Blackstone, GE Capital, HDFC expected to bid for stake in IFCI

Blackstone, GE Capital, HDFC expected to bid for stake in IFCI

Mumbai: Manager of the world’s biggest buyout fund Blackstone Group LP., General Electric Capital Corp. and a group led by billionaire Wilbur Ross are among investors who may bid for a 26% stake in India’s oldest state-owned project financier, the Industrial Finance Corporation of India Ltd (IFCI).

Ross’s group, including Goldman Sachs Group Inc., Standard Chartered Plc. and Housing Development Finance Corp. Ltd (HDFC), is vying with Cargill Financial Services Corp., Natixis SA and Newbridge Asia HT LP, IFCI said in a statement to the Bombay Stock Exchange (BSE).

The successful bidder would gain access to a market where lending grew 28% last year, and where the Reserve Bank of India (RBI) limits foreign banks’ ownership of local private rivals to 5%.

IFCI, which was bailed out by the government in 2003 because of bad debts, in July announced plans to sell a stake to a local or overseas investor to bolster its capital.

“It gives entry into the financial sector, where foreign holdings are restricted," said Mahesh Patil, assistant vice-president at Birla Sun Life Asset Management Co. Ltd, which manages the equivalent of about $6 billion (Rs24,240 crore). “Whoever gets control, they can clean it up."

Other potential bidders for a stake in IFCI include a group comprising Sterlite Industries (India) Ltd and Morgan Stanley, and a team consisting of Japan’s Shinsei Bank Ltd, India’s Punjab National Bank Ltd and J.C. Flowers & Co., IFCI said. Kotak Mahindra Bank Ltd and Infrastructure Development Finance Co. (IDFC) may also submit offers, the lender said.

IFCI shares rose 2.4% to close at Rs79.05 in Mumbai. The New Delhi-based lender’s shares have gained by six times this year, the best performer on the BSE-500 Index, valuing the lender’s stake at about $330 million.

IFCI said chairman N. Balasubramanian has resigned, without assigning any reason. The company didn’t say when it expects to complete the stake sale. Balasubramanian quit because of a conflict of interest arising from his role in advising London-based Standard Chartered, the Press Trust of India reported on Sunday, citing unidentified company officials.

Balasubramanian couldn’t be reached for comment.

Under Balasubramanian, IFCI posted net income of Rs247 crore for the quarter ended June 2007, compared with a loss of Rs15.6 crore a year earlier, according to the project lender’s website.

The company’s ratio of bad loans that have been written off or provided for, out of total lending, fell to zero as of 31 March, from a high of about 32% in 2004.

IFCI was founded in 1948 to fund industrial and infrastructure projects at a time when investment banks were non- existent in India and commercial banks lacked the funds to provide long-term financing.

But the IFCI, along with several other lenders got mired in rising bad loans in the 1990s, when interest rates climbed to around 15% and industries including textiles, chemicals and steel went through a situation where there was excess supply.

IFCI has shored up its finances by trimming bad loans and selling shares in companies such as the National Stock Exchange of India Ltd (NSE) and rating company ICRA Ltd, an arm of Moody’s Investors Service, which yielded a profit of Rs793 crore in the year ended March 2007, according to the company’s annual report.