LIC set to pare stake in IFCI

During the process of strategic investor induction late last year, IFCI had converted the debentures held by LIC into equity shares to enable the insurance company to maintain its stake at 8.39 per cent.

With the talks with Sterlite-led consortium collapsing, there was no induction of a strategic investor. Despite this, LIC's stake increased to 11.35 per cent. So the life insurer requested the IFCI management to take steps to reduce its stake to 8.39 per cent.

 

IFCI will reduce the paid-up capital by about 3 per cent to accommodate LIC's request and convert those shares into debt instruments, sources said. However, there was no such request from other financial intermediaries, who had also converted debentures into equity during the strategic investor induction process.

IFCI had converted debentures into shares at a price of Rs 107 a share. The shares now hover around Rs 38.

The reduction in share capital will be done under the provisions of Section 100 to 104 of the Companies Act, 1956. "We are in the process of doing that (lowering LIC's stake). We are approaching a court for approval to reduce LIC's stake without affecting other shareholders," IFCI chief executive officer Atul Kumar Rai said.

Rai said the company is still open towards inducting a strategic investor and is willing to shed reservations on management control going to the investor. However, the company has to thrash out some obstacles that stood in the way of strategic investor induction exercise last year. The prominent bone of contention is the Rs 900 crore optionally convertible debentures held by the central government.

With no immediate solution in sight, the company is readying an alternate plan to keep the bottomline intact.

It plans to expand the asset base by Rs 2,000 crore every year, strengthen the non-performing assets sale business, build capacity in subsidiaries such as venture capital and factoring business, and unlock value in real estate assets.