The official said the issue figured in the last central board of trustees (CBT) meeting held in October, and it was decided then that the EPFO will assess the repercussions of exiting IFCI immediately or stay invested for some more time for the rating of the instruments to improve as the market stabilizes.
“Ideally, the EPFO should exit IFCI securities which are being continuously downgraded and if exit is not possible, keep a close watch as there are high chances of these securities going into losses,” the official said.
The EPFO has sought inputs from the finance ministry. The government is a majority shareholder in IFCI with 64.86% stake and the entity is administered by the finance ministry.
The exit policy allows EPFO to exit any investment that has been downgraded to avoid losses.
“We are in a wait and watch mode. The downgrade was partly due to a volatile market. There is a possibility that the ratings of IFCI improves. If it doesn’t, EPFO may decide to exit,” a member of the Finance Investment and Audit Committee said on the condition of anonymity.
According to Brickwork Ratings, IFCI’s gross NPA (GNPA) and net NPA (NNPA) ratios deteriorated to 90.67% and 75.43% respectively as on March 31, 2022 as compared with 73.72% and 50.05% respectively on March 31, 2021.This prompted the rating agency to withdraw the rating for secured non-convertible debentures of ₹575 crore on full redemption, while downgrading the ratings for the NCDs or bonds, proposed NCD and proposed commercial paper aggregating to ₹6638.14 crore of IFCI in October 2022.
