IFCI may get Rs 1,300 cr from govt, if needed

Clearing the air of confusion, IFCI today said the government will provide Rs 1,300 crore assistance this year to the institution in case there is a need.

The statement assumes importance as IFCI is in the last leg of induction of a strategic investor by offering a 26 per cent stake. There were doubts that government may not keep its promise after IFCI started the process to induct an investor.

The prospective investors are likely to put in their financial bids tomorrow and the IFCI board will consider the bids on December 17.

In 2002-03, the government sanctioned a restructuring package of Rs 5,220 crore to IFCI, which was then experiencing high level of non-performing assets, to service its future liabilities.

The government has disbursed Rs 2,409 crore during 2004 to 2007 and further it had made a provision of Rs 1,300 crore in the budget for this financial year.

However, with IFCI set to undergo a change in ownership after a strategic investor is roped in, there were doubts if government will release money. These doubts still persist, if IFCI's communique to BSE is read carefully.

It says "as regards the financial provision of Rs 1,300 crore, government has informed that it would assist the company in case such a need arises."

The government has also informed IFCI that that it would not exercise its conversion option in respect of its optionally convertible debentures of Rs 923 crore at this point of time.

Conversion of Rs 923 crore debentures into equity along with stakes held by public sector financial institutions, would have made the government too big a player on the IFCI board, which investors did not favour.

Lack of timely clarity on issues such as conversion of debentures held by creditor banks (Rs 1,300 crore) and government, besides sharp rise in share price, may see some investors dropping out from the race to acquire 26 per cent stake in IFCI. It is expected that four likely to put in their bids, out of the eight investors or consortium on investors shortlisted.

The non-banking finance company is also in talks with multilateral agencies such as International Finance Corporation (IFC) to take a stake in the company, to increase the investor confidence.