IFCI plans to offload 1.21 million shares in NSE, invites merchant bankers

Government-controlled development finance company IFCI Ltd has invited merchant bankers to help it offload stake in the National Stock Exchange (NSE). 

The company is looking to sell 1.21 million of NSE shares (0.24 per cent stake). The deal is likely to be valued at Rs 1.05 billion to Rs 1.11 billion, based on the price-band of Rs 870-920 mentioned in the tender.

“IFCI intends to sell part of its equity shareholding (0.24 per cent) in NSE, which accounts for 1,209,991 fully paid-up unencumbered equity shares each of face value Rs 1. This will be done through a competitive bidding process,” said the tender document on the company’s website.  Previous exchange announcements show that IFCI sold stake in the bourse in three tranches in March. It raised 1.78 billion through the three sales, which in total amounts to 0.41 per cent in the exchange.

The financer has been selling assets in order to improve its balance sheet as it struggles with asset quality issues. For example, it had sold stake in hospitality infrastructure financer Tourism Finance Corporation of India (TFCI) in September 2017. It has set a deadline of September 21 for the completion of the latest stake sale.  Business Standard had reported earlier that another shareholder – public sector lender IDBI Bank – was looking to exit through private deals due to a delay in the initial public offer. The bank has also been in need of capital because of bad loans. It was later announced that the Life Insurance Corporation of India is acquiring stake and pumping in required capital into the lender.

NSE had filed for an initial public offer in December 2016. Its public issue would have provided an exit to many shareholders. It has been held up on account of a regulatory probe into the bourse’s activities. 

The Securities and Exchange Board of India (Sebi) is looking into allegations that the bourse provided unfair access to some participants. This also had a bearing on revenues.

“Sebi has directed that, pending completion of investigation to the satisfaction of Sebi, all revenues emanating from the collocation facility, including the transaction charges on trades executed through the collocation facility, be placed in a separate bank account. Accordingly, as of March 31, an amount of Rs 11.97 billion was transferred to a separate bank account,” said a note to the exchange’s latest financials.

The NSE saw a 13.13 per cent rise in total income to Rs 30.33 billion in 2017-18. Profit after tax rose 19.91 per cent to Rs 14.61 billion.

The exchange had earlier said that it is aiming to launch its issue in the current financial year after the probe is completed. It had previously been reported that the exchange’s IPO would be worth Rs 100 billion, valuing the bourse at around Rs 400 billion.

A number of public sector companies had come together to fund the creation of the bourse in the early 1990s. Other stakeholders in the exchange include Life Insurance Corporation of India, National Insurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company Limited.

Emails sent to the exchange and IFCI did not receive a response.