The International Finance Corporation will acquire equity stake in a $125 million off-shore venture being co-promoted by ICICI.
While the equity stake of IFC has been pegged at $10 million, the other
co-promoter, Trust Company of the West Group Inc, is yet to firm up its stakes. The foreign promoter may eventually end up acquiring a majority stake in the venture.
The IFC is a World Bank affiliate and is the largest multilateral source of loans and equity financing for private sector projects in the developing world.
It finances and provides advice for private ventures and projects in developing countries in partnership sometimes with governments.
The Fund will invest in unlisted equity or equity-related securities issued by medium-size, later-stage and some early stage companies in a broad range of industries in India.
The latest IFC initiative forms a part its efforts to promote ventures in financial sector. In 1996-97, it has taken equity exposures in several ventures in the sector. These include moves by several leasing companies to diversify into financing infrastructure-related equipment and machinery.
The closed-ended venture capital fund, to be formed as a limited life company
based in Mauritius will operate for a term of seven years with the option to extend for two one-year periods.
The Fund will be administered by a fund management company, TCW-ICICI Investment Partners, LLC, also to be based in Mauritius. TDICI (Technology Development and Information Company of India Ltd), an affiliate of ICICI, will be investment adviser.
The Fund will be required to undertake an environmental review of eligible investee companies operations to ensure consistency with World Bank policies and guidelines and government requirements.
In addition, TCW/ICICI will provide IFC with an annual environmental monitoring report.
These interest rate swap transactions were priced on the basis of standard IFC pricing guidelines for client risk management transactions. IFCs total exposure under these swap transactions is estimated at approximately $2.5 million.
It is believed that interest rate risk management would improve the stability of the companys future cash flows and enhance its economic viability. Thereby the IFC has also ensured greater security for its investment, say officials.
