New Delhi, Nov. 9: The sale of a strategic stake in the Industrial Finance Corporation of India (IFCI) will be delayed till the first quarter of the next fiscal because of hitches in converting debentures of the company into equities.

Banks who hold the IFCI’s zero-coupon optionally convertible debentures want their holding to be turned into equities.

On the other hand, the five public sector insurance companies are demanding a conversion formula that will keep their stake intact after the induction of a strategic partner.

Besides, it’s also unclear whether the government will convert its Rs 923-crore loan into equity.

Earlier this month, the IFCI gave an option to nearly 30 banks and financial institutions, which had helped it to restructure its liabilities, to convert less than 50 per cent of their debt worth Rs 1,479 crore into equity.

For the potential strategic partners, bidding for 26 per cent of the IFCI, the conversion of the entire debt means they will have to pay more for their stake.

A lack of clarity on the amount to be paid for the stake is preventing the eight shortlisted bidders from placing their financial bids. Five entities and three consortiums are in the race for the stake.

Earlier, the IFCI chief executive officer and managing director Atul Kumar Rai had said, “Bidders will submit the financial bids by November and the board will finalise the name of the strategic investor by the end of December 2007.”

But this timeline is likely to be extended to resolve the impasse. “Bankers have indicated that they will be more than willing to convert a part of their debt into equity,” said IFCI officials.

The insurance companies and the government are yet to take a decision on converting the debt.