Ifci In Parleys To Offer Stake To Foreign Majors

IFCI has rejected the idea of transforming itself into a universal bank. It has instead initiated talks with some international finance majors like Commonwealth Development Corporation (CDC) and Germany's DEG to acquire a strategic stake in the institution.

"We have sounded out a few international financial institutions and initiated talks with some of them to get a strategic partner," IFCI chairman and managing director V P Singh said. He, however, refused to name any institution that has been approached.

Singh said the amount of equity that would be offered to the foreign strategic partner is also yet to be decided. "Talks are in a preliminary stage and these things would be finalised as we move forward," he said. While the existing stakeholders in IFCI would dilute their equity, the strategic partner would also use the private placement route.

 

IFCI had been considering roping in a strategic partner to help in the diversification of its business. The idea had also found support with the expert committee headed by former State Bank of India chairman D Basu.

Singh said IFCI was not in a position to become a universal bank due to nature of the business it is doing at present. "Unlike ICICI or IDBI, we do not have a bank and we don't meet some of the parameters. Besides, there is a need for an investment banking institution which is also into term finance," he said.

At the same time, IFCI is planning to diversify its business -- from being just a term finance provider to greenfield ventures, which accounted for over 90 per cent of the institution's business portfolio. "We want to have the right mix of business ranging from term loans, short-term loans and working capital to taking equity positions in companies," Singh said, adding that the focus would shift to brownfield ventures _ financing expansion of existing ventures.

The Basu committee had recommended that IFCI should reduce its dependence on term finance to about 50 per cent of the business over three-four years by focusing on brownfield ventures and taking up fee-based business.