To give option to 30 FIs to convert less than 50% of their Rs 1479 cr zero coupon bonds into equity
NEW DELHI: The IFCI board on Monday decided to give an option to 30 financial institutions (FIs), including Life Insurance Corporation (LIC), to covert their zero-coupon convertible debentures issued in 2002-03 into equity to the extent of 50%.
The debentures payable in 2022 were part of a revival package worked out by the government to rescue the financial institution that had accumulated high level of non-performing assets.
IFCI chief executive officer and managing director Atul Kumar Rai said: “We have firmed up certain options that include the right to convert part of the optionally convertible bonds …. Outer limit for the conversion is 50%.”
IFCI, which has recently been given the status of a non-banking financial institution, had issued Rs 1,479 crore zero-coupon optionally convertible debentures (OCDs) to 30 FIs.
The conversion of OCDs is crucial to the 26% stake sale in IFCI since it will impact the final shareholding pattern.
In a posting on the Bombay Stock Exchange, IFCI said its board decided to give a proposal to the holders of 0% optionally convertible debentures to convert a part of their outstanding into equity as per Sebi guidelines on pricing of preferential allotment and the balance outstanding may carry concessional rate of interest linked to G-sec.
Explaining the need for such a proposal, Rai said: “We want the strategic investor to remain strategic. If conversion is exercised the strategic investor will remain strategic in the post diluted equity.”
About 35% (Rs 518 crore) of these debentures are held by LIC. Asked whether the proposal to convert the bonds into equity was from the financial institutions, Rai said: “The proposal was at the behest of IFCI.”
He said LIC has remained a long-term investor and has not even shed 1% of its equity to capture the upside in IFCI scrip. LIC currently holds 8.3% equity in IFCI.
Another crucial issue that needed to be settled before the strategic sale was Rs 923 crore loan which came from the government to IFCI which could also be converted into equity.
Rai said the company will be issuing the request for proposal (RFP) document in a week and hoped to finish the strategic sale in two and a half months. There are eight consortia in the fray for the stake after Kotak Mahindra and New Bridge Asia opted out of the race. The country’s oldest financial institution posted a four-fold jump in net profit at Rs 497.29 crore for the quarter ended September 30 compared with Rs 115.89 crore a year ago. Rai said IFCI expects to sustain improved results in the next three quarters.
