The Union Cabinet last month approved a proposal for coversion of debentures worth Rs 923 crore into shares of IFCI (Industrial Finance Corporation of India Ltd), following which the government's stake in the financial institution would rise to 55.57 per cent, from a meagre 0.0000011 per cent currently.
Subsequently, the Finance Ministry wrote to Sebi (Securities and Exchange Board of India) on August 29, seeking an exemption from the requirement of making an open offer.
IFCI is into funding of industrial projects. It has no promoters but major shareholder is LIC.
As per Sebi's takeover norms, any stake purchase of 25 per cent or more requires the acquirer to make an open offer for a further 26 per cent stake from the public shareholders.
In an order, dated September 24 and released today, Sebi said that it has decided to grant the exemption to the acquirer, the Government of India in this case, as the current proposal was in consonance with the previously declared government policy with regard to IFCI Ltd.
Sebi added that IFCI was made a public limited company with a view to make it a government company and a substantial amount of public funds have been infused into it.
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Sebi's Whole-Time Member Rajeev Kumar Agarwal said that conversion of such debts into equity would provide "more accountability and would stand as an additional safeguard to the investment of such public funds.
"These observations also address the issues raised by the Target Company (IFCI) with respect to the interests of the investors...," he said.