Pricing wrinkles remain in IFCI stake sale
IFCI looks to wrap up stake sale on Wednesday but Sterlite may be negotiating lower price. The decision on 26% stake sale rests with IFCI Board. Penny-pinching ideas
By TNN |
NEW DELHI: The Sterlite-Morgan Stanley consortium, the highest bidder for the 26% stake in IFCI, may be formally named as the financial institution’s strategic partner on Wednesday, Vinod Rai, secretary financial services, said on Tuesday.
Speculation was rife on Tuesday that IFCI has introduced other conditions into the sale process, because of which Sterlite was planning to negotiate a lower price. “There is speculation that IFCI has introduced new conditions which can alter Sterlite’s offer,” a source said. These conditions are believed to have resulted in prolonged negotiations which continued till the early hours of Tuesday. No official announcement was made on Tuesday. Mr Rai’s statement seems to indicate that negotiations are in the final stages. The bids were opened on Monday.
“The stake sale will be finalised on Wednesday, the bid price is not an issue. The decision on 26% stake sale rests with the IFCI Board. A few other issues need to be addressed. IFCI will continue to function as a finance institution, there is no question of a change in its status. There is no plan to convert IFCI into a bank at this stage, since no such proposal has been discussed,” Mr Rai said.
This may calm investors punting on the IFCI stock which lost nearly 8% due to the perceived ambiguity in the sale process. The IFCI scrip plummeted to Rs 96 during the day and closed at Rs 100.75 on the NSE.
IFCI officials declined to give a timeframe for a decision on the stake sale.
IFCI CEO Atul Rai met officials from the ministry of finance regarding the stake sale.
“Negotiations are still on. Some of the issues need to be sorted out,” a source close to the development said. The strategic investor will become the majority shareholder in IFCI with management control, once the deal, including an open offer for 20%, is closed. Sterlite-Morgan Stanley will be expected to submit a vision statement outlining their business plan for IFCI. It is understood that the consortium has offered a price of around Rs 110 per share.
It was indicated earlier that the strategic investor is being offered two seats on the board, which has a current strength of eight members. Going forward, the board size can increase to 15. The new shareholding pattern after the completion of the sale process will be — 46% held by strategic investor making it the largest shareholder. This is taking into account the 26% stake and a minimum 20% of additional shares which the investor should acquire through an open offer as per Sebi regulation — to gain management control of IFCI.
The International Finance Corporation (IFC) is being offered around 10% and the rest will be held by banks, financial institutions and FIIs and the public. With state-owned banks and insurers converting their debt worth Rs 1,479 crore into equity at Rs 107 per share, the stake of government-controlled firms will become 39%.
In a anti-climax of sorts, the consortium headed by WL Ross pulled out of the process after conducting due diligence. Mr Ross’s consortium was touted to be one of the front-runners in the race. “The due diligence was conducted, and it was felt that the stake was overpriced,” a source in the consortium said.
Speculation was rife on Tuesday that IFCI has introduced other conditions into the sale process, because of which Sterlite was planning to negotiate a lower price. “There is speculation that IFCI has introduced new conditions which can alter Sterlite’s offer,” a source said. These conditions are believed to have resulted in prolonged negotiations which continued till the early hours of Tuesday. No official announcement was made on Tuesday. Mr Rai’s statement seems to indicate that negotiations are in the final stages. The bids were opened on Monday.
“The stake sale will be finalised on Wednesday, the bid price is not an issue. The decision on 26% stake sale rests with the IFCI Board. A few other issues need to be addressed. IFCI will continue to function as a finance institution, there is no question of a change in its status. There is no plan to convert IFCI into a bank at this stage, since no such proposal has been discussed,” Mr Rai said.
This may calm investors punting on the IFCI stock which lost nearly 8% due to the perceived ambiguity in the sale process. The IFCI scrip plummeted to Rs 96 during the day and closed at Rs 100.75 on the NSE.
IFCI officials declined to give a timeframe for a decision on the stake sale.
IFCI CEO Atul Rai met officials from the ministry of finance regarding the stake sale.
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Last week, the government made a commitment that it would not convert its debt worth Rs 923 crore into equity. The government’s stand was clarified barely 48 hours before bidders put in their financial bids on December 14. The government was also willing to provide Rs 1,300 crore to IFCI as budgeted for in this fiscal. “Negotiations are still on. Some of the issues need to be sorted out,” a source close to the development said. The strategic investor will become the majority shareholder in IFCI with management control, once the deal, including an open offer for 20%, is closed. Sterlite-Morgan Stanley will be expected to submit a vision statement outlining their business plan for IFCI. It is understood that the consortium has offered a price of around Rs 110 per share.
It was indicated earlier that the strategic investor is being offered two seats on the board, which has a current strength of eight members. Going forward, the board size can increase to 15. The new shareholding pattern after the completion of the sale process will be — 46% held by strategic investor making it the largest shareholder. This is taking into account the 26% stake and a minimum 20% of additional shares which the investor should acquire through an open offer as per Sebi regulation — to gain management control of IFCI.
The International Finance Corporation (IFC) is being offered around 10% and the rest will be held by banks, financial institutions and FIIs and the public. With state-owned banks and insurers converting their debt worth Rs 1,479 crore into equity at Rs 107 per share, the stake of government-controlled firms will become 39%.
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The other parties that submitted their bids included consortia of Shinsei Bank, Punjab National Bank and JC Flowers; and Cargill Financial and Texas Pacific Group. “There were a lot of uncertainties in the whole process. Pricing was an issue, we did not see that kind of value in IFCI,” a source in the Shinsei Bank-led consortium said. In a anti-climax of sorts, the consortium headed by WL Ross pulled out of the process after conducting due diligence. Mr Ross’s consortium was touted to be one of the front-runners in the race. “The due diligence was conducted, and it was felt that the stake was overpriced,” a source in the consortium said.
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