Cabinet okays conversion of Rs 923 cr IFCI debentures into equity

Our Bureau Updated - November 16, 2017 at 06:39 PM.

The Union Cabinet on Thursday cleared the conversion of optionally convertible debentures (OCDs) of Rs 923 crore held by the Government in IFCI into equity.

The conversion option will be exercised immediately, paving the way for Industrial Finance Corporation of India to be a Government company.

The proposal seeks to allow the Government to exercise the option to convert Rs 400 crore and Rs 523 crore OCDs held by it in IFCI into equity at par, an official release said.

After this conversion option, the Government’s holding will be 55.57 per cent, and by including the holding of banks/financial institutions, it will be 68.31 per cent.

The IFCI was converted into a company incorporated under the Companies Act, 1956 on March 31, 1993. It was then decided that holding of Government-controlled institutions in it should be maintained above 51 per cent.

In the wake of the likely impact of IFCI defaulting on its liabilities, in 2001, the Government infused Rs 400 crore as tier-l capital in the form of 20-year 9.75 per cent unsecured convertible debentures. This was a cash-neutral transaction.

In December 2002, the Government approved a financial assistance of Rs 5,220 crore to IFCI, out of which Rs 2,932.31 crore (Rs 523 crore as loan in the form of OCDs and Rs 2,409.31 crore as grants-in-aid) was released.

In 2006-07, the company started making profit and it was decided to stop release of further assistance to IFCI, the release added.

New DMIC equity structure

The Cabinet also approved a change in the equity structure of the Delhi Mumbai Industrial Corridor Development Corporation (DMICDC).

According to the revised structure, the share of the Government stands at 49 per cent or less; share of Government-owned FIs of Japan, the Japan Bank for International Cooperation at 26 per cent; and share of FIs owned by the Government of India at 25 per cent or more.

No financial implications will be involved after the revised equity structure on the part of the Government of India, an official release said.

The DMIC project is a strategic partnership project between the Government of India and Government of Japan.

“Long-term financing institutions in Japan like pension funds have limited experience in India and 26 per cent equity would give them comfort level and a feeling of participation in the project,” the release added.

> aditi.n@hindu.co.in

Published on August 23, 2012 16:53