India grabs No 2 slot on IFC investment chart

By SiliconIndia   |   Monday, 26 January 2004, 08:00 Hrs
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NEW DELHI: India has risen to the second position among nations ranked according to the size of investment by the World Bank’s private sector investment arm, International Finance Corporation (IFC). The lending institution has an exposure of $1bn in India.

Just three years ago, India ranked No 6, IFC vice president, investment operations, Assad Jabre told ET. Currently, Brazil, India, Mexico, Russia and Argentina are the five countries with most IFC exposure, ranked by size of investment. In India, around 80% of its investment is in the form of debt and only around $200m has been invested in equity in Indian companies. In China, the share of equity in IFC’s investment has been higher, at around 40%.

IFC is interested in raising its exposure to India. It would like to focus, in particular, on the SMEs which has enormous scope to expand. Mr Jabre does not share a widespread perception that India should focus on services, leaving manufacturing to the Chinese. IFC sees a bright future in production locally.

Of particular interest is the emerging auto components sector. The international lending agency has already invested $50m in the sector. While admitting that this is small money as yet, IFC director, South Asia department, Dimitris Tsitsiragos, said the institution is prepared to lend more if the right investment opportunity comes up. IFC is able to lend in India at rates that are a couple of percentage points below the prime lending rates of commercial banks. IFC raises money at competitive rates from global markets, builds in its own margins and an element to cover the exchange rate risk over a 5-7 year period, apart from sectoral risk premia and yet manages to offer rates lower than what domestic banks offer Indian corporates. IFC also seeks to enhance the creditworthiness of its borrowers by promoting their integration into the vendor network of large companies and promoting good corporate governance practices.

(Source: Economic Times)

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