The Union Cabinet has approved the conversion of OCDs (optionally convertible debentures) worth Rs.923 crore held by the government in IFCI into equity. Following the conversion, the Centre’s stake in the public financial institution listed on the bourses will go up to 55.57 per cent. “The Cabinet, on Thursday, approved the proposal to exercise the option by the government to convert Rs.400 crore and Rs.523 crore OCDs held by the government in IFCI into equity. The conversion option will be exercised immediately,” an official release said.
Post-exercise of conversion option of Rs.923 crore OCDs into equity at par, the holding of the government will become 55.57 per cent and, by including the holding of banks’/FIs, it will be 68.31 per cent, making it a government company. “This would ensure compliance to the Cabinet decision of 1992. There has been full disclosure in the annual reports of IFCI about the said OCDs of Rs.923 crore with a right to convert at par,” the release said. The Industrial Finance Corporation of India (IFCI) was converted into a company incorporated under the Companies Act, 1956, on March 31, 1993. It was then decided that the holding of government-controlled institutions in IFCI should be maintained above 51 per cent. However, in the wake of likely systemic impact of IFCI defaulting on its liabilities, the government infused Rs.400 crore in 2001 as Tier-l capital of IFCI in the form of 20-year 9.75 per cent unsecured convertible debentures as a cash-neutral transaction.
In December 2002, the government approved a financial assistance of Rs.5,220 crore to IFCI, which was to be released from 2003 through to 2011-12. Of this, financial assistance of 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, therefore, decided to stop release of further assistance to it.
The government equity, which had come down to below the threshold limit of 51 per cent in 2005 following equity dilution, will now go up to 55.57 per cent and thereby ensure compliance with the cabinet decision of 1992.
The decision to go ahead with the conversion of OCDs into equity was taken by a Committee of Secretaries to look into the affairs of IFCI and suggest a way forward. The government has also taken exemption from the SEBI for application of the takeover code.
CCEA nod for
The Cabinet Committee on Economic Affairs (CCEA) has cleared a proposal of Chennai-based Shriram Financial Ventures. As per the approval, Shriram Financial has been permitted to allot shares to Mauritius-based Sanlam Emerging Markets and Sanlam Emerging Markets to hold, through Shriram Financial Ventures (Chennai), a stake (not exceeding 26 per cent) in Shriram Capital.