Shareholders’ nod for issue of Rs 523 cr OCDs

The legal decks have been cleared for IFCI Ltd to turn into a Government company.

IFCI’s shareholders have given their nod for the company to issue optionally convertible debentures (OCDs) worth Rs 523 crore to the Government and subsequently convert them into equity shares at par.

Simply put, IFCI will now convert the financial assistance of Rs 523 crore (which was part of package of assistance of Rs 5,220 crore provided in 2002-03) into OCDs.

The matter of issue of OCDs against Rs 523 crore of loan hinged on the strategic investor coming into the company.

As the strategic investor did not materialise till April 1, 2008 (which was cut-off date) and given that OCDs were contingent on such an investor, the said OCDs did not come into existence.

In August 2012, the Union Cabinet exercised the option with the Government to convert Rs 400 crore convertible debentures and Rs 523 crore OCDs in IFCI into equity at par. Post conversion, the holding was set to become 55.57 per cent, making IFCI a Government company.

Already, the Government has debenture certificates for the Rs 400-crore unsecured convertible debentures, which are being converted into equity at par as per the terms of the instrument.

The thorny issue was the financial assistance of Rs 523 crore. Now that shareholders have approved that OCDs be issued for this amount, the process of IFCI turning into a Government company has gathered pace, said company observers.

Capital market regulator SEBI has done its bit by exempting the Government from making an open offer to the shareholders post the allotment of 92.3 crore shares of IFCI. Minority shareholders however are peeved by this move.

As per the two-phase process, the Government will acquire control of IFCI by first converting unsecured convertible debentures of Rs 400 crore into equity at par. This would take Government holding in IFCI from a level of 0.0000011 per cent to 35.15 per cent.

The subsequent conversion of Rs 523 crore OCDs into equity is expected to take the Government holding to 55.57 per cent, making it a Government company.

At the recent extraordinary general meeting (December 5), shareholders also gave their nod for reclassifying the Authorised capital to accommodate the additional shares to be issued to Government at par.

(This article was published on December 9, 2012)
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