IDFC float plan put on hold

New CEO in 3 months.

The Infrastructure Development Finance Company (IDFC) has put on hold its plans to come out with an initial public offering (IPO) till the next board meeting in June.

Company chairman Deepak Parekh said that the IPO proposal was discussed by the board and kept on the backburner. Board members, however, will discuss valuation issues with investment bankers. The book value of a Rs 10 face value IDFC share today stands at Rs 17.

Meantime, Parekh said IDFC will remain an autonomous, independent body and retain its private sector characteristic. "This has been reaffirmed today by the board of directors," Parekh told Business Standard immediately after the board meeting. There is no proposal to merge or further realign the shareholding in IDFC, he added.

He said a four-member committee chaired by American International Group (AIG) country head Sunil Mehta will identify a new CEO in the next three months. "We are using head hunters and looking at candidates in the banking and financial sector," said Parekh.

Responding to the drama that took place recently at IDFC with regards to the seven management team putting in their papers, Parekh said: "That is now behind us."

The board accepted the resignation of IDFC managing director Nasser Munjee, while the other six members of the top brass had earlier withdrawn their resignation letters.

The importance of IDFC's IPO was to give some shareholders an exit option, while at the same time listing of the shares would give shareholders a fair valuation of their investment.

According to the original shareholder agreement, the IPO was to be done five years back, and subsequently a two-year grace period was given which expires in 2005.

With IDFC expected to play a greater role in the area of infrastructure funding, the institution will need additional capital. "IDFC will increase its operations as it has been given the role of a nodal agency for the Rs 50,000-crore infrastructure fund," said Parekh.

He added that in fiscal 2005 IDFC is expected to sanction Rs 7,000 crore worth of projects and disburse about Rs 3,000-4,000 crore in loans.

Foreign investors including American International Group, IFC Washington, Asian Development Bank (ADB), Government of Singapore, CDC, Deutsche Asia Pacific, among a host of others hold 40 per cent stake in IDFC. Domestic institutions hold the balance 25 per cent.

Parekh confirmed that the Reserve Bank of India's 15 per cent holding will be sold to the government, taking the centre's stake to 35 per cent. If one were to include Industrial Development Bank of India's (IDBI) five per cent holding, this will take the government's stake to 40 per cent, equivalent to that of foreign shareholders.