40 SEPT 84 JUE 37 33 875 ØIVERSAL CA~LES LTD E 23. 25.90 0.00 4.40 18.41 SEPT 83 SEPT 83 0 876 AUOPOODPNT LTD E 17.00 17.00 0.00 4.40 25.88 JA 84 JAN84 0 191 - THE INDUSTRIAL CRIIT l tm$gSTMlET CORPORATION 0 INDIA LTD. (DITAIL$ 0 SU8.PR0)ICTS IIAC UNDER 1890 toM 2051 II) ATt ESTIMATED ACTUAL PROJECT 18RD 1 00 AAS EAPECEt0 ACTUAL yInt L*a v PROJECT PROt Co$i LOA t 01 ACTUAL Mm Offi slOxN cp fun U~ uftt er $Ul-PROJECT PRO1CT ¢ØST CST OVERRUN AMUNT PROJECT 0si CORsLETlom Co ETtOa wst. . . . . ........... ....... ....... .... .... ....... .... .... ...... ............ .......... .......... ...... 877 AIL $VAR¢H LTD e 19.60 19.60 0.00 6.30 32.14 JULT 94 JM. s 0 878 00E] i 60T¢E *MUFACTURING " 16.60 16.60 0.00 6.25 37.65 lA 84 JAN så 2 CO LT0 879 BWREALLIC STEEL 8 ALLM$ LTD N 7.0 105.40 9.40 6.60 t.6 APRIL 83 JUE 6 't 880 UTURI a 5$0 LTD 9 16.00 15.24 -0.76 3.97 26.05 OEC 83 MARCN 84 3 881 RI IALGACCAR 4 BROTHERS VY E 40.00 41.10 1.10 3.06 7.69 0C 80 DEC 80 2 LTD 882 JR SYNTHETICS LTD n 61.50 61.50 0.00 28.30 4.02 SEPT 85 Ct sS i 883 US TELE40IST LTD 0 82.00 79.20 -2.80 2.10 2.65 UCT 55 JAN 4 3 85 NATIONAL 0GANIC CHE1ICALS LTD 51 8.40 8.60 0.00 2.39 28.4S AUG 83 AUG 83 0 886 8ARAT FRITZ ERMER MT LTD 8 7.20 7.20 0.00 3.50 18.61 JULT 83 JULIT 5 0 888 eilETAL 8Eamal LTD E 30.90 21.00 -9.90 5.71 27.19 aEC 85 JUNE 85 18 889 ASIAICN OUI« LTD aE 12.60 12.60 0.00 2.25 17.86 mmCN 85 ec 84 21 891 AKTIFRICTION 81aRING CRP LTD 8E 25.00 25.00 0.00 2.08 8.32 APRIL 83 APRIL 83 0 92 TATA IRON 6 STEIEL Co LTD 2.90 52.90 0.00 7.82 14.78 0E¢ 83 0EC 83 0 893 ELECTRIC LARP ffi a0 (INDIA) R 2.90 3.50 0.60 1.67 47.71 DEC 83 DEC 83 0 LTD 896 ATLAS COPC0 LTD R 4.64 4.74 0.11 2.75 S8.02 SEPT 83 "AT 8 8 891 $0071RN PETROCHENICAL n 22.50 22.50 0.00 4.82 21,33 APRIL 83 AP!L U Z INDUSTRIt$ CM§PU LTD 89 AUROP000 PT LTD e 10.10 10.10 0.00 2.46 24.16 DEC 83 DE¢ 83 0 897 ACME ~N ACTURING ¢0 LYD R 1.45 1.4i 0.00 0.50 20.9 JUR! U DE 1 8 t! 898 mIn IVAT LTD b 4.90 49.70 3.30 2.60 5.23 ULT 84 JUNE 6$ t: 99 I I~U$TRIE$ LTD £ 390.00 400.00 10.00 8.40 2.10 DEC 86 DEC 86 0 8100 MåRLA mUE a INDS LTD n 397.50 420.00 22.50 12.00 2.86 HARCM 82 fARCN 53 12 8101 VIDINA VENEER IDUSTRIf$ LTD 8E 5.80 6.30 0.50 1.00 15.87 AcN 82 RARCN 83 1: 8102 ¢IMCM LTD n 61.80 42.20 0.60 7.90 18.72 APR 86 0c U6 m - 192 - Tg INDUSTRIAL ¢RE01l 8 IN4TI1NT CORPORATION OF INDIA LTD. IOETAILS GP SU8.PROJECT FIIANCED UNDER 180 l0Am 2051 IN) NATURE ESTIMATED ACTUAL PROJECT 18R0 *1R0 LOAN 4 1PtECTE AC'UAL Tqg LOAN or PROJECT PROJECT COVT LOM8 4 OF ACTUAL "NTfi er 5TM 0l ot u U18tR HANE 0F M8-PROJECI PROJECT COSI ¢0$I OVERRUN AnOUNT PROECT ¢ØST CPlTIOk CMPLETIO § ca. 8103 KAIRA ca CORPANY LTD 1 29.50 29.$0 0.00 6.45 21.86 SEPT 85 sEPT 85 3 8104 SHARPIDGE LTD 0 27.90 27.90 0.00 4.00 14.34 JNE 1 JNE 84 2 80$ RALLIUOLf LID N 27.50 27.50 0.00 7.90 21.?3 AUG es AVG IS 8106 LIGHT RtVAL 1905 LTD I 144.60 212.50 67.90 4.52 2.13 OCC 14 SEP, 86 t 81C7 bETiA8e sLAfANÆ$ F0o05 CO f 14.70 16.70 0.00 3.65 2.86 ME 54 NE 84 2 LTD 8108 STE11CAST 8MmyAGAR PvT LTD 0 2,87 2.87 0.00 0.70 24.39 FEB 84 FE 84 a 8109 SHRI 016IUAY ¢EUNT CO LTD N 19.10 19.10 30 3.90 20.42 DEC 83 DEC 83 0 8110 EM¢ STEELAL LTD E 4.20 4.20 0.00 2.50 59.52 0¢V 83 0¢V 83 I ill INDIA CEMINTS LTD n 25.90 27.10 1.20 4.75 17.53 FEB 8U UARCK 84 8114 8AAL0T U006 LTD n 19.00 19.00 0.00 3.90 20.53 FEB 84 HAN 84 1 8115 HARNADA CENENT CO LTD n 37.60 37.60 0.00 7.60 20.21 DEC 83 0EC 83 0 8116 600E 8 0fCE Wf6 CO LTD n 13.05 13,05 0.00 4.60 35.25 NOV 83 NOV 83 0 8117 SAE (IØDIA1 LTD E 6.96 11.65 4.69 3.09 26.52 DEC 83 AUG 84 8 8119 LAK$NU ELECTRICAL CONTROL n 29.50 29.50 0.00 0.80 2.71 JAN 85 NOV 84 - SYSTEM LTD 8120 TIM¢~ LTD R 2.70 2.70 0.00 1.67 61.85 wc¢# 84 JUNE 84 1 8121 6mF REY PNILLIPS INDIA LTD n 6.50 2.80 -3.70 1.96 0.0 APR 83 APR $3 c 8122 STUPP SCHUELE 8 NAPPA LTD 8 1.70 1.55 -0.15 0.90 58.06 DEC 83 2EC 83 0 5123 HERDILLIA ¢IR1ICAL$ LTD R 3.25 3.25 0.00 1.37 42.15 DEC 83 0e¢ 83 0 8121 MmNE PLATICS LTD R 8.20 8.20 0.00 1.36 16.59 HAR¢11 t3 MCN 83 0 8125 SK4T6E PATIL INU$TRIES LTD 0 23.50 23.50 0.00 1.93 8.21 ARCM 84 jugt 84 8126 ~1LCAST STEEL$ LTD 0 12.00 12.00 0.00 2.48 20.67 SEPT 84 SEPT 84 0 8127 LAR$EN 4 T0UR0 LTD n 19.80 19.80 0.00 3.75 18.94 JUNE 84 JUNE 84 0 8128 RAYROND UGOLLEN HILL$ LTD 9 18.00 19.50 1.50 4.70 24.10 HARCK 84 JUNE 84 3 8129 £mL M~NIMR ~MUWACTUIEM 0 83.90 87.60 3.70 4.29 4.79 APRIL 84 JAN 85 9 LTD - 193 - TME Immu1$ 4L CR01f 1 IuMOT9N1( C8P0 1 104 OF 1014 LTD. 10ETAILt OP f8f-PROJICIS FINANCID UNDER gen LAs 2011 INI XATURE ESIMATID ACTUAL PROJECT 180 1580 LomN AS ExPICTiD ACTUAL TIM L0 OP PROJECI PROJECI CoSi LA 4 Of ACTUAL RomT? 0? KONTN c? p 0 UmSe mNn or Sul-PROJECT PROJE¢T CoSi C01 0¥EIUN AmU10 PROJECT Cosi 3CPETamm CON PLEI4 @KA- 8130 A$M0¢IATED CEMENT ¢eMPAS$ m 73.30 74.20 0.40 23.72 31.97 JULI 84 ot u 3 LTD e11 IIRLO$KAR ELECIRIC Co LTD e 29.50 29,50 0.00 ,.3 26.54 Jull 85 lut 85 ¢ 8133 TOV 10N t0 8 148.50 2:6.00 67.50 8.75 4.05 MARCH 85 ma" 8 8134 SURAT CoTtom SPRG b V6 PILLS R 43.50 46.80 330 12.00 25.64 DEC 84 JAN 85 I LT 8136 89CO (NG6 CO LTD e 18.40 8.63 -9.77 3.78 43.80 JUNE 84 OCT 85 16 8137 TVS Utut81 LTD 9 250.00 250.00 0.00 9.00 3.60 JAn 8$ JAN 85 0 8133 ORI$SA CEUERT LTD m 56.00 58.00 2.00 '.47 7.71 Dec 84 O¢T 85 10 5139 CROXP1014 GRAVES LTD 8 14.00 14.00 0.00 2.85 20.36 DEC 84 DEC 8 0 8140 SUJARAT FILAMTS LTD 4 27.60 26.90 -0.70 2.86 10.63 MARCH 85 RC0 85 0 8142 DAVID RN GREAVES LTD 0 6.30 6.00 -0.50 2.81 46.83 MAY 84 noV 84 6 843 KARTAM PETROCHESICALS LTD 1 70.50 122.00 51.50 4.34 3.56 Au$ 85 APRIL 86 8 81U LUCA TV$ LTD E 9.60 6.14 .3.46 2.79 45.44 JUL 84 JULY 8 0 814 14014% RY01 8 10 TRIES LTD 0 32.00 32.00 0.00 3.20 10.00 0ec 83 RARCK 84 3 8146 TNIUMALLAI CHENICALS LTD t 127.00 127.00 0.00 $.1$ 4.06 DEC 85 DEC 85 0 8147 VIIAT SYITHEI PRIKt LTD 8 26.30 29.70 3.40 6.00 20.20 JUNE 84 DEC 84 6 1148 VICKERS SYTEm INTUNATIONAL 0 28.50 27.60 -0.90 4.50 16.30 MARCH 85 MACH 87 24 LTD 8149 UmRE DIVIJAY CEMINT CO LTD 11 345.00 488.00 143.00 20.94 4.29 DEC 84 OCT 85 te 8150 PER1NE1 M~SET$ LTD E $1.50 60.00 8.50 3.10 5.17 SEP 84 JAN 85 4 11 PARSRMPURIA SYTNIKETICS LTD N 71.00 119.52 48.5 2.08 1.74 luxE 35 MAY 8 8152 m110fE CmENTS LTD n $7.20 58.30 1.10 9.25 15.87 JAN 84 AUG 8 7 8153 utn MNELAL INDUTRIES LTD * 12.50 12.50 0.00 0.27 2.16 SEPT 84 SEPT UA 2 8154 KLTA4I 8RAKES LTD 4 114.30 114.50 0.00 5.13 4.48 JUKE 85 JUNE 85 0 8156 mUAPPA N0A5A17 CoAlc b 28.00 28.00 0.00 5.40 19.29 ap 84 NOv 84 2 FIES LTD - 194 - føl IUUIMIAL CRIDIT 8 iIiI C~APtIell v0 INDIA LID. (0ITAIL OF sus.Pel utis IFINANCD U00 lI Løn 2051 IN) 1atm ($IIAT ¢CM MMW ic IT le1 to" IPECTIO ACTUAL 1113 Q¥ Loms ør PROJICT PIOJitI c0l tom* $Qf O CIVAL "NIs er MØUTH OP Rf . MUEI 1A1! 0a e Ur.PROJECT PØDJECI ces? ¢osT OVERRU ~A1N? PROJEC? ¢01 ComPkt1104 C0RPLETI" 081,# 1ó (mLtet(O sit$ELS ALLoys 0 0.80 116,80 26.00 5.1 4.42 Ja 85 OC? 8 21 LTD 8158 5G11I INDIA LTD N 76.60 76.60 0.00 3.10 4.57 JULI 86 MRCH 88 20 8159 000 VALLEY Costes PYT LI0 §t 0.74 0.74 0.00 0.38 51.31 ftARCH 14 APRIL 14 1 8160 ØEST C1k01P0 ENSINEERING 1 6.00 7.30 1.30 1.80 4.66 APRIL 84 APRIL 14 0 LTD 8161 UAJAJ AUTO LTD 1 31.70 36.00 1.30 4.00 11.11 ivNt 84 0C 8 4 8162 Ma$ INDIA LTO 9 9.20 9.20 0.00 1.88 20.43 C¢T 84 OCT 8 0 8163 KA$SMI 501 LTD R 42.50 50.20 7.70 6.28 12.51 JIX 85 ~ es -3 e16h GUT REE MILLIAM LTD 1 354.30 235.00 .119.30 &.97 2.11 JAN 84 Ii 84 1 8168 NATIONAL RADIO & ELECTROMICS I 27.50 32.00 4.50 2.30 7.19 JUNE 83 APRIL 87 22 LTD 8169 0005AL PYT LTD i 5U.80 58.80 0.00 15.13 27.61 lat 84 JWIE 88 0 8170 ASSO¢IATE CSENT COWPA1I1s 110.00 110.00 0.00 4.02 3.65 AUG 85 Oe 85 4 LTD 171 KIRL~KA PEUuTc CO LTD t 15.60 15.60 0.00 11.54 74.10 JE 88 JUNE 84 0 f174 £IRLt A1 OttIL mn$I LTD t 13.20 14.00 0.80 3.30 23.57 JUNE 84 DEC 84 6 8175 5 $ n~RANA LT 0 31.60 U.80 3.20 4.53 13.02 øA' v5 Y 55 8176 UNIMTD PHAM 101A'LTD 1 58.60 63.00 4.40 7.80 12.31 SV !! J4 E 85 9 8177 MICD PRODUCTS LID e 0.32 0.83 -0.09 0.43 100.00 0C. !tå X? g 0 8178 filiv Eus1mERs LTD I 56.00 70.90 14.90 4.50 6.35 qAc4 55 JA 85 -2 8179 1tALA 1ELECTRI¢ LAWP ømNK$ LTD n 72.00 115.30 43.30 9.35 !.11 *Åg:- ! **R¢v s :4 1180 MIIML MASANIC CEICAL$ LTD SE 8.50 8.50 0.00 0.88 10.35 C.: !L EC 84 0 818 PAMA~IUUT CEMTISPUN CASTIMBI N 22.50 27.00 4.50 2.76 10.22 8Et5 "1CH 86 9 PyT LTD 8182 NIØUMTAU CN5TRUCTIGN CO LTD SE 92.70 92.70 0.00 2.10 2.27 .. 4 :Uv 84 0 88 8 $tøf a $01101 to LID I 20.20 20.30 0.30 2.15 10.49 :: V! :uME 86 30 - 195 - TRE 101STRIAL ¢REDIT i INVESTREMT CORPAT10M F INDIA LTD. (ITAIt oF SU.PROJECTU FINANCED UNDER 18C0 on 20$1 Ini bTURE ESTIMTED ACTUAL PROJEC 1820 1890 t0Am AS E1PECTE AcTUA4 tM ot 0m oF PROJECT PROJECT coT LtAm 8 oF ACTUM ROui oF 0MTN 0v W': 14 ~U18ER amn OF $U8.PROJECT PROJECT COST Cosi OVERMJ AXOUMI PROICT COSI COMPLETIOM CORPLETI:n r.443 ...... ....... . ........ ...... ...... ....... ........ ...... ............ ... ...... .......... ......... 88 A$1AN CAOLES CORPORATION LTD k 7.80 7.80 0.00 2.80 3$.90 MARCm 85 MARCM 85 0 6186 IN00 MULF EXPLOSIVES LTD l 60.00 60.00 0.00 6.20 10.33 APRIL 81 WRCH 86 11 9*4' ASCCIATED CEENt C0**ANjES BE 4.5 &.55 0.00 3.25 71.43 iLNE 8t *A es y LTD 688 PPAMS TUIKS LTD 0 119.60 119.60 0.00 3.45 2.88 JUNE 86 DEC 85 .6 8189 Ayl0m0 OOLLN ILLs LTD R 12.10 14.50 2.40 2.85 19.66 URCH 84 DEc 84 9 8190 RAA$I CENDT LTD E 735.00 931.60 1%.60 10.30 1.11 JUK 86 DEC 86 6 8191 IATA RIFRACTORIES LTD uE 26.60 25.00 -1.60 2.20 8.80 OCT 84 MARc 85 1 8192 SAMY0 VIKA$ !3DIA1 LTD 4 25.30 21.50 •3.10 3.58 16.65 MAY 84 JAN 85 8 8193 A15 INMU$TRIES LTD 8u 36.00 36.00 0.00 1.60 3.89 MR 85 UARC 85 0 81% CENTURT EMA LTD 0 119.00 126.30 7.30 14.28 11.31 nuE 85 JUL 86 13 8195 PAolPE m8NEti PV LTD* 4 21.50 21,50 0.00 1.30 6.05 3AN86 JULI 86 6 81% SOUTHIER PtMOCCHICALS 8E 218.00 218.00 0.00 9.62 4.41 DEC 85 Dm 86 3 INDU$TRIES COfP LTD 8197 101A# C810E 6 CME NICAL L1M a 89.70 151.50 61.80 1.75 1.16 0¢ 84 APRIL 88 410 8199 8UM0y TUBIN of INDIA LTD m 29.80 22.50 -7.30 2.44 10.84 OCT 85 APRIL 85 -6 8201 TATA i0 8 STL CO LTD uE 15.40 15.40 0.00 4.22 27.40 DEC 84 DEC 4 0 822 GOJA ALALIE 8 C~e NICALS 0 203.50 203.50 0.00 10.00 4.91 DEC 85 DEC 85 0 LTD 8203 R 8 0 i en LTD 3 59.00 39.00 0.00 2.30 5.90 KAR 86 mM 86 0 8205 k0ol CAS a COMTAIKERS 0 25.30 25.30 0.00 1.28 5.06 DEC 84 IARCH 86 15 LTD 8207 NIM05 0EN 0 IPAT LTD 9 145.00 175.60 30.60 4.51 2.517 J 86 O¢T 85 .3 8208 EALU~R= I 2DUSTRIES LTD E 84.30 82.50 -1.80 22.45 27.21 JULI 8 FEl 86 19 8209 11 C~MUWI 005 LTD 1 215.0 326.00 111.00 7.76 2.58 juNE 85 juNE 85 0 8210 t^N0*8A5 CLUT0M LTD 0 32.50 32.50 0.00 1.33 4.09 RAT 84 HAV 84 0 8211 001f01 LTD 0 33.70 52.50 18.80 7.73 14.72 JAN8 JUNE 85 5 - 196 à THE INUSTRIAL CDIT a ImENffNit CORPORA11N P 141A LTD. (TO CIA0 of SU8.PROJECIS FINANCD UMER IIRO, tm 2051 1N) NATURE ESTIRATED ACIUAL PROJECT 1880 18*0 LA* AS E4PECTIO ACT4AL list om1 0Am OF PROJECT PIOJECT COSI t0A t ep ACTUAL 80o8 l P 0TH l V U8 * N om88E Me OS U8.PROJEcT PROJCT COST COST OVERRUK ARO0NT PROJECT COST COMPLETION CpPLEtION KNIk$ 8212 LOTUS R00FINS PVI LTD m 13.00 12.00 -1.00 2.30 20.83 Jon as JUNI 85 0 8213 ge0in INDU$TRIE$ LTD e 35.90 43.30 7.40 4.29 9.91 APRIL 85 JAN 86 9 8214 MR~AAR TIKBER PROUCTS LTD 8 260.00 321.00 61.00 12.60 3.93 JULY 86 OCT 87 13 821s 171UNIK PIf ARNACEUTIAL 10 E 2.4o 24.40 2.00 1.1 5.' SEP !$ OCT 86 1! 8216 RE60t CERAHICS LTD n 120.00 155.80 35.80 1.10 0.71 JUNE 86 Ab 86 .1 8219 SAN00 TEXTILE ILLS LT0 m 28.50 29.60 1.10 3.12 10.54 JUNE 85 a6 85 2 8220 AJAJ TEMP0 LTD E 43.$0 43.90 0.40 14.25 32.46 $EP 85 SEP 85 0 8221 PUCO ELECTRONICS 8 t 15.00 15.00 0.00 11.04 73.60 DeC 84 DEt 84 0 ELECTRICALS LTD 8223 ASIATIC 068EN LTD et 3.10 3.10 0.00 1.41 45.48 DEC S5 DEC 86 12 8226 ELECON 866 CO LTD E 29.80 29.80 0.00 2.50 8.39 DEC 84 DEC 84 0 8227 ORIEMT CER0L LTD N 58.80 57.80 .1.00 4.63 8.01 JAN 85 0¢T 85 9 8228 til6 GUIPKENIS LTD 0 24.20 26.53 2.33 3.25 12.25 RCH 85 APRIL 85 1 8229 STU*ORM E866 LTD 8 44.80 44.80 0.00 1.57 3.50 NARM 85 MARCH 85 0 8230 f1101E KIRLSM0A LTD mE 5.20 5.20 0.00 3.07 59.04 Ant 85 APk 85 0 8231 RAKISKAN 1SP1 LTD 0 1.40 1.40 0.00 1.00 71.43 JAN 85 JAN 85 0 8232 H00I NEROX LTD 8 300.00 373.80 73.80 6.64 1.78 JAN 85 RAY 85 4 8233 SI0*Et 1CREN1A01* LTD 0 29.00 29.00 0.00 7.90 27.24 $EPT 85 DEC 85 3 8234 1N00 ffl$$ WISKOCK LTD N 42.50 $1.50 9.00 2.79 5.42 JUNE 85 80V 85 s 83 Wm$L tel& LTD n 29.00 29.00 0.00 4.64 16.00 AU 85 AUG 85 0 8236 NELLK N ININDUSTAN) PVI LO f 4.00 4.30 0.30 1.53 35.51 JUNI 84 JUNI 84 0 8237 LUCAM TVS LTD R 5.29 5.29 0.00 1.53 28.92 MAT 85 8A1 85 0 82m Timm8Ta TELELImKs LTD a 121.50 121.50 0.00 5.90 4.86 AUG 85 OEC 85 4 8239 HILTON RU8ERS LTD E 31.50 31.50 0.00 7.95 25.24 JUN 85 AUG 85 2 8340 MNDia P130NS LTD 8 11.30 11.90 0.60 3.72 31.26 DE 85 DEC 85 0 -197- TE IDUSIRIAL CRt0oll I UITIrNT COPATIMO er il* LID. (DETAILS OF fU8-POJECTS PINA¢to UNDE 180 toA 2011 IN) AlU.E 01INATED A¢TUAL MJECT IBM 1[0D0ol A4 EPECTEo ACTUAL ?Js LA ep PROJECT MiJEC COSI L0n t O A¢IUAL. OSIN Of 00s. e . NU~itt m eP SU-POECT MJe COSI Cosi OVtUn AN1s miOJECr CO$ CPLTIO1N ColP1.,0 n-. 8241 PmP AUT0 INDUSIRIES LTD 1 29.20 31.80 2.60 1.73 5.4 JULI 85 IAM 86 6 8242 oEEPAX NITRITE LTD 8e 4.50 4.50 0.00 1.65 36.67 DEc 78 OEC 78 0 8243 MOM$INAX INDIA PV? LID 8 2.17 2.00 -0.17 1.98 99.00 Oe 85 DEc 85 0 8244 SATAJI MILL$ LTD E 15.30 17.00 1.70 2.30 13.53 APRIL f$ AmS 85 4 8245 ELCOMIET LTD a 28.10 26.80 -1.30 3.30 12.31 SEPT S$ DtC 86 15 8247 SA002 TEXTRLE ILLS LTD E 24.00 25.50 1.50 10.00 39.22 JUSE 85 A8 85 2 8249 "UUAPPA ELECtRSI$ LTD a M.00 68.00 15.00 5.75 8.46 S0V 85 JULT 86 8 8250 CEMT PORATION OP SUJARAT 5 1210.00 1675.00 465.00 61.30 3.67 JULI 87 HARCK 88 8 LTD 82$5 NatiONAL "0K10< LTD mE 1.80 1.80 0.00 1.46 81.11 DEC 85 DEC 85 0 8258 10A PISIOMS LTD n 8.50 8.50 0.00 5.41 63.65 ec 85 DEC 85 0 8260 KUMARAM INDUSIRIEI LTD 1 4.70 4.70 0.00 2.67 56.81 MIACH 85 Jm 85 3 8262 8RAA STRIPS LTD 4 140.00 227.00 87.00 15.80 6.96 DEC 85 imf 88 0 8263 Ud 1R08 8 STEEL K~ LID 1 107.90 125.80 17.90 2.20 1.75 JULI 86 AU8 86 1 8264 omRAT LAS$ Tu3s LTD 4 63.50 81.10 17.60 9.80 12.08 JULI 86 MAy 88 22 8265 OALLAMPUR INDUSTRIES LTD 9 25.20 27.90 2.70 11.00 39.43 BOV 85 NOV 85 0 8266 VXII (MIA LTD 0 21.50 24.00 2.50 4.20 17.50 D¢I 83 MARCH 8 I 8267 ¥ESTERM 101A ECIU LTD 0 64.00 64.00 0.00 6.80 10.62 OCI 85 OCT 85 0 8269 Mel VISMU PACKAUISS PVT LTD 8 34.40 34.10 -0.30 1.80 5.28 Jut 86 DEC 85 -6 8270 EMPINE 1 2011U$8 LTD A 1.59 1.46 .0.13 1.46 100.00 lukt 85 SOV 85 I 8271 TUE I STESTS F lala* LTD " 23.80 23.80 0.00 2.90 12.18 DEC 85 DEC 85 0 8272 1BA MRTIO =NUSTRIES LTD 0 20.40 19.70 .0.70 5.53 28.07 ett 85 MRCN 87 13 8275 KATAU 1KAII IP 8 VS CO o 148.70 185.90 37.20 7.70 4.14 lA 86 SEP 17 2G LTD 8274 OEM WALVERSCHEIDT FORGIRKS 8 47.20 49.20 2.00 2.15 4.37 HARCK 86 NARK 86 0 LTD - 198 - mn IMUIIAL Cuol1 8 INtUXEI Co mTaI 0 1101& Lti. (OTAILS OF U-PROJIt FIMED¢ Ui 180 LOAM 2051 In) MATURI (IsIRTIt ACtUAL PRMT IRD 1810 LOAN A5 tIPIMD ACTUAL i: x* LOM er PRIOJeC PROJICI CO LOAN t OF ACTUAL 01iH OF 0TH OF ta im am1E8 m80 er su.PIEtt PIOJECT CoI ¢i I 0 1y ot~ ANOMI MOUT COSI COMLtION COmPLIom aIns 8275 LAK0I WHIRE 01$ LTD 1 6.80 6.80 0.00 2.13 31.62 DEC 85 #t 85 0 5276 AS$OCIAItD fIt 0INDUMhIts LTD 0 2.50 2.50 0.00 1.80 72.00 MI15 MAå 81 0 8278 011A tiSINERING LTD a 15.00 13.20 0.20 2.68 20.30 CI 86 OCT 86 0 827.4 KLOCXER u00 140.3 L' 0 1.?0 ^ .9 0.00 1.10 t'.27 DEC så DE¢ 94 Z 8280 CENTI TEXTIL£ 8 INDUSTRIE$ R 59.00 91.10 32.10 3.62 3.97 SEPT 85 MMRC 87 18 LTD 8281 PEICO ELECTROXICS 8 1 12.00 12.00 0.00 2.10 17.50 DEC 85 Det 85 0 CLECIRICALS LTD 8282 HINDUSTAN 010R LTD 8e 69.30 82.00 12.70 5.30 6.46 SPI 86 OCN 87 e 8215 8Am00A RAY0N CORDORATION LTD t 28.12 47.07 18.95 13.80 29.32 DEC 87 DEC 88 12 8286 KUff~CM JUTE t IND LTD - 11.00 53.00 2.00 7.40 13.% JUE 87 DEC 87 6 8287 ORIEMT PAPER 8 IMUSTRI LTD A 11.70 11.70 0.00 7.70 65.81 KMC 86 MuCN 86 c - 199 - FIUNU¢*L PWU*1MM¢ OF SU8.PA0t¢Tl PIINACD¢0 Dt 100 PaumrifaTu LOAU•2051 IN (NmL. '<AR) tIPCTIø A¢TUAL (IEICTID ACTVAL EXPlCTED ACTL Lom ZIPEVED0 ACTUAL PROFIT/ PROFIT/ RETUR§ a RETUR# a CAPA¢åTy CAPåctT mu~ ømt OF THE $fi PROJECT sAlø SALE$ (LOSS) ILMSS) INVsTmEN? IVtsNøl UlILISATC UTILHATZOmf A1 SP aMINSS INDIA LTD 537.60 660.70 107.20 131.80 23.50 9.00 5£. 92.00 83 i00 $11ss lint LTD 38.40 20.00 6.80 -0.20 12.00 -VI 50.00 .0 86 PUN3A8 ANAND 8ATTIRICS JO 22.80 6.70 3.90 -21.80 20.00 -v£ 30.C0 70.30 64 FuWmL tiERIUINIG CO UTO :11.30 75.90 21.80 -7.80 33.10 -Ve 00:.00 s3.o; 811 PRECISION FASTEffRS LTO 141.00 148.10 7.90 10.10 14.30 29.60 68.00 60.00 513 00ttl STEIEL 8 FI0 ALLOfS 48.50 51.00 7.20 ..60 24.40 -VI 60.00 40.40 PVT LTD 816 eimaR CAUSTIC I CHENICALS LTD 114.60 50.00 6.90 -39.20 - 11.00 -VE 85.00 65.00 817 KARNATAKA SALL BEARIKS 150.50 101.90 15.30 -44.70 18.90 -VE 15.00 44.cc CORO#ATION LTD 819 ~AKElit KYLEN LTD 89.50 90.00 36.00 32.00 24.00 20.00 82.00 75.00 821 AMALAL M 5M*AI TERPRISIS 361.00 23.60 21.80 13.50 31.00 23.00 80.00 65.0 LTD 828 Pø3=8 CCT STULS LTD 287.70 455.40 32.10 9.60 36.00 21.00 85.00 100.00 829 PRENNR AUTONDILES LTD 1183.70 1808.70 110.50 242.90 23.00 22.50 :C.30 100.00 32 TI DIAOND CNAI LTD 90.50 111.70 5.30 4.50 19.70 12.22 0 95.00 833 RELIA¢t INDUSTRIES LTD &758.70 5140.00 282.00 710.00 22.60 10.10 : 80.00 834 *PACRA1*NG A $~VM$ LTD 53.80 25.10 3.20 .8.30 17.70 -4 :: 0.00 838 =Ilun a mANImRA LTD 753.90 4304.10 251.20 169.00 22.80 15.60 1:c. 85.00 80 UNEEL M INDIA LTD 433.10 40.70 38.90 17.10 30.40 S.A. U:.C 90.00 841 AUTOKOTIVE ALa1 LTD " 346.00 0.00 24.20 0.00 17.00 0.0C 4 : 0.02 843 mm10* RU~8ER LTD 98.30 42.10 9.50 -4.10 - 19.60 . : .A. W PATl ALLTS STEEL LTD 21.70 9.60 1.70 -6.00 - 20.70 .VE ' 37.90 850 ELLIAN (NIUST*) PVT LTD 89.00 115.00 2.30 8.00 14.70 24.00 '.21 89.00 s4 V SEJERIN am INDIA LTD 65.30 48.80 6.50 2.60 22.00 13.70 's.:: 35.00 -200- FINANCIAL PERFORMANCE OF $UW-PROJECTS FINANCED UNDER InA) mOUiENTI LOA*20st IN INORRAL Ito) (iRS In ILLION) EXPECTED ACTUAL EXPECTED ACTUAL EXPECTED ACTUAL LOAN EXPECTED ACTUAL PROFITt PROFIT/ RETURN ON RETURN ON CAPACITY CAPACITY NUASt# #ARE OF THE SUg PROJECT SALES SALES (LOSS) (LOSS) INVESTRENT INVESTMENT UTILISATION UTILI1A'1T. 658 SWIDARAN FASTENERS LTD 175.00 399.80 20.50 25.60 35.50 15.60 75.00 75.00 86$ SHRIRAf FISES LTD 126.00 130.00 24.50 2M.0O 27.10 24.00 0.OO 90.00 072 SMIRAM FIBRES LTD 126.00 130,00 24.50 22.00 27.10 S4.00 90.00 40.00 875 UNIER0A CABLES LTD 501.20 W9.10 36.10 93.30 20.00 22.00 8.0C I5.0 077 AMIL STARCH LTD 21.00 24.00 5.60 6.30 15.80 17.00 87.00 90.00 879 8IMETALLIC STEEL & ALLOYS LTD 96.20 6.30 13.10 *24.S0 - 20.10 -vt 75.00 5.00 888 1IETAL BEARINGS LTD 179.20 109.50 54.00 9.20 30.20 8.60 90.00 52.10 696 AUROFOOD PVT LTD 191.90 245.30 21.10 8.20 31.60 23.60 60.00 66.70 898 HIP ISPAT LTD 140.60 112.70 5.25 2.00 18.00 13.60 75.00 9.10 B99 J K INDUSTRIES LTD 1708.20 1497.00 75.10 67.40 15.60 24.40 90.00 62.00 8100 SIRLA JUTE I IMS LTD 768.00 2396.60 136.50 377.40 20.90 11.00 90.00 80.00 6106 SHARPEDGE LTD 35.00 39.40 6.10 6.70 24.00 10.40 70.00 70.00 8105 RALLIVOLF LTD 126.80 161.70 12.50 8.40 22.00 15.60 100.00 100.00 6106 LIGHT RETAL INDS LTD 187.90 17.30 12.80 -23.70 17.20 -Vt 80.00 7.50 810 vtSTALt VITANINS FOODS CO 122.50 152.80 8.80 2.40 33.00 17.00 60.00 67.00 LTD 6125 6HAY8 PATIL INDUSTRIES LTD 113.20 9.30 $1.10 -31.70 25.90 -VE 80.00 20.00 6129 KugAL MACHINARY RANUFACTURERV 87.60 13.90 5.90 -20.30 16.00 -vE 75.00 7.0 LTD 8133 OYTRON INDIA LTD 223.90 7.30 29.30 -37.50 0.00 *VE 80.00 20.00 6137 TVS SUZUKI LTD " 582.40 0.00 63.00 0.00 28.80 0.00 80.00 C.03 6138 ORISSA CMEt LTD 811.60 1065.10 39.90 50.50 16.80 11.00 73.00 70.00 0143 HARIMA PETROCHEMICALS LTD 165.00 172.10 19.10 37.80 5.10 3.50 8$5.00 90.00 6119 SHREE DISVIJAY CEWENT CO LTD " 579.50 0.00 28.50 0.00 21.30 0.00 96.00 90.00 - 201 ~ FINAI¢IAL PERPORIUNCE 0F sU-PROJECTS FINARCED UnDEm 1880 VOURTENTK LOM-20 IN (NOfi"AL nla (R$ In MILLION) EXPCTED ACTUAL. ENPECIE AC?UAL (XPECTED ACTUAL LOM ExPECTOD ACLUL PR0lti PROFITI uvfiN ON RETURN 08 CAPACITY CAatTY 0U018t NE nF THE SU8 Pm03ECT SALE SALU$ (L0$1 (L0SU 1MSETM41 IMSØTT UTILISAT[ا uTI:a?IOø 8150 PMAMENT HMtE$ LTD 31.60 20.80 3.00 -3.40 15.30 -V( 80.10 75.- 811 PARASRMPURIA SNTMTICS LTD 46.00 121.00 30.90 23.i0 17.40 11.11 80.00 9.30 8156 NURUGAPPA MRGANI E CERAMIC " 14.30 0.00 2.60 0.00 16.30 0.00 60.00 0.0 MRU. LTD 8157 CONSOLIDATE STEELS i ALL0fS 292.30 75.80 12.80 s.30 18.30 -VE 50.00 30.0 LTD 8176 UNI1t0 PKARRA, INDIA LTD 20.90 17.40 0.80 -8.20 10.80 •VE 90.00 82.00 8179 KERALA ELECTRIC LARP U sRKS LTD 98.00 62.60 9.30 -21.40 22.00 .VE 80.00 60.00 8181 PARANU*T CE8TRISPUN CASTINGS 34.80 4.00 4.30 -5.00 25.30 -VE 60.00 13.30 PV? LTD 8186 100 GUL? E WPLOSIVES LTD 80.00 0.00 4.50 0.00 16.30 0.00 70.00 0.00 B188 PRASKS TUSE$ LTD 86.20 149.40 26.00 29.00 20.00 0.00 90.00 90.00 197 MNDIAN CARIDE i CHEICALS LTD " 130.70 0.00 6.i0 0.00 12.00 0.00 80.00 0.00 8199 BUNDI MUBIN6 0F INDIA LTD " 27.60 0.00 3.40 0.00 48.00 0.00 0.00 0.00 8202 uutuRA ALLIS i CHERICALS " 91.00 0.00 19.50 0.00 16.60 0.00 85.00 0.00 LTD 820 WAR08~ AUTOmTIVE 40.00 1.10 3.00 4.00 -' 0.00 -VE 73.00 3.00 ELECTRICALS LTD 8205 UKNIVEIAL CANS i CONTAIRERS 42.30 49.0 3.60 -2.80 20.00 -VE 70.00 10.00 LTD 8207 NIPPON 0E880 ISPAT LTD 390.50 823.10 19.50 54.00 16.40 16.50 85.00 113.00 8209 sREE CHANWII MPEDI LTD " 278.10 0.00 29.90 0.00 20.60 0.00 80.00 0.00 8212 LOM RI00I$ PVI LTD 29.20 10.90 2.60 -0.70/ 25.0 -VE 8.00 2$.20 216 KW~11.AU TIIIER PROUCTS LTD " 228.50 0.00 34.80 0.00 21.00 0.00 85.00 0.00 ø218 1inig PHmACEUTICALS LTD 43.00 &4.20 0.20 1.20 9.40 11.80 60.00 63.00 8216 Uf6~TCT CERMICS LTD " 90.30 0.00 10.00 0.00 24.80 0.00 72.00 0.00 - 202 - FINANCIAL PERFORMNCE OF sUl*PROJECTS FINANCED UNDER 1o0 IOURTIENIN LOAX-2051 IN IORMAL YARW IRS IN MILLIOl EXPECTED ACTUAL EXPECTED ACTUAL EXPECTED ACTUAL LOu 11PECtED ACTUAL PRFIT/ PROFITI RETURN 0N RETURN 01 CAPACITY CAPACITY NUgER NAK OF THE SUB PROJECT SALES SALES ILOSS) (LOSS) INVESTMENT INVES!ENT UTILIIA?tSN UTILISATIOM ...... ....................... *-----.** .....-.....**.........***..... .................. 5219 SANDOZ TEXTILE RILLS LTD 47.30 102.40 2.20 6.50 17.10 17.s0 85.00 80.00 5222 EACON'S CONTROLS LTD t 321.20 0.00 60.60 0.00 49.00 0.00 90.00 0.00 5226 ELGI EOUIPRENTS LTD o 65.00 0.00 13.30 0.00 53.00 0.00 85.00 0.00 5229 STANFORD ENG LTD 81.50 16.30 16.30 *6.60 22.60 *vf 45.00 3C.00 1232 rO IfRi LTD " 992.70 0.00 140.00 0.00 26.00 0.00 90.00 0.00 8233 STOVIC SCREENS INDIA LTD 63.00 67.80 2.90 4.20 16.20 12.00 3.A. N.A. 5234 100 SMISS ANTISHOCK LTD " 32.20 0.00 0.00 0.00 16.70 0.00 90.00 0.00 6236 VELLRAN (HINDUSTANI PVT LO 1223.00 149.50 .40 8.00 18.00 25.00 92.00 93.00 8238 VIDHYA TELELIMS LTD 175.00 385.50 18.40 77.0: 24.00 51.00 80.00 73.00 5241 PIP AUTO INDUSTRIES LTD 54.00 0.00 3.80 0.00 16.50 0.00 7.00 0.00 52t SAYAJI RILLS LTD 320.00 419.20 16.40 13.10 14.30 15.00 80.00 80.00 6245 ELCONNET LTD " A2.00 0.00 2.60 0.00 17.90 0.00 80.00 0.00 8267 SAMO TEXTILE HILLS LTD 98.90 102.40 7.30 6.50 19.60 17.50 85.00 80.00 6249 HURUGAPPA ELECTRONICS LTD " 42.70 0.00 2.60 0.00 11.80 0.00 75.00 0.00 5250 CEAT CORPORATION OF UJARAT " 911.10 0.00 -27.30 0.00 0.00 0.00 90.00 0.00 LTD 8252 HINDUSTAN ALUNINIUM 1787.60 2932.00 143.00 242.60 21.80 21.50 92.00 102.00 CORPORATION LTD 5263 AKD IRON & STEEL 0RKS LTD 2382.10 3030.20 121.50 142.60 24.20 22.50 94.00 90.00 8264 IHARAT LASS TURS LTD " 57.00 0.00 7.60 0.00 1.90 0.00 80.00 0.00 8267 WESTERN INDIA ERECTORS LTD " 78.10 0.00 12.60 0.00 26.00 C.CO 5.00 0.0.0 6249 NARI VISMgn PACIAINS PVT LTD 59.00 64.70 0.50 9.10 23.40 0.00 60.00 109.67 g273 KNATAU NAKAS SP14 A 1S CO 690.00 811.20 26.70 -69.20 18.80 -VE 80.00 70.00 LTD 6274 IOIAN NALVtMSCHEIDT FORSass 71.40 4.80 6.20 *12.60 20.30 -VE 70.00 3.60 LTD •S@oise.Oo teaos 50 aLo* Ros og ;et e<o5joa c 0 el0'5 co0il ei'91 ' 000t 9 t 099 1 Ol SIUMU WMN I 00 00'06 0II 01'tt oi osl' *o'tla 00'e9 smn ImI U JI1 øitt fie01iv$jf nolivsilin INUfiln IMLSOUAI (M01) (5101, 31U silI n3)0U 51 n<D lx å 30D bm 1134vm AllJv n uSft31 50 milø tilA4 lta" 1W3 01)XI i ilftj2v aÅ13 wt3 1 Mu13 l 03fl33 19M39 031n13 i01li¥ W 51) (VIA i1~50l3 I it08-1101 te5mi50iø 0 M0 50031m14 1133t0m,I-t 3nad 11m514 - 204 - ECONOMIC PERFORMANCE OF $US-PROJECTS FINANCED UNDER IBRD FOURTEENTH LOAN 1 2051 IN ----------------------- ----------------... (ALL FIGURES ARE IN PER CENTAGE) EXPECTED ACTUAL LOAN ECON.RATE ECON.RATE NUMBER NAME OF THE COMPANY OF RETURN OF RETURN B8 SUNDARAM FASTENERS LTD 19 876 AUROFOOD PVT LTD 32 18 888 BIMETAL BEARINGS LTD 36 7 6210 SUNDAkAM CLAYTON LTD t3 ba 8232 MODI XEROX LTD 31 3 8275 LAKSHMI MACHINE WORKS LTD 60 62 - 205 - ECONOMIC PERFORMANCE OF SUS-PROJECTS FINANCED UNDER IBRD FOURTEENTH LOAN tB 2051 IN VALUE LOAN OF EXPORTS AS NUMBER NAME OF THE COMPANY EXPORTS OF SALES Al SKF BEARINGS INDIA LTD 0.38 0.60 s MYSORE KIRLOSKAR LTD $4.30 12.00 87 TATA TEA LTD 120.20 16.80 89 KUNAL ENGINEERING CO LTD 0.02 1.20 522 MOOI ALKALIES & CHEMICALS LTD 5.00 4.00 832 TI DIAMOND CHAIN LTD 0.81 0.70 833 RELIANCE INDUSTRIES LTD 60.00 8.50 543 INDAG RUBBER LTD 6.50 6.60 858 SUNDARAM FASTENERS LTD 0.99 0.30 870 ORISSA INDUSTRIES LTD 5.00 2.00 888 BIMETAL BEARINGS LTD 0.20 1.40 8129 KUNAL MACHINARY MANUFACTURERS 2.50 17.90 LTD 8131 KIRLOSKAR ELECTRIC CO LTD 22.60 1.90 8150 PERMANENT MAGNETS LTD 4.00 12.70 5216 REGENCY CERAMICS LTD 90.30 100.00 . 232 MOO XEROX LTD 92.50 18.20 8272 USHA MARTIN INDUSTRIES LTD 75.10 9.00 8275 LAKSHMI MACHINE WORKS LTD 54.00 15.00 - 206 - ECONOMIC PERFORMANCE QF THE SUB-PROJECTS FINANCED UNDER IRD FOURTEENTH LOAN is 2051 IN NO. OF INVEST LOAN JOBS MENT PER NUMBER NAME OP THE COMPANY CREATED WORKER As SKF SEARINGS INDIA LTD 485 760 63 INDO SWISS TIME LTD 121 477 56 PUNJAB ANAND BATTERIES LTD 30 773 as ELECON ENG CO LTD 138 1086 59 KUNAL ENGINEERING CO LTD 40 635 BS SHRIRAM NEEDLE BEARING 140 128 INDUSTRIES LTD 816 BIHAR CAUSTIC & CHEMICALS LTD 513 536 517 KARNATAKA BALL BEARINGS 432 702 CORPORATION LTD 519 BAKELITE HYLEM LTD 140 290 620 AXLES INDIA LTD 200 150 622 MODI ALKALIES & CHEMICALS LTD 367 969 628 PUNJAB CONCAST STEELS LTD 44 695 534 AR PACKAGING SYSTEMS LTD 125 296 537 JK SYNTHETICS LTD 380 1368 538 MAMINDRA & MAMINDRA LTD 400 2037 839 SWIL LTD 210 &33 541 AUTOMOTIVE AXLES LTD 650 507 643 INDAQ RUBBER LTD 210 377 644 PATEL ALLOYS STEEL LTD 194 89 554 ZF STEERING GEAR INDIA LTD 270 1577 5s5 SELLS CONTROLS LTD 350 233 558 SUNDARAM FASTENERS LTD 290 319 a64 METTUR CHEMICAL & INDUSTRIAL 45 695 CORPN LTD - 207 - ECONOIC PERFORMANCE OF THE SUB-PROJECTS FINANCED UNDER IBRD FOURTEENTH LOAN 10 2051 IN ----------------------------------------- ------.. NO. OF INVEST LOAN 305S MENT PA NUMBER NAME OF THE COMPANY CREATED WORKER 566 WENDT INDIA LTD 120 192 869 MADURA COATS LTD 120 50S 876 AUROFOOD PVT LTD 35 4ee e7q etMETALLIe STEEL 6 ALLOYS LTD 120 21? 881 VM SALGAOCAR & BROTHERS PVT 40 1027 LTD 883 USMA TELEHOIST LTD 239 332 896 AUROFOOD PVT LTD 35 288 898 HIM ISPAT LTD 170 292 8100 SIRLA ILITE & INDS LTD t50 lo 5102 CIMMCO LTD 66 640 8104 SHARPEDGE LTD 179 156 8106. LIGHT METAL INDS LTD 173 1228 8119 LAKSHMI ELECTRICAL CONTROL 150 197 SYSTEMS LTD 5129 KUNAL MACHINARY MANUFACTURERS 200 438 LTD 8133 DYTRON INDIA LTD 200 1080 8137 TVS SUZUKI LTD 825 303 8140 GUJARAT FILAMENTS LTD 108 249 8143 HARYANA PETROCHEMICALS LTD 188 648 Z147 VIJAY SYNTHETIC PRINTS LTD 39 761 8149 SHREE DIGVIJAY CEMENT CO LTD 112 4357 8150 PERMANENT MAGNETS LTD 165 364 8151 PARASRAMPURIA SYNTHETICS LTD 220 543 515S KALYANI BRAKES LTD 390 294 - 208 - ECONOMIC PERFORMANCE OF THE SUS-PROJECTS FINANCED UNDER IBRD FOURTEENTH LOAN IB 2051 IN ---------------------------------------------------------- NO. OF INVEST LOAN JOBS MENT PER NUMBER NAME OF THE COMPANY CREATED WORKER 8156 MURUGAPPA MORGANITE CERAMIC 50 560 FIBRES LTD 8158 MAGNETIX INDIA LTD 200 3a3 5178 UTILITY ENGINEERS LTD 400 177 8181 PARAMOUNT CENTRISPUN CASTINGS 95 -so PVT LTD 8186 INDO GULF EXPLOSIVES LTD 150 400 5188 PRAKASH TUBES LTD 326 367 8190 RAASI CEMENT LTD 497 1874 8192 SANKYO VIKAS (INDIA) LTD 116 185 8194 CENTURY ENKA LTD 100 1263 8197 INDIAN CARBIDE & CHEMICALS LTD 244 621 6199 BUNDY TUBING OF INDIA LTD 160 141 8202 GUJARAT ALKALIES & CHEMICALS 60 3392 LTD 8205 UNIVERSAL CANS & CONTAINERS 118 214 LTD 5209 SHREE CHAMUNDI MOPEDS LTD 800 407 8212 LOTUS ROOFINGS PVT LTD 40 300 8214 MANGALAN TIMBER PRODUCTS LTD 187 1717 8215 IFIUNIK PHARMACEUTICALS LTD 25 1176 8216 REGENCY CERAMICS LTD 190 820 8219 SANDOZ TEXTILE MILLS LTD 23 1057 8229 STANFORD ENG LTD 251 178 8232 MODI XEROX LTD 1387 269 8239 MILTON RUBBERS LTD 96 328 8241 PMP AUTO INDUSTRIES LTD 244 130 - 209 - ECONOMIC PERFORMANCE OF THE SUS-PROJECTS FINANCED UNDER IBRO FOURTEENTH LOAN IS 2051 IN -------------------------------------- ------------ NO. OF INVET LOAN JOBS MENT PER NUMBER NAME OF THE COMPANY CREATED wORKER ** - - - - - -- - - - ----- ------ 8247 SANDOZ TEXTILE MILLS LTD 34 750 8249 MURUGAPPA ELECTRONICS LTD 100 680 5264 BHARAT GLASS TUBES LTD 267 331 82N. SALLARPUR INOk..$RIE! LTD 200 1 8267 WESTERN INDIA ERECTORS LTD 284 225 8269 HARI VISHNU PACKAGING PVT LTD 118 2Q0 8272 USMA MARTIN INDUSTRIES LTD 32 616 5285 BARODA RAYON CORPORATION LTD 141 333 02eb HUKUMCHAND JUTE & INDS LTD 36 1472 /1-1 -210 - cUneni STATUS of Sve.LOU$ IN ata$s uN Icict Ieåocgo U0tøR lt0 LeA# 2031 II (NS. le nILLlmIs) LØA§ TOTAL ICICI åUtMzm mo. §Ane Of MU>-LOA LAN 0$ [SCHIDULInU PRINCIPAL INTEIEST TOTAL 83 1x00 $UMS fint LTD 6.288 ytt 0.000 0.000 0.000 8$ NT$08t KIRLO$KAR LTD 60.862 Yt$ 0.000 0.000 0.000 66 PUNJA6 NAUD 8Aittill LTD 14.867 Y1t 3.934 1.737 5.671 84 KUNAL 1§GMTRINS CO LTD 45.198 11S 0.000 0.000 0.000 sil PR!cflem FATEREn$ LTD 15.285 Ytt 0.000 0.000 0.000 513 DANGELI StittL 6 FERM0 ALLOTS 10.602 ffl 0.000 0.820 0.820 PvT LTD als SMIRAa HEI0L KIARIN 10.548 TØ 0.000 0.000 0.000 INDUSTRIS LTD 816 S1NAR CAUSTIC a CNEMICALS LTD 27.784 TE0 0.000 0.000 0.000 617 KARUATAKA ALL KEAI0S 70.231 1ts 0.000 0.000 0.000 CORPORATION LTD 823 ANnDAA0 NF I CALICO 97.476 Tt 9.015 6.073 18.088 PRINTING Co LTD 825 TRACTEL TIRFOR INDIA LTD 11.321 T$ 0.000 0.000 0.000 826 CHOMNSL 6 co LTD 6.725 1Tø 0.000 0.000 0.000 828 Pun3As ¢OICAT Si1 LTD 5.176 YtS 0.000 0.000 0.000 830 NORRIS ELtEtcOiICs LTD 20.342 VEI 0.000 0.000 0.000 834 AR PACKAsns systENs LTD 9.307 1M5 0.000 0.000 0.000 536 RETAL M0! INDIA LTD 27.837 tIS 0.000 0.000 0.000 541 AUTOROTIV! AcLE$ LTD 37.602 YtS 0.000 0.000 0.900 843 INDAS Rt08§ LTD 10.902 t5 0.000 0.000 0.000 844 pATt ALLOTS STIL LTD 3.376 vEl 0.000 0.000 0.000 549 $"8ttito INDIA LTD 8.914 Itt 0.000 0.000 0.000 853 RAMMYAIA PULICATON11 PYT 10.292 Tit 0.000 0.000 0.000 LTD -211 - CutnIT STATUS et SU•L0å1$ IN AtItAs uIT 1¢0¢0 FINAøtto Unet 1880 LØAN 20s1 IN l11. :1 NILLIONSI LOAU TOTAL ICI¢I SAarr ITar 80. *Aft of tue.LØA" LOA§ ol8 tsCHEOULINS PRINCIPAL trtet$i .0fL ess BLL ¢ONToLS LT 25.990 YtS 3.958 4.723 8.681 866 9110T tu& LT 10.154 It$ 0.000 0.000 0.000 870 *RISSA INOUSTRI£s LTD 10.231 YfI 0.000 0.000 0.000 079 SINTALLIC TIL $ Att¢VS LL 0 25.619 vis O.000 0.000 0.0Oc Ø03 USMA TMLINOIST LTD 27.475 ME$ 0.000 0.000 0.000 887 MASALORE CHENICAL$ 4 107.022 vis 0.000 0.000 0.000 fRTILI$t$s LTD B89 ASIATIC 0XTSN LT 12.517 1t1 0.000 0.000 0.000 990 RACNIAIV NAIUFACTURERI <eP 30.973 5.168 3.965 9.133 LTD 98 mIN IVSAT LTD 8.881 VtS 0.000 0.000 0.000 s101 VIeARBRA VteR IMUSTItI$ LTD 1.280 IS 0.000 0.000 .000 8102 cinUco LTD 23.412 MIS 0.000 0.000 0.000 810 SARP9069 LTD 15.801 MI$ 0.000 0.000 0.000 8106 LIGHT UETAL !»$D LTD 31.656 It 0.000 0.000 0.000 8309 SNut OMMVIlAT CENENT co LTD s4.776 ftS 0.000 C.000 0.000 8114 4hALT 0 010 MT 19.1S Us 0.000 0.000 0.000 0118$ ØARRADA Cnt Co LTD 78.738 VIS 0.000 0.000 0.000 8120 fTMAC0 LT 62.261 VIS 0.000 0.000 0.000 0122 $TUPP K¢RUL i SONPPA LTD 13.388 VIS 0.000 0.000 0.000 8125 BUATht PATIL INDUSTRIES LTD 35.521 T$ 0.000 0.000 0.000 8129 tUUAI NINART finUFACTURø 18.182 YI$ 0.000 1.340 1.340 LTD 1133 Dyflø0 INIA LTD t3.255 ItS 0.000 0.000 0.000 9136 EC C6 CO LTD 12.947 IS 0.000 0.000 0.000 -212 CUmRENT $TU$ oF $U8.L0ANI ta ARRuff$ WITH ICiCI FINANCE UnDER 180 LOAN 2051 I tes. In MILLION)S LoA TOTAL I¢I¢I A2 as n0. NARE 0F lUs-L0A1 LoAM 2li 0ISCNEDULING PRINCIPAL IättREST TOTAL 813 tAilmA PeTrCNIRICAL$ LTD 19.669 TES 0.000 0.000 0.000 8148 VICKEs sVMfES INTERNAI1NAL 19.580 ve$ 0.000 0.000 0.000 LTD 8150 PERMANENT MAGNETS LTD 17.456 Y(S 0.000 0.000 0.000 5151 FARASARPVRIA SYN;ILTICS jTD i3.64 2 S .O0Q 0.0a0 0.000 8153 $LM MANKLAL INDUSTRI[$ LTD 17.743 le$ 0.000 0.000 0.00g 8154 KALTANI ORAKES LTD 21.350 YES 0.000 0.000 0.000 8158 fAGNETIX INDIA LTD 23.467 yE$ 0.000 0.000 0.000 8176 UNITED PHARMA INDIA LTD 25.220 5.200 3.639 8.839 817! CTILITT !ENGIMIER LTD 15.446 MI5 C.000 0.000 0.000 8179 KERALA ELCTRIC LAMP WORK$ LTD 38.734 Yl$ 0.000 0.000 0.000 8181 PARAMOUNT CteTRI$PUN CASTING$ 7.279 Te$ 0.000 0.000 0.000 PVT LTD 8186 IN00 $ULF EXPLOSIVES LTD 21.707 MES 0.000 0.000 0.000 8195 PANTAPt 1AGNITICS PVT LTD 13.647 res 0.000 0.000 0.000 8197 INDIAN CARBIDE 8 CHEnICALs LTD 19.398 YES 0.000 0.000 0.000 8204 WARDMAKAR AUT811TIVE 9.216 1.331 1.581 2.912 ELECTRICALS.LTD 8209 $822E CHARUNDI NOPED$ LTD 67.897 8.278 10.852 19.130 8214 NANGALAN TIMBER PRODUCTS LTD 51.128 Ts 0.000 0.000 0.000 8234 IN00 $U$ ARTI9NOCK LTD 15.536 TIS 0.000 0.000 0.000 821 P1P AUTD INDUSTIB$ LTD 7.419 YES 3.000 0.000 C.000 5268 JATPRAKAN INDUSTRIES LTD 154.392 yES 0.000 0.000 0.000 8269 NURUGAPPA EtUCTROItS LTD 19.265 yIS 0.000 0.000 0.000 6251 MIRLOR $YTNTHVIC PI0RES 8 52.423 11.739 4.968 16.707 CHtRICALS LTD - 213 - tut111 siU lu $s-ULkAm ta ammAl uld ICICI finattD unga M0eI Leif 201 I ias. ii UiLtI085I 10m 101ta ItI Arra»m me. mi er sU.a LOM 0/ ftlI0rLIs PIstIPAL INTERIs rtT 4261 P5ARAT MMl Lie 50.915 It% 0.000 0.000 0.000 8264 BMAAI stalS T8St tre 13.531 ve$ 0.000 0.000 0.000 5274 MNIfå FöRt IG0 S :$.536 lII 0.000 0.000 0.000 L'0 828i NiN0uSaR ROTOR$ TD . ft$ O.O0 C.O0 0.000