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NEW DELHI: A consortium of Sterlite Industries and Morgan Stanley & Company has emerged as the front-runner to acquire 26% stake in the country’s oldest financial institution, IFCI. The consortium would have to make an open offer for another 20% if and when it is formally selected as the strategic partner by the IFCI board. This would make them the majority shareholder with management control in IFCI. The IFCI board meeting continued late into Monday evening, and an official announcement was still awaited at the time of going to press. Sources close to the development told ET that the Sterlite-Morgan consortium has bid a minimum of Rs 107 for a share, the price at which institutional shareholders will convert their debt into equity. The IFCI scrip closed at Rs 108.4 at the Bombay Stock Exchange on Monday, 4.62% below its previous close. Sources said Sterlite Industries consortium was the only bidder to be invited on Monday evening for discussions since the bids made by the other two consortia are understood to have many conditions attached. This, however, could not be independently confirmed with those consortia — Shinsei Bank, Punjab National Bank and JC Flowers; and Cargill Financial and Texas Pacific Group. The fourth consortium in the race headed by WL Ross pulled out of the process and did not submit a financial bid after conducting due diligence. The combine of Shinsei Bank, Punjab National Bank and JC Flowers apparently bid between Rs 80 and Rs 85 a share while that of Cargill was below that, according to television reports. The institution received bids last week from the three consortia. The board has fixed the price for converting bonds issued to public sector banks and insurance companies into equity at Rs 107 per share. Earlier this month, the institution had decided to convert all optionally convertible bonds of Rs 900 crore issued to PSU banks into equity. IFCI also wanted to convert about Rs 400 crore of Rs 579-crore worth of bonds issued to public sector insurance firms so that they retain their shares at the existing level of 13% even after selling 26% stake to the new partner. In all, the company would convert zero coupon optionally convertible debentures worth Rs 1,300 crore into equity. The move would raise the stake of these banks in the financial institution to over 25%, taking the total holding of government-controlled firms to over 38%. In addition to this, the government was also issued Rs 923-crore such bonds by the institution, but it decided not to convert those into equity. Last week, the government has stated that it would not convert its debt into equity. The government’s stand was clarified barely 48 hours before bidders put in their financial bids on December 14. It was indicated earlier that the strategic investor is being offered two seats on the board which has a current strength of eight members. Going forward, the board size can increase to 15. The International Finance Corporation (IFC) is being offered around 10%, rest will be held by banks, financial institutions and FIIs and the public. After the financial bids are submitted, bidders will be expected to submit a vision statement of sorts — their gameplan for IFCI going forward. This statement will include a plan for new businesses among other issues. The IFCI board is expected to announce the strategic investor thereafter. Ernst & Young was the consultant to IFCI.