Investors dump IFCI as it calls off stake sale plan

IFCI slumped 22.79% to Rs 77.25 at 10:12 IST after the company, on Wednesday, 19 December 2007, called off the exercise to rope in a strategic partner through the private placement of 26% equity stake..

The BSE Sensex was up 69.79 points, or 0.37%, to 19161.23.

On BSE, 1.44 crore shares of the scrip were traded. The stock had an average daily volume of 1.54 crore shares on BSE in past one quarter.

The scrip had touched a high of Rs 86 and a low of Rs 73.25 so far during the day. The stock had hit a 52-week high of Rs 121.20 on 17 December 2007 and a 52-week low of Rs 10.75 on 20 December 2007.

The scrip had outperformed the market in the one month to 18 December 2007, adding 1.52% as against the Sensex's 0.98% decline. It had also outperformed the market in the past three months, soaring 25.06% against the Sensex's 16.79% rise.

The state-run non-banking finance company has an equity capital of Rs 639.99 crore. Face value per share is Rs 10.

At the current price of Rs 77.25, the scrip trades at a PE multiple of 2.48, based on Q2 September 2007 annualised EPS of Rs 31.14.

Sterlite Industries-Morgan Stanley combine was the front-runner for the stake as it offered the highest price of about Rs 110 per share among the three consortia that submitted the financial bids last week. The deal was, however, called off in the wake of conditional offer made in the financial bid by the Sterlite-Morgan Stanley consortium, which was not acceptable to the members of the board, the report suggested.

As per reports, the Sterlite-Morgan Stanley consortium was not looking for management control, but they were certainly looking for some more representation on the board. As per the bidding documents, a strategic investor with 26% stake (and 20% additional stake through open offer) was entitled to two seats on a board of eight.

The reports suggested that IFCI, which has a negative capital adequacy ratio at the moment and has poor credit rating, will now look to rope in multilateral agencies like International Finance Corporation to expand its equity base. Reportedly, the institution would also explore the possibility of seeking some government assistance as a short-term measure.

IFCI was seeking a strong partner, be it an Indian entity or from overseas, which can add value to the company. The 26% stake sale was part of IFCI's aim of being a world-class term-lending institution and not converting itself into a bank

IFCI's net profit rose 329.3% to Rs 497.29 crore on 82.9% growth in net sales to Rs 591.60 crore in Q2 September 2007 over Q2 September 2006.

IFCI's principal activities are project financing, providing financial services and comprehensive corporate advisory services. The company also provides equipment finance, equipment credit, equipment leasing, corporate loans, short-term loans and working capital loans to meet the specific needs of corporate.