Day after: IFC silver lining for IFCI

NEW DELHI: A day after the IFCI-Sterlite stake sale deal fell through, there are indications International Finance Corporation (IFC) is willing to invest in the financial institution. The government is also ready to help out IFCI. Currently, there is a budgetary provision for Rs 1,300 crore for the institution. "IFC's interest in IFCI is independent of other investors. IFC is not planning to revisit its interest in IFCI because the deal fell through," a source said. The private lending arm of World Bank has already conducted due diligence on IFCI. "IFCI needs capital to enhance its capital adequacy requirements. IFC is known to maximise returns from every dollar that is put in," an IFCI official had said. While IFC is not known to be active in running the institutions it invests in, it is specific in terms of its mandate, which may mean investments in social sectors and towards public-private partnerships, he added. IFCI needs capital for fresh initiatives, new businesses and capital adequacy.On the government's role, an official said the government is open to providing assistance to IFCI. "The government has already supported IFCI through the restructuring package worth nearly Rs 5,000 crore. The assistance for this fiscal — Rs 1,300 crore — has already been provided for in the Budget. After all, IFCI is a quasi-government institution," he said. In 2002, the government had restructured IFCI's liabilities. The IFCI stock plunged by 23% on NSE to Rs 76.85 after the deal was called off on Wednesday over issues of management control. Analysts, however, believe the intrinsic value of IFCI based on underlying real estate assets backing bad loans and its portfolio investments are expected to sustain the stock at a higher level. The stake sale process that was kicked off earlier this year helped boost IFCI's stock price from Rs 12 in January to Rs 121 earlier this week. The IFCI board will soon meet to take stock and decide on the future course. Uncertainty prevails over the direction the financial institution will take. While there are no plans to revisit the stake sale at this point, it may look at a pure financial investment instead, sources indicated. Creditor banks and financial institutions had converted their debt into equity at Rs 107 per share on December 17, when the shares were allocated by IFCI. With public sector banks and insurers converting their debt to equity, the stake of government-controlled firms went up to 39%. Banks had converted their debt assuming the strategic sale will materialise. "IFCI has intimated us that the conversion process has been completed," an official at one of the creditor banks said. These banks were hoping to fetch a better price at the open offer that would have ensued after the 26% sale.