Sterlite, Morgan Stanley group front-runner for IFCI stake

Sterlite, Morgan Stanley group front-runner for IFCI stake

A Sterlite Industries and Morgan Stanley consortium is the front-runner for picking up a 26% stake in IFCI Ltd.

“After considering proposals received from three interested parties, Sterlite Industries and Morgan Stanely emerged as the lead player," an IFCI official said late Monday night.

He added a meeting of the board of the company was going on and more details would emerge after it ended.

A CNBC-TV 18 report that cited unnamed sources claimed that the consortium had bid between Rs90 and Rs100 a share. It was not immediately possible to ascertain the overall value of the deal because IFCI’s capital restructuring is still in progress.

Analysts had previously estimated the size of the deal at between $500 million and $700 million. The reported price per share is lower than the Rs108.4 close the share registered on the Bombay Stock Exchange on Monday.

The original list of eight shortlisted bidders comprised the Sterlite-Morgan Stanley consortium; Cargill Financial Services; Natixis, a consortium of Shinsei Bank, JC Flowers and Co. Llc. and Punjab National Bank; a consortium of WL Ross and Co., GS Capital Partners VI Fund, Standard Chartered Bank and HDFC Ltd; GE Corp.; and Blackstone Group Lp. Three of these, including the Sterlite-Morgan Stanley consortium, a consortium of Shinsei Bank, JC Flowers and Punjab National Bank, and Cargill Financial Services submitted final bids.

Interest in IFCI peaked after the government let on that the company could get a banking licence. India’s banking regulator Reserve Bank of India (RBI) has not issued a licence in five years.

In early November, Business World magazine quoted Vinod Rai, secretary in the finance ministry as saying that RBI was “not averse" to allowing IFCI entry into the banking sector. However, senior executives of IFCI have said that the company is not considering an entry into banking.

IFCI, India’s first development financial institution, was set up in 1948. The company is trying to recover from a poor run. It returned a net profit of Rs809.34 crore (it made losses of Rs266 crore the previous year) largely on account of the sales of its equity holdings in National Stock Exchange and Icra Ltd.

The government has bailed out the company twice before, in 2002 and then in 2003.

The firm that acquires a 26% stake in IFCI will become the principal shareholder; the co-mbined holding of public sector banks and institutions such as the Life Insurance Corp. in the company was less than 23% when the hunt for a strategic partner began in August. However, since the process began, some of the banks and financial institutions have converted their securities in the company (debt) into equity.

Earlier on Monday, S.P. Arora, company secretary at IFCI, said the company had no idea about the identity of the bidders. “We will open the proposals today (Monday), and by evening, we should know who has bid at what price."

“They should be able to get bids around the current market price," said S. Amarnath, regional head at Religare Securities Ltd. “The kind of network (it has) among corporate clients should, help IFCI command a (good) price," he said.

Bloomberg and PTI contributed to this report.