The board of directors of long-term lender Industrial Finance Corporation of India Ltd at its meeting on Saturday has set a deadline of September 14 to receive expressions of interest (EOI) for offloading a 26 per cent equity stake in the form of new shares to a strategic partner.
A large number of financial giants including Barclays, Deutsche Bank and some leading corporate houses and banks have shown a keen interest in getting a strategic hold on one of the country’s oldest financial institutions.
According to highly placed sources, besides valuation, there are a lot of other criteria that will be considered before taking a final decision on selecting the right partner. "The company has not yet taken shareholders approval. The company is expected to move a proposal to this effect in the next annual general meeting. However, that depends on what these strategic investors are bringing to the table," an investment banking source said.
An IFCI source said the company was also in talks with the Life Insurance Corporation, which is the largest shareholder, and IDBI Bank. "Since the management wants to retain the identity of the oldest institution, it may prefer to have some private equity firm to enhance shareholders value," an IFCI oficial said.
IFCI, which has surplus liquidity of around Rs 2,000 crore has decided to strengthen its management to start disbursements, which were stopped for around than five years.
"It has taken the government’s approval to start disbursements which can start by the end of this month or early next month," an industry source said.
To rope in the strategic partners, IFCI has appointed Ernst & Young to look for the strategic investor. Strategic investors will have to make bids within a month of the invitation seeking EOIs. IFCI will shortlist some investors, who will be allowed to do a detailed due diligence and submit a fresh bid indicating the price they are willing to pay for the stake.
IFCI’s accumulated losses stood at Rs 800 crore as on March 31 this year. It now has a positive net worth of Rs 446 crore. Besides this, it has non-permforming assets of around Rs 7,000 crore which is fuly provided for. The institution expects to raise over Rs 4,000 crore on its NPAs and another Rs 3,000 crore from its investments in various blue chip companies such National Stock Exchange.