Nasser Munjee - MD, Infrastructure Development and Finance Company
By Venkatachari Jagannathan | 15 Jan 2001
But he is not kidding when he declares that his present job would be his last employment. No, he is not planning to start a dotcom company! On the other hand Munjee wishes an early retirement, say, within the next two to three years! Not that he is exhausted, after more than two decades of a hectic career in finance. "I want to enjoy life. Some part of my active life should be for myself. Money and fame are not my only objectives. After my retirement I will pursue my four passions with full vigour," he declares
For many, this may sound strange. Specially coming from a man who recently assumed this position, after being the deputy-managing director of IDFC for more than two years. Prior to that he spent his whole career at one of India's unique financial institution -- the Housing Development and Finance Corporation (HDFC). He is now in the process of building another unique institution, this time in the field of infrastructure finance.
He spent time with domain-B to talk about his passions and plans for IDFC.
"I am fascinated by the dynamics of cities, in general, and Lucknow, in particular." There are two reasons for his love for Lucknow. While the primary one is that the city has a rich cultural heritage, the other, and perhaps more important, reason is the fact that his wife Subar, a social anthropologist, hails from that city. "Lucknow is my northern command and Goa, where I have another house, is my southern command," Mr. Munjee jokes.
His second passion is rural India. As the chairman of the Aga Khan Rural Support Program of India, Mr. Munjee oversees developmental work in 400 Indian villages. "None of the villages in Gujarat that are under our fold is facing drought," he proudly claims.
But what he cherishes most is devoting time for Make a Wish Foundation, an organisation that ensures that the last wish of a child dying of cancer is fulfilled. "It is really heart rending to see little children suffering from dreaded disease," he says with emotion.
And finally his last passion is jazz music. Mr. Munjee who holds the post of chairman, Jazz India, despite his busy schedules finds time to organize the country's largest jazz festival!
Born into a rich business family - the Munjee family years ago had the nationwide distribution rights for kerosene – Mr. Munjee is proud of his lineage. His grandfather was knighted and was also the Sheriff of Bombay.
After his initial schooling in Mumbai and then at Cambridge, Mr. Munjee graduated from the London School of Economics. Despite toying with the idea of pursuing a doctorate degree in Chicago, Munjee decided to join the just-set-up Housing Development Finance Corporation Ltd (HDFC) where was offered a job.
"That was in 1978 and I decided to head back home," he recalls. It was then, Munjee's busy professional career started. And the rest is history.
Recalling his days at HDFC, Mr. Munjee says, "The $250 million World Bank loan obtained by HDFC gave it the necessary growth impetus. Flushed with funds, the company started loan disbursements at relatively faster pace."
But the comfort of having World Bank funding soon ended and the real challenge for HDFC to source cheap funds in India began. In 1990, the chairman, the much acclaimed and renowned Mr. Deepak Parekh, asked him to raise retail funds through public deposits.
With Mr. Parekh turning down the proposal to hire additional hands, HDFC decided to go in favour full-fledged front office automation, which Mr. Munjee very capably oversaw. "Our focus was on service rather than on the interest rates and incentives," he muses.
The college-like atmosphere that prevailed within HDFC enabled the team to offer instant service and the novel schemes like loans against deposits. This in turn swelled HDFC's fixed deposits portfolio regardless of the slightly lower interest rate it offered.
According to him, in two years time HDFC's deposits had grown to Rs. 4,000 crore, from a mere Rs. 300 crore in 1990. Needless to mention the company established its market leadership both in sourcing funds and in disbursement of loans.
All this while, Mr. Munjee climbed up the corporate ladder and reached the position of executive director. At a time when he was about to take life a little easy, Mr. Parekh called Mr. Munjee to build another institution, that is, IDFC. And he complied!
He joined IDFC as deputy managing director, despite losing out heavily on the stock options at his erstwhile company, HDFC.
Slow pace of sanctions and disbursements
Flushed with an initial kitty of Rs. 1,650 crore, IDFC first decided to focus on power, telecom and port sectors, as these sectors attracted several private parties.
But the initial euphoria soon died down. The first two years of operation saw the company earning its revenues mainly from treasury operations instead of interest on its advances. The end of the second year saw IDFC assisting thirteen projects, that included six in the power, four in roads and three in the telecom sector.
The cumulative sanctions stood at Rs. 3,126 crore while disbursements and non-funded commitments (guarantees) aggregated to Rs. 994 crore. Speaking about the company's huge guarantee portfolio at that time, Munjee said," It was in line with our mandate of lending private capital to commercially viable projects."
On the other hand, the company swelled its coffers by raising Rs. 500 crore issuing 5-year debentures to the State Bank of India and through treasury operations.
"We caught the wrong end of the stick in respect of power sector reforms," Mr. Munjee reasons, on the slow progress in the private power projects and the subsequent impact on IDFC's plans. According to him, power sector reforms should have been initiated from
the transmission and distribution end. "The country would become surplus in power if that had been the case", he opines.
Further, private players who decided to set up power generation projects found that their sole buyer, the State Electricity Boards (SEBs) were not financially sound and the chances of defaulting on payments loomed large. Then came the issue of escrowable capacity of the SEBs', as a result of which many of the power projects failed to go on stream.
In respect of the telecom sector, the licence fee tangle saw many projects not proceeding smoothly. "Policy glitches are the most frustrating one", he bemoans.
But the notable thing which IDFC did while grappling with policy issues in its second year, is the introduction of a new financing instrument called "Take-Out" finance, thereby linking non-traditional investors like banks with infrastructure projects. The
company signed deals with banks like the State Bank of India, Corporation Bank and State Bank of Hyderabad.
Now set to take off
Compared to the first two years of operations, IDFC has posted an impressive performance for the fiscal 1999-2000. The company approved financial assistance to twenty projects aggregating to Rs. 1,866 crore while disbursements were made to the tune of Rs. 642 crore for eleven projects.
IDFC's cumulative sanctions stands at Rs. 3,843 crore and disbursements including guarantee commitments for thirteen projects (net of pre-payments) totals to Rs. 1,016 crore. The total loan assets (both funded and non-funded) crossed Rs. 1,000 crore mark and the net worth as on the last day of March 2000, stands at Rs. 1,318.93 crore.
Last year, the company earned a total income of Rs. 288.06 crore as against Rs. 231 .19 crore clocked during 1998-99. The net profit went up to Rs. 149.23 crore during 1999-2000 as compared to Rs. 128.80 crore clocked the earlier year. However, the company skipped dividend for the third consecutive year.
Ironically several hundreds of crore have been invested in the bonds issued by its shareholding institutions like ICICI, IDBI, State Bank of India at interest rate ranging between 10.80 per cent and 13.50 per cent.
Queried about this aspect Mr. Munjee replies, "no other financial institution including HDFC paid dividend to their shareholders during the first three years of operations."
According to him, the mergers and acquisitions in telecom sector is a good opportunity for IDFC to lend its funds. The other area that is being looked at is the urban infrastructure projects. The company has contracted $30 million credit at Libor plus 40 basis points from Asian Development Bank for financing urban and environmental infrastructure projects.
Identifying water as the focus area he says that the government today heavily subsidises the cost of water. Even industries are against any hike in water charges. With the State finances going from bad to worse, Mr. Munjee says that reforming water supplies gains
importance.
Targeting a disbursement of Rs. 2,000 crore this year, Mr. Munjee assures that sanctions and disbursements will climb up at a much faster rate.
One can take his word for that as soon as IDFC stabilises its operations, it is better for Munjee for going in pursuit of his passions!