Sources said LIC has approached the IFCI management to lower its holding from 11.39 per cent to 8.39 per cent, the level it was at prior to conversion of debt into equity earlier this year.On its part, IFCI is seeking a legal opinion on how to go about the process.
"IFCI wants to know the exact provisions of the Companies Act, under which the process can be initiated since LIC never wanted to raise its stake in the erstwhile development finance institution. One option is to allow a block deal, but all routes are being debated," said a source associated with the decision.
The sources also said the IFCI management is yet to hear from the government on the strategy it should adopt for restructuring the operations, which have been in a pause mode for almost a decade.
In recent months, IFCI, which had to grapple with defaults at the start of the decade, has started providing working capital assistance to select companies. Most of the focus is on recoveries and it managed to raise nearly Rs 1,200 crore in 2007-08 from written-off accounts.
The NBFC has communicated the failure of the process to rope in a strategic investor to the government and also reported the apprehensions that some of the bidders had regarding the convertible bonds issued to the Centre, which helped it tide over the financial crisis. IFCI was saddled with high cost debt and was finding it tough to pay bondholders prompting the government to step in.
One of the concerns raised by the bidders was the option for the government to convert the bonds at par. "Once there is clarity, there may be interest. At present there is a fear that the government may step in which resulted in a limited interest during the sale," said a source.
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The government had subscribed to bonds worth over Rs 900 crore.
Asked about the sale of stake, a source said, "The government works in layers and there are some layers which are amenable to restarting the process but there is no consensus."
The absence of a strategic investor has also meant that multilateral institutions like the International Finance Corporation, which had initiated talks with the NBFC for a possible purchase of stake, have put the deal on the backburner.