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Monday, Nov 04, 2002

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Govt passes IFCI bailout buck to shareholders

Sarbajeet K. Sen


PARENTAGE is set to create trouble for IFCI Ltd in its revival efforts. After months of toying with the idea of being the focal point of framing a support package for the ailing institution, the Government now appears to be all set to wash its hands off the exercise arguing that the responsibility of pulling the institution back on rails does not rest with it since IFCI is not its baby.

Instead, the responsibility of sewing up a bailout package for the ailing would now rest squarely with its institutional shareholders. Indication towards this has been conveyed to some of the larger institutional shareholders such as IDBI, SBI, LIC and PNB at a recent meeting with the top brass of the Finance Ministry.

Officials have, however, assured the shareholders that the Government would not abdicate its responsibility totally and it would be willing to participate in the efforts to turn around the institution by pooling in necessary resources.

"The shareholders would have to sit with the lenders and decide on the manner in which the institution has to be restructured. How can the Government decide on the path that needs to be taken since it does not have any shareholding in the institution?" a top Finance Ministry official wondered.

He, however, said the Government would play its role its role once the turnaround course is finalised by the shareholders. "All stakeholders will have to play a role in the turnaround process and the Government will also take action that would be required of it. The Government is deeply concerned over the health of IFCI. The Government would provide whatever support is required once the package takes a final shape," the official said.

IFCI's institutional shareholders would have to analyse in detail the financial position of the development financial institution (DFI) and work out the amount that would be required, along with the internal structural changes that have to be undertaken, for the turnaround. "The institutional shareholders would have to make up their own mind on the turnaround. The restructuring report prepared by McKinsey & Co would only be one of the ingredients," the official said.

The Government, along with the major shareholders, had split the Rs 1,000-crore bailout bill for IFCI. While the Government has footed Rs 400 crore, IDBI, LIC and SBI split the remaining Rs 600 crore equally. The capital infusion by way of long-term bonds was not of much use in turning around the institution since the fortunes of IFCI slid further.

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