RESTRICTED

Report No. P-988

This report is for official use only by the Bank Group and specifically authorized organizationsor persons. It May not be published, quoted or cited without Bank Group authorization. TheBank Group does not accept responsibility for the accuracy or completeness of the report.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO

THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA

LIMITED

October 13, 1971

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REPORT AND RECO15ThNDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS OlN A PROPOSED LOAN

TO THE INDUSTRIAL CREDIT AND INVESTMET CORPORATION OF INDIA IIMITED

1. * I submit the following report and recommelndation on a proposedloan to the Industrial Credit and Investment Corporation of IndiaLimited (ICICI) with the guarantee of India for the equivalent ofUS$60 million to help finance ICICI's operations over a period of twoyears. Amortization will conform substantially to the aggregate of theamortization schedules applicable to the sub-loans and investments finan-ced out of the loan now proposed. The interest rate will be 7¼ percentper annum.

PART I - INTRODUCTION

2. Since 19491, the Bank has made 39 loans amounting to US$1 ,051million and the Association 36 development credits amounting to US$1,551million (both net of cancellations) to India. Of these amounts, US$678million has been repaid and US$403 million is still undisbursed. Theshare of agricultural projects in Bank/IDA operations has increasedsubstantially in the last two years, reflecting the high priority whichthe Government accords to agriculture in the current Fourth Five-YearPlan (1969-74)., and agricultural lending is expected to account for alarge share of future Bank Group assistance, although refinance ofinfrastructure and industry will continue to be important. Support toeducation and family planning is also planned, but here the scope oflending is limited. During the remainder of this fiscal year, I expectto be ready to present for your consideration four agricultural projects,four industrial projects, including another development finance companyproject, two transport projects, a power project and a family planningproject.

3. ICICI, founded in 1955, has been one of the first developmentbanks financed by the Bank Group and an effective channel of substantialBank financing for Indian industry. Since 1955, the Bank has made eightloans to ICICI totalling US$205 million. The proposed ninth loan wouldprovide ICICI with much of the foreign exchange required for itsoperations through the end of 1973. So far, ICICI has been the onlydevelopment finance company in India supported by the Bank Group.However, a mission is about to appraise the Industrial Development Bankof India (IDBI), a government-owned development bank providing finance tolarge private and state enterprises and to many smaller firms. Throughthese two channels, Bank Group assistance should reach a wide cross-section of Indian industry.

4. A summary statement of loans and development credits as ofAugust 31, 1971, is annexed in Attachment I and shows that six loansand 11 credits of those declared effective have not yet been fullydisbursed. Of the undisbursed loans, Loan 307-IN to the Indian Ironand Steel Corporation (IISCO) for the development of their collieriesis very muach behind schedule. In my report to the Executive Directorsof July 9, 1970, (R 70-135), I explained the technical and organiza-tional problems which beset this project. Since then, we have arrangedfor a consultant to pay regular visits to assist IISCO and recently thelist of goods has been revised to meet the present circumstances. Thedisbursement schedule referred to in my report of July 9, 1970,indicating completion of the project by June 1974 still holds good.

5. It was agreed in 1970 that the balance of Credit 89-IN (BeasEquipment Project) should be allocated to Stage II of the projact andhence major purchases will be made during 1972. In the KadanaIrrigation Project (Credit 176-IN), the main contractor of the dam hasbeen suspended, having fallen badly beh:uad. As a consequence, dis-bursements are running about a year behiind schedule, but work has nowbeen resumed with departmental force account labor. Disbursements underthe Sixth Industrial Imports (Credit 18°-IN) we,7e at first mnuch slowerthan ori.ginally projected but they have picked up considerably inrecent months. The closing date has been postponed from June 1971 toDecember 1971, by which time the credit should be fu:lly disbursed.

6. Of the remaining eight credits, two (Third Telecommunicationsand Tenth Railways) are being disbursed on scheduile, while the remainingsix credits either have only just reached the first date scheduled fordisbursement or have yet to reach it. Three of these are for agricul-tural credit and represent the Bank Group s first financing of agricul-tural credit in India. The institutional and procurement arrangementsfor these credits are complex and progress towards making the creditseffective and starting disbursements have been slower than expected.However, in the case of Gujarat Agricultural Credit Project (Credit 191-IN),ordersfor the first tranche of the tractors to be supplied has recentlybeen approved. In the Punjab Agricultural Credit Project (Credit 203-DN),bids for one-half of the tractors have now been received and will shortlybe advertised to farmers. A mission visited India in September to assistthe proj ect institutions in meeting the various requirements, and Iexpect that progress will improve as experience is gained in these newand rather complex projects.

7. There have also been delays in disbursements of the Bank's loansto ICICI. The closing date of the Sixth (414i-IN) ICICI loan has beenPob4tpjMed from December 31, 1969 to June 30, 1 971 and again to June 30,1972, and the Seventh (515-IN) ICICI loan has also had to be po§ipoedby one year. These loans were affected by the 1966-68 rereXion, whichmeant a substantial lengthening of the interval between ICICI's approvalof sub-projects and the actual commitment and disbursemrAt of Bank funds.

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However, the current outlook is better, and more rapid disbursement isexpected in fIture. In fact, the most recent loan to ICICI (Loan 683-L\O,approved in June 1970, is expected to be fully conmitted by the end of1971, half a year ahead of schedule.

8. Since 1957, IFC, has made 13 commitments in India totallingUS$42.3 million, of which US$3.0 miLlion has been repaid, US$5.9 millinnsold and US$6.3 million cancelled. Of the balance of US$27.1 million,US$18.9 million represents loans and US$3.2 million equity. The largestcommitment to date has been US$18.9 million to Zuari Agro-Chemical for afertilizer plant in Goa.

9. The current project was appraised in July and August 1971 andnegotiations took place in September. The Borrower was represented byMr. S. S. Mehta, General Manager. The Guarantor has reviewed and approvedthe proposed loan documents.

PART II - THE ECOlNOMIY

10. An economic report entitled "Economic Situation and Prospectsof India" (SA-25 a), dated May 11, 1971, was distributed to the ExecutiveDirectors on May 24, 1971. A country data sheet is at Attachment II.

11. In the period follouing the recession of 1966-68, the Indianeconomy grew at an annual rate of about 5 percent. This reflects theencouraging progress of agriculture, especially in foodgrain production.Preliminary reports indicate that foodgrain production in the last cropyear reached 108 million tons, which is 8.5 percent above the level ofthe preceding year. This reflects in part substantial investments inirrigation and in the 'green revolution' which have increased theaverage level of agricultural production. But weather remains an impor-tant factor both in agriculture and - because agriculture contributesnearly half of India's GNP - in determining overall economic growth.

12. Manufacturing now contributes 19 percent of GNP. India'scurrent Five-Year Plan (1969-74) aims at an overall annual growth of 5.5percent, and an increase in manufacturing output by about 8 to 10 percenta year in both the organized and the small-scale industrial sectors.Medium and large-scale industrial production rose by about 7 percent inboth 1968 and 1969. In 1970, the growth rate was just over 5 percent.The main reasons for this setback were shortages of raw materials,especially steel and cotton, and low public investment caused by

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restrictive budget policies. In contrast sma.ll-scale firms-/ seem tohave directly benefitted from the advance of agriculture and madeconsiderable gains.

13. The principal cause of concern, and an important constraintfor the future, is the low rate of investment. Net investment was12 percent of national mncome in FY 1970 against nearly 15 percent inFY 1966. Public sector investmefnt is held back by lack of funds, andincreases in public savings through higher taxation were insufficientto make up for the sharp decline in net aid receipts from US$800 millionin 1966/67 to about US$300 million in 1970/71. The difficulties ofthis situation have been aggravated greatly by the large influx ofrefugees this year. Unless adequate assistance is,made available bythe international community, the cost of caring for the refugees couldforce cutbacks of other expenditures, mostly likely public capitalexpenditures.

14. The investment climate in tlhe private sector, however, hasimproved. The number of industrial liceases granted and the volume ofnew capital issues have substantially increased. Associated withthese investment plans is an increased demand for imports of capitalgoods, especially as Indials industry moves into areas of highertechnology.

15. The Government has followed strict budgetary and monetarypolicies in recent years and net foreign exchange reserves are now justover one billion dollars. During 1967-71, imports (especially of food)came down sharply, and in 1970-71, exports increased by over 8 percent.As a result, Indiafs trade deficit has decreased from US$1.3 billionin FY 1967 to US$130 million in FY 1971.

16. In view of the heavy burden of India's external debt (annualdebt service is presently equivalent to some 29 percent of India'sexport earnings), it is clear that as much as possible of India's ex-ternal capital requirements should be provided on concessionary terms.Accordingly, the bulk of the Bank Group assistance to India has beenand should continue to be provided from IDA. However, the amount ofIDA funds that can reasonably be allocated to India remains small inrelation to India's needs for exterxTal support, and I consider itappropriate to propose some modest Bank lending to India as long asthe Bank's net investment in India is not increased thereby. As ofAugust 31, 1971, the loans to India held by the Bank totalled us $560million, of which US$82 million remained to be disbursed leaving anet amount outstanding of US$478 million. Considering the scheduledrepayment of principal, which in the FY 1972 will amount to someUS$55 million, and the expected pattern of disbursements, the pro-posed loan w7ould not lead to an increase of the Bank's net investmentin India above the present figure.

1/ Defined as enterprises with total investment below the equivalentof US$100,000.

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PART III - THE PROJECT

17. A full appraisal report recommending the eighth loan toICICI (R 70-95) was distributed to the Executive Directors on May 21,1970. This report showed that ICICI is a financially sound, wellmanaged, creditworthy institution. Because of the recent date of afull appraisal report to the Executive Directors and the fact thatICICI faces no major problems, a separate appraisal report is notdistributed on this occasion. My report has therefore been expandedto provide a fuller, self-contained evaluation.

18. ICICI's operations since 1963 are summarized in Attachment III-1,and have largely followed the general economic trend. The recovery ofthe Indian economy and the fact that ICICI can provide finance in adesirable form for imported equipment have led to a high level of commit-ments: US $44 million in 1969 and US $38 million in 1970. Projects pre-pared in 1970 and earlier this year indicate that 1971 will achieve arecord, with commitments likely to total more than US $50 mdllion.

19. Well over half of ICICI's commitments in the past two andone-half years have taken the form of foreign exchange loans for importfinancing, totalling about US$20-30 million a year. ICICI's rupeeloan commitments have been relatively modest, although they haveincreased at growth rates of better than 50 percent in recent years(from only 10 percent of total operations in 1968 to 20 percent in 1970and 27 percent in the first half of 1971). Furthermore, increases inshare prices over the past eighteen months and improved prospects fordividend income and capital gains have encouraged ICICI to place moreemphasis than before on equity investments.

Resources

20. For rupee resources, ICICI has relied principally on thepublic sector - initially the Government and later IDBI. Twenty-threepercent of ICICI's resources as of June 30, 1971, had come from thesesources. In addition, ICICI increased its share capital in 1967 (by50 percent to Rs. 75 million) and floated two debenture issues, Rs. 60million in 1967 and Rs. 50 million in 1969. ICICI's own equity nowaccounts for 8 percent, and debentures for an additional 6 percent, ofICICI's total available resources and foreign exchange borrowingscontribute a further 63 percent. The Bank has been the main provider;the Kreditanstalt fuAr Wiederaufbau(KfW) was another significant source.

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Three recent IDBI loans to ICICI, against which ICICI's borrowers canobtain licenses for imports frcm the United Kingdom, providedtogether Z3 million. Efforts to obtain other funds from abroad onsuitable terms have not yet met with success, but are ccntinuing.Attachment III-2 details the resources invested, or available forinvestment, by ICICI as of June 30, 1971.

Ownership

21. For most of its existence, ICICI has been the only privateinstitution in India providing long-term financing for industry andoperating on a national basis. With the nationalization in 1969 ofIndia's 14 major commercial banks (eight of which are shareholders ofICICI, and more recently of the general insurance canpanies, publicsector entities now hold just over 60 percent of ICICI's capital.Other shareholders include foreign institutions in France, Germany,Japan, the United Kingdom and the United States which together holdapproximately 30 percent of the capital (Attachment III-3).

Board, Management and Staff

22. The composition of ICICI's Board of Directors is shown inAttachment III-4. Mr. G. L. Mehta, Chairman of the Board since 1958,has resigned and will retire from his post at the end of 1971. He willcontinue to be associated with ICICI as an Adviser to the Board ofDirectors. Mqr. Mehta's successor will be Mr. H. T. Parekh, now theDeputy Chairman and Managing Director, who has been with ICICI sinceits inception. ICICI's experienced management can rely on a competentstaff, which now numbers 253, including about 120 professionals.Recent staff additions have been used largely to develop ICICI's workon eccnomics, statistics, and market research. ICICI's two branchoffices in Calcutta and Madras, opened in 1969, have served principallyto relieve Bombay headquarters in project follow-up; recently,however, both branches have become more involved in project appraisal,often assisted by technical staff from Bombay.

Procedures

23. Project Appraisal. ICICI's project appraisals continue tocenter on the engineering and financial aspects of investment projectsand are competently handled. Marketing prospects are being coveredwith more care than in earlier years, although domestic sales receivea more thorough treatment than exports. Recently, ICICI has sharpenedits analysis of the eccnomic merits of the projects it supports, forexample, by examining the level of effective protection required.During loan negotiations, ICICI has agreed that these more sophisticatedapproaches to economic analysis will be continued ccnsistently andfurther refined in ICICI's future project work.

24. Follo1J-Up. In the last three years project supervision hasbeen handled more systematically and effectively than before. Inaddition to the careful compilation and evaluation of progress data,projects are visited often during construction and when in operation;projects in difficulties are supervised closely by ICICI's staff. Withthe recent strengthening of ICICI's economic and statistical staff, ICICIis able to keep in touch with general developments in industry in India.

25. Procurement Practices and Disbursement Procedure. ICICI urgesits borrowers to procure equipment on the best terms. Although it doesnot require them to go through a formal bidding procedure, ICICIgenerally insists that its clients obtain quotations from at leastthree or four firms of international reputation from differentcountries. While evaluating alternative quotations, ICICI takes intoconsideration not only quoted prices but also the supplier's reputation,service, facilities, quality and delivery period. Where a foreignpartner of ICICI's Indian client has the right to suggest the sourceof supply, ICICI asks the client to obtain quotations for similarequipment in order to judge the reasonableness of the price. ICICI'sdisbursement procedures are sound.

Business Policies and Practices

26. ICICI has broad policy guidelines set by its Board. It aimsat financing firms using the newrer technologies and in this it has beensuccessful. In the past two years, ICICI has faced a considerableupsurge in the demand for loans, a sizeable portion of which were forprojects referred to ICICI by the Government's Capital Goods Committee,which has to approve most investment imports. Consequently, ICICI didnot have to make special efforts to seek business. Through work withother term-financing institutions and through stepping up assistance tosmall firms, ICICI has attempted in recent years to contribute effective-ly to the general policy objectives of the Indian Government. Similarly,further emphasis has been placed on supporting industrial developmentin India's backward areas and in sectors of industry requiring specialeffort. These efforts are only just beginning to pay off. Anothermeasure to expand ICICI's activities was a decision taken late in 1969,to finance partnerships and proprietary concerns; previously onlylimited companies were accepted as clients. As a result, there hasbeen a considerable increase in ICICI's small loans.

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27. ICICI pursues its long standing policy of not investing inequity for quick yields and marketability, but rather because of thelonger term economic and financial m.erits of a project. ICICI hasbeen prepared to take the riskrs of undernriting share issues even fornew industrialists who would not otherwise have been able to go tothe market. As to lending, ICICI raised its interest rates in 1970;on foreign currency loans fran 8½12 to 9 percent and on its rupee loansfrom 8 to 8-2 percent. Loans are usually secured by first mortgages andbank guarantess. Exercising a right it seeks wnen project considerationsjustify such a course, ICICI has representatives on the boards oftwenty-four companies. Normally, IGIC uses outsiders rather than ICICIstaff to represent it on boards.

Characteristics and Impact of I0ICI's Gperations

28. ICI0I's clients have made substantial contributions to theincrease in India's industrial capacity: its clients account for 100percent of capacity ir. aluminum and in automobiles, the bulk of PVC,80 percent of textile machinery, 75 percent of cement and 60 percent ofpaper. Given the sophisticated nature of the industrial sectors supportedby ICICI, it is not surprising that about one-half of the projects,and the amounts committed, concern ventures linKed to foreign firms.

29. ICICI finarncing, like that of other national financialinstitutions in 1India, remains heavily concentrated in West India,especially in Gujarat and iMiaharashtra. But, I00CI has had some successin spreading its finance to the iorth, spec-fically to Uttar Pradesh andto Haryana, reflecting rapid development of metal working and agriculturalimplement production, and to Bihar, where steel and automobile projectshave expanded.

30. Clients' Performance. Attachment II-5 summarizes importantaspects of the econoiidc and financial performace of ICICI's clients.Iost sectors improved their results in 1970. Projects with a return inexcess of 10 percent on capital invested accounted for about 85 percentof 1OII0's total portfolio; this is a considerable irmprcvemert over thesituation in previous years. (Only about 60 percent of ICICI's borrowershad a return of over 10 percent in 1969). ICICI estimates that totalexports by its clients daring 1970 have been over Rs. 1.2 billion (US$160 million), or 14.5 percent of india's industrial exports, a satisfact-ory proportion.

31. Because of ICICI's involvement in more modern and capital-intensive industrial sectors, the investment per job created in iCICIprojects is quite lhigh by Indian standards. It averages Rs. 42,300(us $5,65o) of investment incurred for every job which was created by

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ICICI projects in recent years. The direct creation of jobs in eachof the last three years resulting from ICICT-financed projects has beenabout 16,000 annually. ICIC1 has estimated that since its inception in1955, the projects it has financed have created a total of about 228,000jobs, which represents over 5 percent of industrial employment infactories employing over 25 workers in India and 11 percent of employ-ment created in industry since 1955.

32. As in earlier years, ICICI has given effective support toIndian industry and its achievements are viewed with critical respectby the Government and the business community. I0ICI has maintained aclose relationship with the Government, without impairing its independ-ence.

Portfolio and Financial Position

33. Loan and Equity Portfolio. ICICI's portfolio outstanding onJune 30, 1971, included Rs. 1,029 million in loans, Rs. 133 mnillion indebentures and Rs. 157 million in equities. Its quality has improvedin the past 18 months. Arrears on learns have decreased, and manyborrowers previously in trouble have recovered fromn the recession in themid-sixties Only 5 loans with an outstajnding amnount of Rs. 10 millionare to companies likely to ace continued difficulti-es or to close down.These loans are well secured by first mortgages. All debentures heldby IICI are in first-class companies and constitute quiclkly marketableinstruments should cash needs arise. The quality of 0CICI's equity port-folio, is, on the whole, good. Losses on doubtf'ul equity investmentswould probably be offset by capital gains if 10ICI decided to sell moreof its good investments.

34. ICICI0 s auditors, the firms N. h. Raiji and Ray and Ray, estimatedICICI's doubtful accounts at Rs. 5.4 milion at the end of 1970; thisamount was edequately covered by ICICI's provision for bad debts (Rs.9.0mi.llion).

35. Profitability and Financial Position. ICICI's Income Statementsfor 1967-70 and for the first six months of 1271 are shown in AttachmentTII-6 and Balance Sheets in Attachment II-7. As in previous years, the

auditors certified ICII's 1970 financial statements without qualification.ICICI's 1970 net profits were 9 percent higher than 1969, reaching27 percent of share capital and 14 percent of net worth. I0ICI has beenpaying dividends since 1956. For the years 1966 to 1969, it paid 9percent annually; in 1970 ICICI increased its dividend to 10 percent.The payout ratio has been modest (37 percent in 1970) and 0ICIG has,therefore, been able to add sizeably to reserves, IICI0's financialposition is sound. Reserves stood, at the end of 1970, at 6.5 percentof ICICI0 s portfolio, compared with 5.4 percent at the end of 1969 and4.6 percent at the end of 1968.

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36. Since the end of 1969, the quotation of ICICI's shares onthe Bombay Stock Exchange has increased from Rs. 111 to Rs. 118 onSeptember 27, 1971, at which price the share yield amounted to 8.5percent. This price compares favorably wfith shares of Indian privateinvestment companies traded in the market, wich have yields rangingbetween 9 and 12 percent.

Operational Prospects

37. Economic and institutional factors augur well for a furthersignificant growth in ICICI's operations in the next five years. Thesefactors include four consecutive good crop years, booming small-scaleindustry, pressure on Indian industry to develop more sophisticatedproducts, and demand considerably in excess of capacity for certainsteel, machinery, food items and some chemical products.

38. Against this background, and supported by a sizeable number ofprojects under study, ICICI forecasts future commitments to rise at anaverage of about 14 percent per year in the period 1970-75, with a growthof 24 percent in 1971-72. Given the foreign currency commitments alreadymade in 1971 (US$15.7 million), the expansion of rupee business, and thegeneral outlook, ICICI's forecastis (Attachment III-8) appear reasonable.

Resource Requirements

39. Looking ahead from June 1971, 101C1 has to raise fresh resourcestotalling the equivalent of nearly US$270 million to carry out itsbusiness forecast until the end of 1975. In the period until the endof 1973, ICICI will need to raise about US$130 million, of which US$73million is required to finance imports.

40. Foreign exchange loan ccmmitments are estimated at a total ofUS$178 million. Commitments expected before the end of 1973 amount toUS$94.5 million, of which US$38 million are projects already approved byICICI's Board and US$18 million under active c cnsideration. The bulkof these projects has received the necessary clearance from theGovernment. A summary of ICICI's expected commitments of foreigncurrency loans, and relevant sources of finance, till the end of 1973,follows (in $ million):

1971 1972 1973 TOTAL(July-Dec.)

Expected foreign exchangecommitments 20.5 38 36 94.5

of which

to be financed underavailable KftW and UKlines of credit 3.5 3 - 6.5

available from IBRD underLoan 683-IN at June 30 15 - - 15

Additional amount required 2 35 36 73

41. In accordance with its recent borrowing pattern, ICICI expectsto have an additional US$8 million from KfW and UK available forcommitments in 1972 and 1973. ICICI is also hoping to obtain limitedamounts of foreign exchange from other foreign banks, possibly aboutUS$5 million to be utilized in the next two years. ICICI would probablyhave to pay more for such borrowings, possibly 81- percent per annum(for a term of about 5-7 years) than for loans from the Bank. For aninstitution such as ICICI, which has already reached a high degreeof maturity and proficiency, it is appropriate, after 16 years ofactivity, for it to try to enter the inteniational capital market. TheBank is encouraging such an entry, even if it means, in respect of arelatively small amount, somewhat heavier balance of payment consequencesfor India, as it is important for ICICI to establish its name and creditabroad. The proposed US$60 million loan would cover a substantialproportion of the amount needed by ICICI to finance its forecast importfinancing commitments to the end of 1973.

42. To cover rupee commitments projected for the period June 30,1971 to December 31, 1975 (Rs. 825 million), ICICI would have availableabout Rs. 275 million from net loan collections, sales of securities andnet cash generation. For the remaining Rs. 550 million, ICICI will haveto look to outside sources. ICICI plans to increase its share capitalby Rs. 25 million (one-third) in 1971, and by another Rs. 25 million in1975. The first share increase is already at an advanced stage ofpreparation and will be paid-in in two installments, in October 1971and January 1972. Most Indian shareholders have expressed theirintention to take part in the share issue and also any portion whichforeign shareholders may not take up. ICICI will have to borrow theremaining Rs. 500 million needed to cover commitments forecast through

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1975. This is substantial borrowing, and ICICI wJill have to make accnsiderable effort to achieve it. Preparatory work for a debent-Lreissue of Rs. 100 miiillion in 1972, is starting now. Given the reactionsalready ascertained from several potential investors, ICICI expectsthat the issue will be well received. ICICI is planning to raise afurther Rs. 140 million in 1973, Rs. 150 million in 1974 and Rs. 140million in 1975, of which Rs. 30 million to cover comnnitments in 1976.

Financial Projections

43. ICICI's projected income statements, balance sheets and cashflow (Attachments III 9-11) based on its business forecasts indicate anadequate debt service coverage, a sound financial position and asatisfactory profitability. ICICI's debt service coverage will not bebelow 1.2 througlh the life of the Bank loan, and interest coverage willnot drop below 1.4- ICICI's liquidity will remain strong, with acurrent ratio of about 2:1 and with a large additional cushion ofmarketable securities. Net profits are projected to increase annuallyby 10 percent and reach 12.5 percent of average net worth by 1975.

44. Even with the expected expansion of ICICI's net worth and withthe share capital increase of one-third projected for 1971, ICICI islikely on its business forecast, to reach in 1973 the debt limit of9:1 established in the 1967 Loan Agreement. The present limit of 9:1provides sufficient leverage for ICICI to remain profitable and toobtain additional share capital when it needs it. It is planned,therefore, to maintain the existing limit. ICICI is, thus likely tohave to move forward its plans for a share increase in 1975 to 1973.

45. In summary,, ICICI remains a creditworthy borrower and aneffective financial intermediary, deserving of continued Bank support.

Onlending Terms

46. The use of the proposed loan would be limited to foreignexchange expenditures. The terms of the proposed loan would followthose of recent Banlc loans to development finance companies, includingthe standard comritment charge. The ccnditions of the proposed loanwould be identical to the provisions of the last Bank loan to ICICI(683-IN). Estimated quarterly loan disbursements are shoan inAttachment III-12.

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PART IV - LEGAL INST m MET AND AUTHORITY

47. The draft Loan Agreement between the Bank and the IndustrialCredit and Investment Corporation of India, the draft GuaranteeAgreement between India and the Bank, the Report of the Committeeprovided for in Article III, Section 4(iii) of the Articles ofAgreement and the text of a resolution approving the proposed loanare being distributed to the Executive Directors separately. The draftagreements conform to the normal pattern for loans to developmentfinance companies.

48. I am satisfied that the proposed loan will comply with theArticles of Agreement of the Bank.

PART V - RECONMIENDATION

49. I recommend that the Executive Directors approve the proposedloan.

Robert S. McNamaraPresident

Attachments

'ttachment I

DIfTIA

SUNJfTARY STATK4,\IT OF LOAITS AND CREDITSAs of August 31, 197). (US t million)

Loan or Undis-Credit No. Year Borrower Purpose Bank IDA bursedLoans/Credits fully disbursed I76 h 137 .6

307-Di 1961 IISCO Coal Mining 19.5 2.7'.4lJb.-IN 1965 ICICI Industry DFC VI '.9.8 5.9

89-IN 1966 India Beas Equipment 23.0 8.8515-IN 1967 ICICI Industrv DFC VII 25.0 3.36!4-IN 1°69 India Tarai Seeds 13.0 10.7615-IN 1969 India Telecommunications III 27.5 26.3'53-IN 1969 India Telecommunications III 27.5 7.0i62-flT 1969 India Tenth Railways 55.0 7.3176-iN 1970 India Kadana Irrigation 35.0 32.).,182-IN 1970 India Sixth Industrial Imports 75.0 18.9683-IN 1970 ICICI Industry DFC VIII to.0 28.6171-IN 1970 India Gujarat Ngriculture 35.0 35.0203-IN 1970 India Punjab Agriculture 27.5 27.5226-IN 1971 India Andhra Pradesh

Agriculture 2!. ), 24.,230)-IN 1971 India A4gro-Aviation 6.o 6.o2L1-IN 1971 India Telecommunications IV 78.0 73.02'12-IN 1971 India Power Transmission II 75.0 75.021 9-IN 1971 India Haryana Agriculture 25.0 25.0*250-IN 1971 India Tamil Nadu A-riculture 35.0 35.0*26b-IN 1971 India Cochin II Fertilizer 20.0 20.0*26 7-IN 1971 India Wheat Storage 5.0 5.0*26S-IN 1971 India Pochampad Irrigation 39.0 39.0*

Total (less cancellations) 1,051.2 1,571.0 527.3of which has beenrepaid _!89.3 .3

Total now outstanding 56.9 1,570.7Amkount sold 110.2

of which has beenrepaid 108.4 1.3

Total now held bv Bank and. IDA 560.1 1T T.7Total un.disbursed 82.It Y.Ol.9 527.3

'-' Not yet effective.

Attachment IPage 2

SUMMARY STATREDNT OF IFC OPERATIONS IN INDIA

Amount US $Year Company Loan Eqty Total

1959 Republic Forge Company,LTD 1,500,000 - 1,500,0001959 Kirloskai Oil Engines,LTD 850,000 - 850,0001960 Assam Sllimaniti, LTD 1,365,000 - 1,365,0001961 K.S.Br. Pamps, LTD 210,000 - 210,0001963-1966 Precision Bearings India,LTD 651,250 378,9)47 1,030,19719648 Fort Gloster Industries,LTD 812,000 399,0)47 1,2l1,0tj.71964. Mahindra Ugine Steel Company. LTD 2,210,000 986,607 3,296,6071964 Lakshmi Machine Works, LTD 960,000 352,431t 1,312, 43b.1967 Jayshree Chemicals, LTD 1,050,000 loll,816 1,154,8161967 Indian Explosives, LTD 8,600,000 2,862,437 11,462,)4371969-1970 Zuari Agro Chemicals, LTD 15,150,000 3,760,502 18,910,502

Total 33,1,58,250 8,844,790 142,303,1Ol*Less sold, repaid and cancelled 15,223,101Now held 27,079,940

* difference due to rounding

Attachment II

INDIA

BASIC DATA

Total2 PercentArea: in km Cultivated

3,268,580 43.0

DensitgPopulation: Total per km

(Preliminary 1971 Census estimate) 517 million 167

Annual Rate of Growth, current estimate: 2.25 percent

Political Status: Republic

Gross National Product at Market Prices, 19 71/7 11/: Rs. 3)46.7 billion

Rate of growth 1955/56 - 1968/69: 3.M% p,a.at constant 1965/66: -5.2%prices 1966/67: 1.3%

1967/63: 8.9%1968/691/ 2.2k1969/701/ 5-5.511970/711-/ 4.5-5e;0

Per capita, 1970/71: US &,8L,

Gross Domestic Product at Current Prices, 1970/7J1": Rs. 349.5 billion

Percentage breakdown: Agriculture 49(for 1968/69) Mlining 1

Manufacturing 19Commerce and Transport 16Government and Other Services 15

Percent of National Income at Market Prices:

1965/66 1966/673 1Q67/682/ 1968/6°3/ 1969/703/

Net domestic investment 13.3 12.1 11.3 11.3 12.0Net domestic saving 10.6 8.2 7.8 8.8 9.9Current account balance -2.7 -3.9 -3.5 -2.5 -2.5

Attachment IIPage 2

1966/67-1969/70March 1970 Average Rate of

Money and Credit (Rs. billion): (Last Friday) Increase (%)

Total money supply 63.85 9.0Net bank credit to gov't sector 47.26 5.5Net bank credit to commercial sector 18.36 15.0

1969/70-Rate of increase in prices

Consumer prices/ 6.8 6.2Wholesale prices 6.5 6.9

Third Plan Period1961/62 - 1965/66

Public Sector Operations (Rs. billion): 1969/70 Annual Average_

Public sector plan outlay 21.76 17.15Balance from current revenues plus

surpluses of public enterprises 6.68 5.82Domestic borrowings 9.11 4.23Total external assistance to

public sector 5.39 4.84Deficit financing 0.58 2.26

External Public Debt, excluding 1965/66 - 1970/71Supplier's Credits (US $ million): 1970/71 Annual Average

Total debt outstanding (As of March 31, 8,263

Total annual debt 6ervice 1970) 5802/ 4602/Debt service ratio_ 30 26

1964/65 - 1970/71Average Rate of

Balance of Payments (US $ million): 1970/711/ Increase (%)

Total exports 2040 3.0Total imports 2170 3.5Trade balance -130

1966/67 - 1969/701969/70 Annual Average

Commodity concentration of exports7/ 28 35

Attachment IIPage 3

Official reserves IMF gold Use of Net inter-of gold, foreign tranche Overall IMF national

Foreign Exchange Reserves: exchange and SDRs position reserves credit liquidity(US $ million)

As of December 31, 1967 662 Nil 662 456 206As of March 31, 1970 1095 Nil 1095 183 9128/As of March 31, 1971 9768/ 7692/ 1052 Nil 1052-

1/ Government of India preliminary estimates as of May 1971. These figures requirefurther clarification.

2/ Preliminary estimates.3/ Preliminary estimates and not strictly comparable with data for 1961/62-

1965/66.4/ December 1969 to December 1970.3/ Working class consumer price index. November 1969 to November 1970.&/ Before debt relief.7/ Jute, tea and cotton fabrics as a percentage of total exports./ Includes allocation of $100658 million in SDRs in J,Tnuary 1971.9/ Includes use of $17.5 million previously non-monetary gold.

June 21, 1971

Attachment III

LOAN SUMMARYNINTH ICICI PROJECT

Borrower: Industrial Credit and Investment Corporationof India.

Guarantor: India, acting by its President.

Amount: Various currencies equivalent of US $60million.

Purpose: To finance the foreign exchange cost ofICICI sub-projects carried out by pro-ductive enterprises in India.

Amortization: The initial amortization schedule providesfor repayment over 15 years through semi-annual installmients starting September 1,1974 and ending March 1, 1989; it is sub-ject to change to conform substantially tothe aggregate of the amortization schedulesfor the sub-projects for which Loan fundsare disbursed.

Interest rate: 7;-4 percent per annum.

Commitment Charge: 3/A of 1 percent per annum.

Final date for projectsubmission: December 31, 1973.

Free Limit: US $ h million from ICICI's resourcesincluding Bank Loan funds, for a singleproject.

Debt covenant: Maximum debt/equity ratio 9:1 (as defined inthe Loan Agreement).

Procurement: Through normal commercial channels.

Attachment IIIPage 2

Terms of loans to ICICI borrowers: Interest 9 percent; comnitment charge1 percent. Amortization - depends onindividual sub-projects; maximum 15years. Exchange risk - borne by ICICI'sborrowers.

BANK LOAN: 1971 1972 1973 1927 1975 1976 Total- million of US $ - -

Estimated Commitments 2 30 28 0 0 0 60

Estimated Disbursements 0 4.2 l.2 21.9 15.6 h.1 60

Attachment III-1

THE INDUSTRIAL CREDIT AND INVESTNENT CORPORATION OF INDIA LIMITED

Summary of Operations(in R9 million)

Foreign DirectCurrency Rupee Guaran- Under- Subscrip- TotalLoans Loans tee writing tion

A. Approvals1/

1963 176.6 61.8 20.2 35.3 3.0 296.91964 151.2 14.1 - 53.9 3.9 254.11965 170.3 55.7 - 50.2 3.1 279.31966 105.2 50.8 - 33.1 2.3 191.41967 65.4 49.0 32.0 68.5 2.0 216.91968 211.2 24.7 13.6 59.0 1.8 310.3

1969 138.9 39.8 0.8 69.9 0.8 300.21970 226.1 58.8 9.0 37.1 10.14 341.141971 (Jan.-June) 110.14 6L4.7 -10.0 2.6 18.8 186.5

Cumulativesince 1,854,4 583.6 67.9 543.0 94.6 3,143.5

1955 -/

B. Commitments./

1963 111.8 31.1 - 29.7 3.5 176.11964 175.2 18.7 22.5 29.5 14.7 280.61965 203.9 68.9 - 52.9 14.3 330.0

1966 88.9 34.4 - 50.1 2.3 175.7

1967 72.6 76.6 30.0 54.5 2.0 235.71968 93.8 19.9 - 73.8 1.8 189.3

1969 255.7 28.4 o.8 42.5 0.8 328.2

1970 153.5 53.9 10.6 58.9 7.14 2814.31971 (Jan.-June) 116.3 52.8 - 17.9 5.8 192.&

Cumulativesince 1,566.8 507.4 63.9 527.0 78.5 2,743.6

1955

C. Disbursements1963 96.7 27.1 - 12.5 6.6 142.91964 117.3 61.0 - 13.9 4.6 196.81965 175.0 44.0 - 34.8 3.5 257.31966 148.3 50.8 - 35.6 2.2 236.91967 102.7 50.7 - 47.2 2.5 203.11968 73.0 39.7 - 50.9 1.7 165.31969 109.3 38.5 - 31.8 1.9 181.51970 205.8 140.2 - 26.9 6.7 279.61971 (Jan.-June) 91.1 24.3 - 3.8 3.4 122.6

Cumulativesince 1,297.3 1453.14 - 308.3 74.9 2,133,9

1955 -

Note: Foreign currency figures have been converted at the present parity of therupee,

/ Net of cancellations August 3, 1971 IBRD/DFC

Attachment III-2

THE INDUSTRIAL CREDIT ANID INVTSTMTET CORPORATION OF INDIA LIMITED

ICICI Resources as at June 30, 1971

Amount inRs million

Rupee Resources

Share Capital 75.o

ReservesTotal 82.3Less Payment of Dividends 7.5 7L.8

Four Government of India Loansl/Total 325.0Less Repayments 21.3 303.7

Five IDBI Loansi/ llhl.0

Debentures-/ 110.0 704.5

Foreign Currency Resources

Eight IBRD Lines of CreditTotal $ 205.0Less Cancellations and Repayments $ 75.0 975.0

One AID Line of CreditTotal $ 5.0Less Cancellations and Repayments $ 3.0 15.0

Ten KfW Lines of CreditTotal DM 92.5Less Repaynents DM 16.1 156.5

Three U.K. Lines of Credit £ 3.0 54.0 1200.5

1905.0

Note: Legal formalities in respect of the tenth line of credit of DMI10 millionfrom KflWl and the third line of credit of £ 1 million from the BritishGovernment have not yet been completed.

1/ The First Government of India Loan is subordinated to all debt andpaid-up share capital, the other three are subordinated to foreigndebt. IDBI Loans and Debentures are also subordinated to foreign debt.

IBRD/DFCAugust 3, 1971

Attachment III-3Page 1

THE INDUSTRIAL CREDIT AND INVESTIMIT CORPORATION OF INDIA LIMITED

Distribution of Shareholding as at June 30, 1971

No. of No. ofShareholders Shares Percentage

India

Public Sector

Life Insurance Corp. of India 1 140,221h

New India Assurance 1 62,960Unit Trust of India 1 52,828Bank of India 1 41,627Punjab National Bank 1 30,526Central Bank of India 1 23,800Bank of Baroda 1 26,505United Bank of India 1 15,000United Commercial Bank 1 13,298

India Reinsurance Corporation 1 11,509Indian Overseas Bank 1 10,000

Jalanath Insurance 1 7,50012 other public sectorshareholders holding less than3,750 shares each 12 11,950_

24 Ly52,767 60.36

Private Sector

Indo-Burma Petroleum Co., Ltd. 1 9,996Central Bank of India(A/c.H.E.H. Nizam's CharitableTrust) 1 7,500

Clive Row Investment Holding Co.,Ltd. 1 6,221

Scindia Steam Navigation Co., Ltd 1 5,750Associated Cement Co., Ltd. 1 4,6821586 other private sector share-

holders holding less than 3,750shares each 1536 51,656

1591 85,805 ll.lth

Total Indian Shareholders 1615 538,572 71.80

Attachment III-3Page 3

No. of Share-hol.ders No. of Shares Percentage

France

Banque Nationale de Paris 1 2,000

1 2,000 0.27

Total foreign shareholders 50 211,428 28.20

Total number of shares andShareholders 1,665 750,000 100o,00

IBRD/DFCAugust 3, 1971

Attachment III-);Page 1

ThE INqDUSTRIAL CREDIT AND n\JVDSTPENT CORPORATIONOF IIDIA LIMITED

Members of the Board of Directors as of July 8, 1971

Pri ncipalName ige Present Position

1. Ir. G. L. Mehta 1/ 70 Chairman and Director of ICICI writhe:^ecutive powers; Chairman, IndianInvestment Centre.

2. Mr. H. T. Parekh 1/ 60 Deputy Chairman & Managing Directorof ICICI.

3. Mr. Kasturbhai Lalbhai 1/ 76 Chairman, Atul Products Ltd.,National Rayon Corporation Ltd.

. Mr. K. K. Birla 52 Managing Director, Birla Bros.Pvt. Ltd.; Jayant InvestmentCorporation Pvt. Ltd.Director of sugarcane, cotton,investment and other companies.

¢. Mr. D. P. Goenka 55 Director of jute, investment andother companies.

6. I5r. N. A. Palkhivala 51 Advocate, Supreme Court of India;Aiuthority on company law andtaxation; Chairman of AssociatedCement Cos. Ltd.; Director of5 companies of Tata Group.

7. Mr. L. J. Miulkern 51 Senior Vice President, Bank ofAmerica, M.T. & S.A.

8. Mr. M. M. W:Jagle 1/ 56 Ilanaging Director, Grer.ves Cotton& Co. Ltd.

° Mr. Stafford Northcote 61 Chief General Manager, The CharteredBa^nk, London.

10. T5r. Bhaskar Mitter 61 M4anaging Director, Andrew Yule &Co. Ltd.

Attac1hment iiI--LPage 2.

Principalame A Present Position

11. Pt. M. V. Soloniu 58 Managing Director (II), difeInsurance Corporation of India..

12. Mir. A. TJ. B. Hayward 43 Chairman, Shaw .7allace & Co. Ltd.

13. 11rk. K. P. J. Prabhu 60 Custodian, Canara Banl.

14. It. B. B. Lal * Secretar2y, Y4nistry of IndustrialDevelopment, Goverrunent of India.

15. Mr. V. II. Bhide 56 Additionnl SecretarJ, Ministry of

(Government Director) Finance, Department of Banking,Government of India.

165. 1Mr. M. L. Greenberg 33 Mlanager, Bank of america, IN.T. & S.A.,(Alternate for Mtf. L. Calcutta.

J. Yulkern)

17. Mr. I. S. Gordon 49 Chief Manager in India, The Chartered(Alternate for Mr. S. C. Bank, Calcuttta.R. Northcote)

I/ lembers nf the Board's Investment Committeewhich decides the disposition of ICICI'ssecurities portfolio.

* Appointment not yet effective, as formalitynot complete (Board appointment on June 13, 1971).

2Dt 31/DFC.ugust 3, 1971

.Attachment TII-5

THE D1DUSTIRI T CRFTDIT AND DVESTln-IT CORPORTOTTO! OF ITDIr r LD41ITED

Performnvrce of ICICI's Borrowers in Cperation

% of ICICI frrears as Return on Value Investment1o . of Loans % of t,onns Investmqnt Y% C,pitoI Acdded/(%) Exports as Employment

Industry Clients Outstanding in Sector 1969 1970 1969 1970 % of Salos Ratio(Rs.OO0

Chemicals 63 1S.7 1 11. 13 28 32 0.4 139.5Ferrous products 51 14.2 25 8 11 30 34 11.0 45.7Machinery 73 10.5 8 10 10 33 33 6.1 21.5Electrical equipment 53 8.7 5 12 15 40 44 3.9 24.7Textiles 76 7.5 12 8 11 45 47 20.9 22.2Shipping 5 6.6 0 9 7 23 20 - n.a.Automobiles and cycles 25 5.5 7 10 9 31 30 3.3 16.2Cement 12 5.5 0 9 12 28 31 1.4 25.0Pulp and Paper 26 4.6 10 6 12 26 32 3.7 67.8IMetal Products (non ferrous) 21 4.0 13 11 13 23 25 1.6 25.3Rubber products 14 3.9 0 25 22 53 50 n.a. n.a.Glass a Pottery 19 3.2 39 9 16 34 43 4.3 24.7Electricity mnd Gas 7 2.1 0 6 9 15 16 - n.a.Food Products 13 1.3 0 29 26 73 65 4.7 27.6Sugar 11 0.9 0 9 5 18 15 3.9 n..aPliscellaneous 57 2.9 3 18 16 39 38 2.5 22.6

Tot.l 526 lCO.0

Aerage 8 11 12 32 314 3.9 142.3

IBRD/DF CAugust 3, 1971

Attachment III-6

THE INDUSTRIAL CREDIT ANiD IiVESTN,lMT CORPORTIONJ OF INDIA LDITED

Income Statements 1967-1970 and First Six Months of 1971(in Rs. million)

INCMOE 1967 1968 1969 1970 1971(six months)

Interest on Temporary Investmentsand Deposits 2.89 2.78 2.46 4.03 2.37nterest on Rupee Loans & Debentures 21.17 25.38 27.35 29.20 14.66Irnterest on Foreign Currency Loans 48.40 50.08 53.70 60.64 34.78DiLvidends 3.76 3.82 h.63 5.42 3.55Capital gains 0.60 0.70 2.91 4.20 3.40Uruerw-iting Commission 1.49 1.314 0.92 1.19 0.31Gtiarantee Commission 0.38 0.31 0.35 0.16 o.18Other Income 0.47 0.34 039 1.02 0.14

Total Income =7916 97-T 92.71 105.86 5939

EXFENSES

S'alaries, etc. 1.81 1.97 2.39 3.53 1.72Other Administrative Expenses 1.05 1.08 1.46 2.83 1.17Interest E& Discount on Debentures o.64 3.75 4.00 6.77 3.31Interest on Rupee Loans 15.86 16.93 18.74 19.06 9.77Interest on Foreign Currency Loans 31.02 32.34 33.04 37.88 22.38Provisions for Doubtful Debts 1.27 0.72 0.714 1.27 -

Total Expenses 51.72 56.79 60.37 71.34 38.35

Profit before tax 27.44 27.96 32.34 34.52 21.04Less: taxes 13.07 13.09 14.29 14.79Add back: Excess provision for -

Income Tax on previous years - 0.31 0.49 0.48Net Profit 15.327 15.28 18.514 20.21

Dividend (in Rs. million) 6.75 6.75 6.75 7.50Dividends as % of Share Capital 9.0 9.0 9.0 10.0Nlet Profit/Alverage Net Worth (%) 13.0 12.8 14.2 13. 8NQet Profit/Average Share Capital (27) 19.2 20.4 21.7 26.9Dividend/Net Profit (%) 47.0 44.0 32.4 37.0

IBRD/DFCAugust 3, 1971

Attachment ITI-7

THE TMDUSTRIA1 CB1REDIT AND INVESTMENT CORPORATION OF INDIA LhIITED

Comparative Balance Sheets 1967 - June 30, 1971(in Rs. million)

December 31 June 30ASSETS 1 97 1968 1969 1970 1971

(Unaudited)Ter,por rx Inyestments 20.7 12.7 12.1 10.7 11.3

Industrial AssistanceShares 131.4 140.0 142.0 156,9 158.2Debentures 81.6 11509 134e2 131.6 132.9Loans in rupees 238.1 24765 250.2 244.7 251<2

141 3 __2: 2-

Loans in foreign currencies 583.7 584.2 618.4 737.5 778.1

Fixed Assets 3.2 4.6 6.1 6.6 6.7

Current Assets & AdvancesCash and bank balances 82.4 49.3 89.0 77.6 77.5Other assets and advances 48.4 57.6 65.o

1 -18 :L5 1 -202.6 1 Lo 9.6 ;2.6_ gLIABILITIES AND CAPITAL

Current Liabilities 46.7 42.2 45.9 42.0 38.9

Rupee BorrowingsDebentures 6o.o 60.0 110,0 110.0 110CGovernment of India 325,o 325.0 325,0 314,0 303.7IDBI 8 <OO 105.0 123.0 123.0 1)1.0

46S.o i W~~58.0 t4.7ff

Foreign Currency BorrowingsIBRD 4741.1 462.0 473.: 577.9 616.7AID 27.7 24.5 20.9 17.2 15.3KFW 55. 59.0 75.0 89.2 .14

557.4 5h5.5 59.0 684.3 727.

Net WorthShare Capital 75.0 75.0 75.0 75.0 75.0Reserves & surplus 41.4 0 61.7 82 9391/

11a 1279 IT., 7 1HT.3 le)3.9-, 1,202.t 139 1,430.6 1,439.9

Guarantees Outstanding 52.6 51.7 49.4 53.5 49.7

Total debt/equity ratio 9.2.1 8.7:1 8.6:1 8.2:1 8.().-lDebt/equity ratio as

defined in Bani agree-Sub ment No._51-]N .74:1 74:1 74:1 8 .0:1

1/ Subject to tax, reserve appropria•ions, etc.

IBRD/DFCAugust 3, 1971

Attachment ITI-8

THE TNDUSTRIAL CREDIT AND \IVESTI'ENT CORPORA8TION OF TIDIA LIDITED

Forecast of Approvals, Commitments and Disbursements(in Rs. million)

Year ending December 31. 1]970 1971 1972 1973 1974 1975

ApprovalsRupee Loans 58.8 120.0 118.0 122.0 130.0 140.0Guarantees 9.0 - - 10.0 10.0 10.0Underwriting of shares ) 12.0 25.0 26.0 30.0 33.0Underwriting of debentures ) 37.1 10.0 23.0 25.0 30.0 35.0Direct subscription to shares) 12.0 1.0 2.0 3.0 3.0Direct subscription to ) 10.4

debentures 12.0 17.0 23.0 25.0 29.0115.3 166.0 184.0 208.0 228.0 250.0

Foreign currency loans 226.1 270.0 2-O.O 27 J 297.0 320.0Total approvals 341.4 406.o 444.o 483.0 525.0 570.0

CommitmentsRupee Loans 53.9 101.9 95.8 99.6 109.6 120.5Gluarantees 10.6 - - 10.0 10.0 10.0Underwriting of shares ) 58.9 15.8 20.3 25.3 27.8 30.6Underwriting of debentures ) 6.3 26.0 22.8 25.1 27.6

Direct subscription to shares) 9.8 0.4 2.0 2.2 2s4Direct subscription to ) 7.4

debentures 11.0 13.9 22.8 25.1 27.6

130.8 lhh.8 1. 182.5 199.8 i-2 ITForeign currency loans 253.5 271.5 285,0 270.0 297.0 327.O

Total Commitments 28 13 453 1. 452.5 496.8 iL. 7

DisbursementsRupee Loans 40.2 86.3 9h4.4 107.2 110.0 120.8Guarantees - - - - - -Underwriting of shares ) 26.9 8.8 14.1 13.1 15.4 17.2Underwriting of debentures ) 3.2 12.1 18.3 18.0 19.7Direct subscription to shares) 10.5 1.4 1.8 2.2 2.4Direct subscription to ) 6.7

debentures ) _ 11.0 13.61 21.9 24.9 27.373.8 119.8 135.6 162.3 170.5 187.4

Foreign currency loans 205.8 211.2 242.1 279.4 293.1 302.0

Total disbursements 279.6 331.0 377.7 441.71 463.6T h89.h

IBRD,/DFCAugust 3, 1971

Attachment III-9 Page 1

THE INDUSTHIAL CREDIT AND LIVSTVEPZT C0;P.POATION OF INDIA LTIITED

Projected income Statements 1971-1975

(in Rs.•nillion)

1971 1972 1973 1974 1975Income

Income from loans -

Interest 83.786 102.052 118,931 13,.495 153.228Commitment charge 3.076 3.67S 3.764 3.611 3.691

86.862 105.-730 122.695 1)40.iO6 156.919Capital gains 4.000 1.500 1.800 2.100 2.400Dividend income 5.933 6.125 6.227 6.353 6.479Income from short-terminvestments, deposits 3.188 2.099 1.892 1.613 1.784etc.

Other income -

Underwyriting commission 0.490 0.89'8 0.974 1.072 1.17°Guarantee commission 0.381 C.350 0.354 O.409 0.458Debenture interest 10.369 11.576 1)4.107 17.363 20.896I"Iiscellaneous receipts 0.300 0.300 0.300 0.300 0.300

Total Income 111.523 128.578 1)48.3)9 169.316 190.415

Expenses

Interest & commitmentcharge on borrowings 72.831 85.226 58.424 116.P2)4 130.404Salaries & otherpersonel expenses 4.100 4.700 5.400 6.100 6.9ooOther administrativeand general expenses 1.800 2.000 2.200 2.400 2.600Depreciation 0.258 0.238 0.285 0.265 0.245Provision for doubt-ful debts 1.268 1.268 1.268 1.268 1.268

Total Expenses 80.257 93.4.32 107.577 126.957 141,417

Profit 'efore tax 31.266 35.146 )40.772 42.359 48.998Provision for tax 12.917 15.267 17.963 18.676 21.842

Net Profit 18.349 19.879 22.809 23.683 27.156

Appropriations

Dividends 7.812 10.000 10.000 10.000 12.500R~eserve against doubt-ful debts 3.000 3.000 3.000 3.000 3.000Heserves & unappropri-ated profits 7.537 6.879 9.809 10.683 11.656

15.349 19.879 22.809 23.683 27.156

Attachment III-9Page 2

1971 1972 1973 1974 1975

Net profit as / ofaverage networth 11.8 11.6 12.3 12.3 12.5

Net profit as ofshare capital 21.0 )9.9 22.8 23.7 21.7

Dividend as % ofshare capital 10.0 10.0 10.0 10.0 10.0

Dividend as % ofnet profits 43 51 44 42 46

Attachment III-10Page 1

THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LDfITED

Pro.jected Balance Sheets 1971-1975(in Rs. million)

1971 1972 1973 197h 1975

Assets

Cash & short-term deposits 36.7 34.7 25.7 21.6 28.1Short-term investments andfixed deposits 11.3 13.2 13.2 13.2 13.2

Receivables, accrued income etc. 74.0 84.o 96 107.9 112j.122.0 131.9 ILh2.7 160.8

Outstanding loans -

Foreign currency 854.3 976.3 1,110.7 1,230.9 1,339.1Domestic currency 286.5 333.7 392.1 451.8 519.5

Outstanding investments -

Shares 168.2 173.7 176.6 180.2 183.8Debentures 14o.8 161.5 6.7 234.6 276.6Total loans & investments 1,4j9.8 1,645.2 1,876.1 2,097.5 2,319.O

Fixed assets (net) 7.6 8.7 9.7 9.4 9.2Total assets 1,579.4 1,785.8 2,021.0 2,249.6 2,h89.0

Liabilities & Equity

Tax payable 12.9 15.3 18.0 18.7 21.9Dividends payable 7.8 10.0 10.0 10.0 12.5Accounts payable and other

current liabilities 32.6 37.0 42.4 47.5 52.653.3 62.3 70.4 - 76.2 87.0

Foreign currency borrowings 805.1 912.8 1,023.5 1,122.1 1,213.1Domestic currency borrowings 548.2 615.6 719.3 829.9 927.9

1,353.3 1,528.4 1.742.8 1,952.0 2,141.0Share capital 87.5 100.0 100.0 100.0 125.0Reserves against doubtful

debts 12.0 15.0 18.0 21.0 24.0Other reserves and unappropriatedprofits 73.3 80.1 89.8 100.4 112.0

172.8 195.1 207.8 221.4 261.0Total liabilities & equity 1,79.4 1,785. 2,021.0 2,2749.6 2,489.0

Contingent Liabilities

Uncalled liability on invest-ments partly paid 5.2 20.0 22.0 24.3 26.8On account of guarantees 50.0 47.4 51.1 53.8

55.2 63-7. TTT; -75 15 S

Att;achment III-10Page 2

1971 1972 1 973 19 175

Debt/equ-I.ty ratio 8.2 8.5 9.4 1-0.0 9.3

Deb/sc-rvice coverage 1.4 1.3 1.2, 1.2 1.2

Book value as %of par value 184 180 190 200 189

IBRD,/DFCAug, st 3, 1971

Attachment ITI-l:

THE INDUSTRIAL CREDIT A*D INVEST.1ENT _OEP0i1 OTI0I OF INDIA LlIlTED

Projected Cash Flow Statements 1971-ln7T(in Rs. milliof)

1971 1972 1973 1974 1975

Sources

Profit before tax 31.2 35.1 40.7 42.3 49.0Add back non-cash charges 1.3 6.1 4.3 2.3 7.2(Depreciation, provision,write-off 3tc.)

Cash generations from oporations 32.5 41.2 45.0 44.6 56.2Increase in share caDital 12.5 12.5 - - 25.0Draw-down on foreign currencyborrowings 211.2 242.1 279.4 293.1 302.1.Domlestic currency borrowings 18.0 100.0 140.0- 150.0 140.0Loan collectiorns: 1/

Against domestic currenicyloans 44.5 47.2 48.8 50.3 53.1

Against foreign currencyloans 98.1 120.1 145.0 172.9 193.9

Sales from portfolio:Shares 8.0 10.0 12.0 14.0 16.0Debentures 5.0 5.0 5.0 5.0 5.0

429.8 578. 75.2 729.9 791.3

Uses

Increase in fixed assets 1.3 1.3 1.3 - -

Increase in temporary invest-ments 0.6 1.9 - - _

Disbursement of loans:Domnestic currency 86.3 94.4 107.2 110.0 120.8.Foreign currency 211.2 242.1 279.4 293.1 302.1

Equity investments:Shares 19.3 15.5 14.9 17,6 19.6Debentures 14.2 25.7 40.2 42.9 47.0

Repayments: 2/Against domestic currencyborrowings 16.8 32.6 36.3 39.4 42.0Against foreign curr-encyborrowings 89.5 116.4 141.7 167.5 184.1Paid to Govt. on account ofU.K. credit 4.5 18.0 27.0 27.0 27.0Increase in receivables,accrued income, etc. 10.3 11.3 13.6 12.9 12.9

Less increase in payables,deferreditems, etc. (4.0) (4.4) (5.4) (5.1) (5.1)

Payment of tax 12.9 15.3 18.0 18.7 21.9Payment of d:ividend 7.8 10.0 10.0 10.0 12.5Increase (cIecrease) in short-term investments and cash (40.9) (2,0) (9.0) (4,1) 6.5

429,8 578.1 6T'5.'C 729.9 791.3

IBRD/DFCAugust 3, 1971

Attachment III-12

WE INDUSTRITI. CREDIT AND IVWESTMIENT CORPORATION OF INDIA LIMtITED

Estimated DI-sbursement .Schedule for the Proposed Ninth Bank Loan.

Amount in $'000 Cumulative

1972

First quarter 470 1470Second quarter 855 1,325Third quartcr 1,240 2,565Fourth quarter 1,620 4,185

1973

First quarter 2,025 6,610Second quarter 3,180 9,790Third quartcr 3,900 13,690Fourth quarter 4,705 18,395

1974

First quarter 4,955 23,350Sec.ond quarter 5,305 28,655Third cuarter 5,680 3 ,3.5FoLurth quarter 6,000 40,335

19_

First quarter 5,055 h5~,390Second quarter 4,280 49,670Third quarter 3,525 53,195Fourth quarter 2,760 55,955

1976

First quarter 2,060 58,015Second quarter 1,$52 59,355Third quarter o5 60,000

60,000

August 21, 1971IDRD/IFC