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IFCI to sell about 20 percent stake to IFC
By siliconindia
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Thursday, 20 December 2007, 02:35 IST
New Delhi: Luring the potential strategic investors, the IFCI board has decided to bring in International Finance Corporation (IFC), a multilateral institution as an investor. IFC, the investment arm of World Bank, is likely to hold less than 20 percent stake, reported The Economic Times.
"IFCI needs funds to meet its capital adequacy requirements. But more importantly, the strategic investor will have the comfort of having a long-term investor such as IFC on board. IFC has already conducted due diligence on IFCI," said a source on the board.
While IFC is not known to be active in running the institutions it invests in, it is specific in terms of its mandate which may mean investments in social sectors and towards public-private partnerships, he added.
The move could sweeten the stake sale, considering that the bidders for the 26 percent stake have to contend with creditor banks converting their debt into equity, which will change the original valuation of the deal by increasing the fresh issuance of shares by over 15 percent. "Keeping the investor interest alive after changes in the equity structure will be a challenge," the source added.
Last week, at its board meeting, the IFCI management resolved issues of debt conversion for its creditor banks by letting them convert all their debt into equity. Even as the board resolved these issues, it took note that only four of the eight short listed bidders have actually conducted due diligence till date.
These include the Sterlite Industries and Morgan Stanley consortium, the WL Ross, GS Capital Partners (VI) Fund, Standard Chartered Bank and HDFC combine, the Shinsei Bank, PNB and JC Flowers group and the Cargill Financial Services Corporation and Texas Pacific consortium Cargill Financial Services has teamed up with Texas Pacific Group, which is a new entrant.
IFCI officials said bidders were allowed to bring in new financial investors as per their requirement. "The value game in IFCI has gone beyond the immediate resolution. It is a 3-5 year play and only serious players will put in bids," said a source.