IFCI: The Fall and the Need for Revival
(10 pages of text)
After independence in 1947, the government of India founded the Industrial Finance Corporation of India as the first development financial institution to provide medium- and long-term loans to public limited companies and cooperative societies engaged in productive activities. Then in 1991, the government’s New Economic Policy opened the door to liberalization, privatization and globalization of the Indian economy. The company was restructured and incorporated in 1993 but was unable to diversify its business model from project financing to other financial services. By 2004, it had almost collapsed; its profitability had become negative. Non-performing assets had reached their peak, and the company did not have money to do business. It began selling off and/or renting out its premises, going door-to-door to save its future, and employee morale hit rock bottom. The business had become unsustainable and unviable. With this as backdrop, the board of directors needs to decide on the company’s future. What is their best option: liquidation, restructuring, merger or strategic partnership?
The case can be used in courses on crisis management, liquidation strategy, financial restructuring, mergers & acquisitions and strategic sales and also in executive management training programs in accounting, finance and strategy. It can be used to
- Provide orientation towards accounting and strategy.
- Highlight the need to change a company’s business model to adapt to an evolving economic and financial environment.
- Review growth strategies, financial market and economic analyses, leadership issues and the SWOT analysis.
- Explore how the competencies of employees affect the growth of a financial institution.
Finance and Insurance
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