The Hindu Business Line : IFCI board calls off 26% stake sale process

New Delhi, Dec 19 In a dramatic development, the board of directors of IFCI on Wednesday unanimously decided to call off the process of inducting a “strategic investor” to whom a 26 per cent stake in the country’s oldest financial institution was to be offered through fresh issue of equity shares.

Sterlite Industries-Morgan Stanley combine was the front-runner for the stake as it offered the highest price (about Rs 110 per share) among the three consortia that submitted the financial bids last week.

The deal was, however, called off today in the wake of “conditional offer” made in the financial bid by the Sterlite-Morgan Stanley consortium, which was not acceptable to the members of the board, sources in IFCI said.

In a filing to the Bombay Stock Exchange on Wednesday evening, IFCI said that the financial proposal submitted by Sterlite Industries-led consortium was “conditional” and that the board had unanimously decided not to accept the conditional offer and, therefore, rejected it. The process of selecting the strategic investor had gained momentum in the last few days, with the IFCI board holding lengthy meetings including an overnight one early this week to come to a decision.

Sources close to the board-level developments said that the Sterlite-Morgan Stanley consortium was not looking for “management control”, but they were certainly looking for some more representation on the board. As per the bidding documents, a strategic investor with 26 per cent stake (and 20 per cent additional stake through open offer) was entitled to two seats on a board of eight.

“They wanted some more representation and not what was offered. The consortium pointed out that it was coming into IFCI as a strategic partner and not as a financial investor. Therefore, the representatives wanted to know how they could control the destiny of IFCI through their stake. Some more representation on the board was the precondition which led to this situation and not the pricing issue”, sources said.

At the time of invitation of expression of interest (EoI) in August this year for the stake sale, Mr Atul Rai, Chief Executive of IFCI, had said that IFCI was looking for a strategic investor who would help it remain relevant and viable. “As we transform, we also want to retain our basic character (as a development finance institution)”, he had then said. The RBI has now categorised IFCI as a “systemically important non-deposit taking NBFC”.

IFCI sources maintained that an “intricate matrix” of issues including management control led to the deal being called off today. Sources also said that the entire process has been called off and no decision has been taken on the future course of action.

It is learnt that Mr Rai met senior Finance Ministry officials on Tuesday to discuss the emerging situation at the country’s oldest financial institution.