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Sterlite leads in IFCI race

New Delhi, Dec. 17: The consortium of Sterlite and Morgan Stanley has emerged as the front-runner to pick up a 26 per cent stake in the country’s oldest financial institution, IFCI Ltd.

Sources said the duo had bid the highest for the stake.

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 board of IFCI met today to consider the induction of a strategic partner.

Also on the agenda was the price for the conversion of zero coupon optionally convertible debentures to equities. The meeting will continue tomorrow.

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.

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.

Earlier this month, IFCI said it would convert all the optionally convertible debentures, worth Rs 900 crore, issued to public sector banks into equity.

It also decided to convert about Rs 400 crore of the Rs 579 crore of debentures with public sector insurance companies.

This will allow the insurance companies to retain their stake at the existing level of 13 per cent even after selling a 26 per cent stake to a new partner. The move will raise the stake of the PSU banks to over 25 per cent, taking the total holding of government-controlled firms to over 38 per cent.

Based on Sebi norms, the conversion price should be between Rs 107 and Rs 109.

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.

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