3 suitors left for IFCI

The race for picking up 26% stake in IFCI has narrowed down to three players. While the consortium formed by WL Ross, GS Capital Partners VI Fund and Standard Chartered Bank has opted out, three consortia submitted financial and technical bids on Friday. Those in the fray include consortium led by Sterlite Industries of Anil Agarwal, Shinsei Bank and Cargill Financial.

While Sterlite Industries has tied up with Morgan Stanley, the Shinsei Bank consortium includes Punjab National Bank and JC Flowers & Co. According to sources familiar with the proposed stake sale, the bid from Cargill Financial is in tie-up with Texas Pacific Group.

While there was no official word about the bids, the IFCI board is expected to consider them on December 17. Once the board picks a winner, the consortium concerned has to get approvals from regulatory bodies.

The process of inducting a strategic partner for IFCI started in August and is expected to be completed in a month from now.

Initially, nearly 10 suitors had expressed interest in buying stake in IFCI. However, only eight were shortlisted by the IFCI board, with Kotak Mahindra Bank and Newbridge Capital exiting the race at this stage. Of the shortlisted eight, only four undertook due diligence of IFCI.

With the WL Ross-led consortium not bidding, the race has now narrowed down to three players. The induction of a strategic partner is aimed at bringing in financial resources and management expertise without diluting the basic character of IFCI as a development financial entity.

It is believed that IFCI has fixed Rs 107 per share as a rate for converting bonds issued to public sector banks and insurance companies into equity. The institution had plans to convert Rs 900 crore of optionally convertible bonds issued to PSBs into equity.

However, it was decided later that the conversion would be limited to Rs 579-crore worth of bonds. This will ensure that public sector insurance companies retain their shares at the existing level of 13%, even after offloading 26% to a strategic partner. After the conversion and induction of a new partner, the stake of banks in IFCI would be more than 25% and government-controlled organisations would hold over 38%

How do you think will pick up stake ? Our prediction is Sterlite consortium