Sterlite-led consortium frontrunner for 26% equity stake in IFCI

A consortium of Anil Agarwal-led Sterlite Industries and global financial services major Morgan Stanley has emerged as the frontrunner in the race to acquire a strategic 26 per cent equity stake in the troubled financial institution IFCI Ltd.

The IFCI board met today to select the bidder for the 26 per cent stake. The meeting of the board was going on at the time of going to press.

The board considered the three financial bids that were submitted against eight shortlisted.

Besides Sterlite, two other consortiums "" Shinsei Bank-PNB-JC Flowers and Cargill Financial Services Corporation-Texas Pacific Group "" had put in bids on December 14.

The IFCI share prices today closed at Rs 108.4 against Rs 113.65, a decline of 4.62 per cent in line with the market fall.

The allotment of shares to the winner is likely to be completed by the end of January next year. After the strategic investor is inducted, the non-banking finance company will prepare a business plan to revive its fortunes.

IFCI, which has been reeling under a high level of bad loans, turned profitable only in 2006-07 after five or six years of being in the red.

Currently, the shareholding of IFCI is dispersed among a large number of investors. However, state-owned banks and insurance companies collectively hold about 24 per cent in the company.

Recently, the IFCI board agreed to convert debentures of Rs 1,300 crore held by public sector FIs, out of a total of Rs 1,479 crore into, equity shares.

The conversion is likely to increase the stake of public sector financial institutions to 39 per cent and the government may continue to influence IFCI even after the induction of a strategic investor.

The government has also the option to convert debentures worth Rs 923 crore into equity in IFCI at a later date.