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The Industrial Finance Corporation of India (IFCI) today said its board has decided to proceed with the conversion of Government of India bonds worth Rs 923 crore into equity.
With the conversion, the direct shareholding of the Government will increase to 55.57 per cent.
The board of directors of the company has decided to proceed with the conversion of optionally convertible debentures held by the Central Government for Rs 400 crore and financial assistance of Rs 523 crore, IFCI said in a filing on the BSE.
IFCI, a term lender, is promoted by financial institutions and banks including LIC.
In August, the Union Cabinet approved conversion of Rs 923 crore of debentures held by it in IFCI into equity.
Post conversion of the Optionally Convertible Debentures (OCDs), the holding of Government will become 55.57 per cent including the holding of Banks/FIs; it will be 68.31 per cent making it a government company.
Since 2001 the Government had been giving funds to IFCI to tide over the financial problems. It initially gave Rs 400 crore in the form of 20-year OCDs.
Later in 2002-03, as part of the financial restructuring package of Rs 5,220 crore, the Government gave IFCI Rs 523 crore as loan in the form of OCDs.
However, the Government stopped releasing funds after IFCI started making profits.
The Government equity, which came down to below the threshold limit of 51 per cent in 2005, will again go up to 55.57 per cent and ensure compliance with the cabinet decision of 1992.
The decision to go ahead with the conversion of OCDs into equity was taken by the Committee of Secretaries, the release said, adding the Government has also taken exemption from SEBI for application of the takeover code.
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