Govt evaluating options to sell two subsidiaries of IFCI in revival bid

Not keen on infusing funds into NBFC, to unlock value created by subsidiaries

The government is evaluating options of selling subsidiaries of IFCI to infuse money into the non-banking lender.

The government is not keen on infusing funds into IFCI, and plans to unlock value created by its subsidiaries — Stock Holding Corp­ora­tion of India and IFCI Infr­a­structure Development, said a senior government official. 

IFCI has been saddled with soured assets and its net non-performing assets (NPAs)-to-advances ratio was 42.7 per cent as of March, against 31.8 per cent a year ago, according to its annual report.

The company’s gross NPA ratio was at 62.5 per cent as of June 30, against 61.9 per cent as of March 31, according to a report by CARE Ratings. 

The company and the government have been trying to change the non-bank lender’s fortunes through sale of non-bank lenders investments and non-core assets, but the same hasn’t worked out. 

“IFCI has certain legacy issues which are still playing out. But some of their subsidiaries have good value,” said a senior government official. The government is exploring how value created by these subsidiaries can be unlocked so that the parent company is back into business, he said.

Financial Services Secretary Debasish Panda, in an interview to Business Standard last week, had said the government infusing money every time in IFCI “does not make sense”. The government is considering all options, to bring company on track, that also includes strategic stake sale of the company, he had said.

The government would first try reviving the industrial finance company through sale of subsidiaries, and strategic sale would be the last option, said the government official. The government holds 61 per cent in IFCI as of September 30. 

Stock Holding Corporation of India is the country’s largest custodian in terms of assets under custody, and provides post-trading and custodial services to institutional investors, mu­tual funds, banks, and insurance companies. The company, in which IFCI owns 52.9 per cent, has three subsidiaries — SHCIL Services, StockHolding Document Mana­gement Services, and StockHolding Securities IFSC.  IFCI Infrastructure Development is a wholly owned subsidiary of IFCI, and has interests in the real estate and infrastructure sector. IIDL Realtors is a wholly owned subsidiary of the firm. 

These subsidiaries are not dependent on the parent organisation for any kind of capital, and have a strong balance sheet, the official quoted above said. 

Some value has been created by these subsidiaries of IFCI, he said, adding that “If value created by step down subsidiaries can be unlocked, then that can be used by the parent organisation and help it in turning around.” 

The process would move faster once a new managing director and chief executive of IFCI is appointed, he said. The government is yet to appoint a new head of the NBFC after E.S Rao’s term ended in September.