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IFCI stake sale off

New Delhi, Dec. 19: IFCI Limited today cancelled the joint bid of Sterlite Industries and Morgan Stanley for a 26 per cent stake in the company.

“The bidder was putting too many conditions along with the bid which were not acceptable to the board,” an IFCI official said.

The duo, which had bid as a consortium, demanded management control, which was unacceptable to the IFCI board.

Atul Kumar Rai, chief executive officer of IFCI, ruled out the possibility of a rebid under current terms.

Rai said they wanted the bid to be unconditional as was stated in the proposal.

Sterlite director Tarun Jain told a TV channel the consortium’s objective was to strengthen the business of IFCI by bringing management expertise.

Their offer was made in the light of this objective, and it turned out that the board did not accept the offer, Jain said, adding that the consortium respected the decision.

The bid price was also a reason for the deal getting called off. There were apprehensions within Sterlite and Morgan Stanley of paying more than what IFCI was actually worth.

Following the norms of the Securities and Exchange Board of India (Sebi), Sterlite had offered to pay Rs 110 per share, whereas the next highest bid was Rs 85.

On the management front, the consortium found that the effective control would be with the government and government-run entities who had made it clear that their stake should not go down after the sale.

Analysts said the entire exercise was not done properly — so many conditions were imposed from time to time and the deal was doomed from the beginning.

Thorny issues included the conversion of the optionally convertible debentures held by government entities, a lack of clarity on the Centre’s commitment to give Rs 1,300-crore assistance, the offer of only 20 per cent of the seats on the board to the strategic investor who ultimately will be holding 46 per cent equity and the Sebi norms on share pricing that prevented the consortium from quoting below Rs 100 per share.

The exercise started in March when IFCI appointed Ernst & Young as a consultant to the stake sale and was to end in January.

Other contenders were the consortium of Japan’s Shinsei Bank Ltd, Punjab National Bank and JC Flowers and that of Cargill Financial and Texas Pacific Group.

The IFCI scrip closed at Rs 100.05 on the BSE, down 1.04 per cent.

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