Rai: New move

New Delhi, Oct. 15: Industrial Finance Corporation of India Ltd (IFCI) has given some of its debenture holders an option to convert part of their holding into shares prior to its divestment exercise.

In 2002-03, IFCI had made a zero-coupon debenture issue worth Rs 1,480 crore, and the company now plans to convert 30 per cent of this amount into shares. Around 24 Indian banks and six financial institutions, including the Life Insurance Corporation of India (LIC) and IDBI, had subscribed to the issue.

The LIC, which has a 8.4 per cent stake in the financial institution, had bought Rs 500 crore of debentures. If the insurer agrees to the conversion proposal, its stake in IFCI will be 20 per cent, officials said.

Atul Kumar Rai, CEO and managing director of IFCI, said, “Discussions with various investors showed sufficient interest for conversion to shares.”

Under the terms of the debenture issue, the year of their conversion into equity is 2020-21. However, there is a profit clause that allows for an earlier conversion.

“With IFCI posting profits last year, the board decided to grant an option to its investors,” Rai said.

Though IFCI has not fixed a time frame for the conversion, sources said the company would finish the exercise before the strategic sale of 26 per cent of its equity.

On August 14, the country’s oldest financial institution invited expressions of interest from domestic and foreign investors to buy the stake.

“We will submit request for proposals to prospective bidders by next week. By November, financial bids will be submitted. The board will finalise the name of the strategic investor by the end of December 2007,” Rai said.

In the second quarter, IFCI posted a four-fold jump in net profit at Rs 497.29 crore compared with Rs 115.89 crore a year ago. Total income increased 81 per cent to Rs 595.60 crore against Rs 327.4 crore.