IFCI crashes after Sebi approval

Scrip tumbles 19% on NSE, trades at Rs 30.50 down 5% on the BSE

Shares of institutional lender IFCI crashed nearly 19 per cent after the Securities and Exchange Board of India (Sebi) on Tuesday allowed the government to acquire control without making an open offer.

The company's scrip tumbled 18.69 per cent to Rs 26.10 on the NSE.

At the BSE, the scrip plunged 13.86 per cent to Rs 27.65. The stock later recovered much of the lost ground and was trading at Rs 30.50, down 5 per cent on the BSE.

The government proposes to convert IFCI debentures worth Rs 923 crore in to equity shares at par. The move will give the government a controlling stake of 55.57 per cent in the company.

 

Under takeover rules, any acquirer acquiring over 25 per cent stake in a target company is required to offer an exit option to the minority shareholders. But Sebi yesterday granted an exemption from this requirement.
 
IFCI investors are of the view that the conversion of debentures should be made at a price that is determined according to Sebi-mandated formula for preferential issues. This would ensure a fair deal for minority investors in the company. If debentures are converted at par, it erodes the value of small investors substantially.
 
The paid-up capital of IFCI is 737.8 crore. If the government converts the debenture this expands to Rs 1661 crore, giving the government a 55.57 per cent stake in the company.
 
As a result of this, an investor holding 1 per cent stake in the company today will hold less than half a per cent in the company after this conversion. Over 761,000 small investors hold IFCI shares.