IFCI postpones bid offer

Mumbai, Oct. 10: The Industrial Finance Corporation of India (IFCI) on Wednesday informed all the applicants interested to take a 26 per cent stake in the institution that the request for proposal (RFP ) will be available only on October 16. It was earlier to be made available this week. There are eight suitors for the 26 per cent stake estimated to be valued at Rs 1,500 crores.
The bidders include Japan’s oldest bank Shinhsai Bank in a consortium with Punjab National Bank and J Chris Flowers, a consortium of Goldman Sachs, Standard Chartered and HDFC, Sterlite and Morgan Stanley, Blackstone, GE Capital and IDFC. Kotak Mahindra was a bidder earlier but it exited. The networth of the bidders has to be Rs 10,000 crores.
While the reason or reasons for the delay in the RFP was not mentioned, sources say that it could be due to the inconclusive negotiations with the banks and Life Insurance Company which bailed it out when it was sick. LIC and the nationalised banks had given Rs 2,000 crores and were given OCD (convertible bonds) which they are holding. LIC alone gave Rs 500 crores.
There have been discussions between IFCI and the banks as it is said that the banks want to covert these OCDs into equity with interest. This will cause a problem because if the OCDs are converted into equity it will bring down the stake of the proposed strategic partner to just three to four per cent. The parties have yet to reach an understanding on the OCDs. The 26 per cent stake would be worth Rs 1,500 crores and the whole enterprise would be around $1.2 billion or Rs 5,000 crores according to the current price of the stock.