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IFCI set to reveal partner’s identity

New Delhi, Dec. 18: IFCI Ltd is likely to transfer 26 per cent of its stake tomorrow to the consortium comprising the Vedanta group company, Sterlite Industries, and Morgan Stanley.

The board of the country’s oldest financial institution, meeting for the second day running, could not reach a final decision on the induction of a strategic partner.

The Sterlite consortium has emerged as the front-runner to pick up the IFCI stake.

Amidst speculations of price acting as a constraint in wrapping up the deal, Atul Kumar Rai, the CEO and managing director of IFCI, met finance ministry officials this evening to discuss the financial and technical bids of the three shortlisted consortiums.

Of the two other consortiums, Japan’s Shinsei Bank Ltd, Punjab National Bank and JC Flowers is one; and Cargill Financial and Texas Pacific Group the other.

Ministry officials denied that price was a bone of contention and said that the decision on the sale rests with the IFCI board.

They said the deal was likely to be sealed by tomorrow. IFCI will retain its status of a financial institution after the sale of the stake.

IFCI has informed the Bombay Stock Exchange that the price of converting its debentures into shares is Rs 107 per share. This is a premium of Rs 97 per share.

These debentures, worth Rs 1,323.99 crore, are with insurance companies and creditor banks.

The committee of directors of IFCI, constituted for the purpose of converting the zero coupon optionally convertible debentures into shares, will issue 12,37,37,735 shares to the banks and insurance companies.

All the banks have converted their debentures into equities, while the insurance companies have converted to the extent that their shareholdings remain the same after the stake sale to the strategic investor.

The banks and FIs together held debentures worth Rs 1,479 crore.

Sources said IFCI wanted the bid price for the 26 per cent stake to be higher at Rs 107-108 per share.

This valuation is based on the norms of the Securities and Exchange Board of India.

As many as 10 suitors had expressed preliminary interest in buying the stake. The board shortlisted eight bidders, of which four undertook a due diligence of the company that included the three final bidders.

The fourth entity was the consortium of WL Ross, GS Capital Partners VI Fund and Standard Chartered Bank.

IFCI, bailed out by the government in 2003, had announced in July that it would sell the stake. The process started in August and is expected to be over by January.

IFCI was set up in 1948 to fund industrial and infrastructure projects at a time when investment banks were non-existent and commercial banks lacked funds for long-term loans.

The IFCI counter on stock exchanges was attracting buyers after the institution started its restructuring exercise, including identification of the strategic investor.

However, its shares plunged over six per cent to close at Rs 101.10 in a bearish market today.

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