Fis To Pick Up 26% Stake In Giic

In a bid to synergise business in infrastructure finance, three leading institutions Industrial Credit and Investment Corp of India (ICICI), Infrastructure Leasing & Financial Services (IL&FS) and Housing Development Finance Corp (HDFC) are acquiring a collective equity stake of 26 per cent in Gujarat Industrial Investment Corporation (GIIC).

GIIC chairman S K Shelat confirmed that the three institutions would jointly hold a 26 per cent stake in GIIC. However, the price at which the shares will be acquired is still under discussion. Sources said the price would be around Rs 300 a share.

ICICI will hold a stake of 15 per cent and HDFC and IL&FS will jointly hold another 11 per cent. All the three institutions will be represented on the GIIC board. An MoU to this effect will be signed soon between the three institutions and GIIC. GIIC will also undertake an organisational restructuring, aimed at scaling down its non-performing assets, reducing staff through voluntary retirement schemes and decentralising operations.

Explaining the rationale of the tieup, GIIC managing director A K Luke said, The equity tieup with IL&FS and ICICI will give us the benefit of their experience in infrastructure financing. GIIC, on the other hand, can provide them field-level knowledge. HDFC is interested in urban infrastructure. Hence, they are picking up a small stake.

GIIC is the investment vehicle for the Gujarat government. The three institutions are expected to benefit substantially from their tieup with GIIC as several infrastructure projects have been proposed in the state. Various projects are also in an advanced stage of implementation. Gujarat has $6 billion worth of infrastructure projects lined up, including power projects worth $4 billion. About $1 billion each is earmarked for road and port projects, some of which have already started.

Once the three institutions pick up their stake, the first phase of GIICs disinvestment will be complete. In the second phase, the corporation will issue shares to the public to reduce the Gujarat governments stake to 49 per cent, as per the stipulation of the Asian Development Bank (ADB). ADB has advanced loans worth $250 million to both the state government and GIIC.

However, the public offer will be made only after GIIC completes its restructuring. The issue is expected to take place late this fiscal or early next fiscal, according to sources.

ADB clears $250m loan to GIIC